 "Donald Trump soured on a deal, and Hong Kong partners became litigants")
Donald J Trump, who has made reversing America's trade imbalance a pillar of his campaign, often portrays himself as uniquely capable of wringing concessions out of China through hard-nosed business tactics he has honed over the years.
In fact, he says, he has a personal track record to back up his boasts.
"I beat China all the time," Trump declared in a speech the day he announced his candidacy. "I own a big chunk of the Bank of America building at 1290 Avenue of the Americas that I got from China in a war. Very valuable."
It began when a group of Hong Kong billionaires, including one who has been called the Donald Trump of China, helped rescue Trump from the verge of bankruptcy by investing in one of his properties in Manhattan.
For years, the carefully cultivated relationship between Trump and his Hong Kong partners proved lucrative for both sides, and stands out as perhaps the closest that Trump has come to international diplomacy.
To strike the deal, Trump had to attend elaborate dinner parties featuring foreign foods he did not want to eat. He delayed the closing because of Chinese spiritual beliefs and hunted around New York for a "feng shui" master to help with the building decor, instead of indulging his tastes for marble and gold, according to former associates of Trump who were involved in the deal.
But when his Hong Kong partners sold the property without his support, Trump waged a bitter, long-shot legal battle against them. And far from winning his share of the Bank of America building, according to court documents, he had to settle for it after losing in court. In the end, Trump's alliance and eventual rivalry with some of Hong Kong's richest men proved to be a tale of Trump at the extremes. It showcased his unflagging confidence in his ability to turn a bad financial situation around. But it also underscored his willingness to destroy a fruitful relationship with aggressive litigation.
Their partnership began in 1994, after the collapse of the real estate market left Trump deeply in debt. He could not afford to make the bank payments on a 77-acre swath of land near Lincoln Centre known as Riverside South, let alone to develop the property.
In need of cash, he agreed to meet with intermediaries from a consortium of Hong Kong billionaires who were willing to buy the land, assume Trump's debts and pay him 30 per cent of the profits, as well as fees for helping to manage the development of the site, which they agreed to finance. It was by far the best offer he received. The group included Henry Cheng Kar-shun, one of the world's richest developers, and Vincent Lo, who is Trump's Chinese counterpart in more ways than one.
Like Trump, Vincent Lo comes from a wealthy family. He is well known for creating a hip restaurant area in Shanghai called Xintiandi, or "new heaven on earth," an upscale brand he has replicated across China. His life has been chronicled by tabloids and society pages, especially his divorce from his first wife and his marriage to a beauty pageant winner, Miss Hong Kong of 1977.
Despite their similarities, Trump hesitated when he received an invitation to travel to Hong Kong to negotiate the deal. He does not like to travel, and he feared that negotiating on the Hong Kong developers' turf would put him at a disadvantage and make him appear weak, said Abe Wallach, Trump's executive vice-president of acquisitions and finance at the time.
But face-to-face meetings are crucial in Chinese business culture, where personal bonds and political connections, collectively known as guanxi, are relied upon to avoid and resolve business disputes, sometimes more than the legal system. Eventually, Trump's aides convinced him that he had to make the trip.
In Hong Kong, the golf games, dinner parties and intensive talks featured the awkwardness and cultural miscues that can crop up in any high-stakes international negotiation. Lo and Cheng invited Trump to play golf, but Trump was appalled when they told him they usually bet more than $1,000 on each hole. They ended up betting $100 per hole, and Trump wound up losing more than he won, Lo recalled in an interview this month.
"He's a good golfer, but we had the local knowledge - he probably was jet-lagged," Lo said.
Lo and Cheng invited Trump to dinner at the home of Cheng's father, an uncommon honour in Chinese culture. But the evening was a trying experience for Trump.
"He didn't like the food, and couldn't use chopsticks," recalled Wallach, who was there. "The first course was a whole fish, with the head still on. You could see the face of the fish and the teeth, which really looked grotesque. The servant put the fish in front of Donald. Donald said, 'The honour belongs to Abe.' I took my chopsticks and began to pick at it."
Cheng and Lo also half-jokingly proposed an informal drinking contest, which Trump, a teet-o-taler, declined.
The Hong Kong partners were wary of Trump's well-earned reputation for litigiousness. But for more than a decade, Trump avoided conflict with them. Indeed, he often deferred to them. Chase Manhattan Bank, which held Trump's mortgage, initially scheduled the closing of the deal during China's Ghost Month, during which some believe the spirits of the dead roam the earth.
"The Chinese told me that we would have to wait until after the fifteenth of September to close the deal," Wallach wrote in a chapter of an unpublished book he is writing about his years with Trump. "Trump went apoplectic." But he said that Trump went along.
(Lo said that any delay had been caused by a need to complete paperwork, and that he and his business partners were not superstitious.)
The project proved extremely profitable, as the New York real estate market rebounded. In 2005, the Hong Kong partners sold the development for $1.76 billion. Although it was believed to be the largest residential real estate transaction in the city's history, Trump was furious, and contends to this day that his partners did not consult him first.
"I said: 'Why didn't you come talk to me? Whatever price you got, I could have gotten more money,'" Trump recalled in an interview this month.
Lo said that Trump had been informed of the decision, and that in any case it would have been very hard to shop such a large property around without Trump's becoming aware of it.
Instead of accepting his share of the proceeds, Trump sued his partners for "staggering breach" of fiduciary duty in a lawsuit that demanded $1 billion in damages. Lo, who felt that Trump should have been appreciative of the deal he had received, called the lawsuit "a shock."
And when the Hong Kong partners sought to invest the proceeds from the sale in Bank of America buildings in San Francisco and New York, Trump sought an injunction to scuttle the deal.
The judge ruled against him. Instead of receiving the cash he wanted, Trump had to accept a 30 per cent share in the profits from the two Bank of America buildings, tied up in a partnership that is slated to last until 2044. But today, Trump counts that legal defeat as a victory.
"Through more luck than talent, I ended up much better because the buildings have increased in value," he said. "In the end, it was fine."
Nonetheless, Trump's litigation over Riverside South dragged on for at least four years. He forced his partners to produce more than 166,000 pages of documents in court and accused them of various transgressions, including fraud and tax evasion.
During the litigation, Lo was forced to keep his trips to the United States secret, out of concern that Trump's lawyers would serve him with court papers that would force him to remain in the United States.
Outside court, Trump's battle seemed to take the shape of a personal rivalry with Lo, who had just bankrolled a Chinese reality television show called "Wise Man Takes All." It loosely resembled Trump's show "The Apprentice," although Lo appeared just once on the show and handed out start-up capital to the winners instead of jobs.
Trump announced that he was going to take a version of "The Apprentice" to China to compete with Lo's show, although Trump's show there does not appear to have gotten off the ground. In an interview, Trump asked a reporter how Lo's show had turned out, then answered his question, "Let's put it this way. It wasn't 'The Apprentice,' which was a big success."
Lo said his show had met his real goal of promoting entrepreneurship in China.
After the lawsuit, the Hong Kong partners moved swiftly to cut all ties to Trump. Lo sold his shares in the partnership to the Cheng family, which sold to Vornado Realty Trust, now the owner of a 70 per cent interest in the Bank of America buildings.
But in the interview, Trump sounded almost wistful about his former partners, marveling at the money they had made together and at the fact that they no longer spoke. He acknowledged that his former partners might have gotten the best deal possible on Riverside South, after all.
"It's too bad that this happened," Trump told a reporter.
"If you speak to Vincent and Henry, tell them I think they are fantastic people," he said. "You let them know that Donald Trump has great respect for them, OK?"
Eight thousand miles away, in his penthouse office in Hong Kong, Lo laughed when told of Trump's comment. He made clear that he had not forgotten being sued for $1 billion.
"Well, that's him," Lo said. "To file a lawsuit is nothing. It's just like having lunch."
© 2016 The New York Times News Service
In fact, he says, he has a personal track record to back up his boasts.
"I beat China all the time," Trump declared in a speech the day he announced his candidacy. "I own a big chunk of the Bank of America building at 1290 Avenue of the Americas that I got from China in a war. Very valuable."
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Trump does have an investment in the building, an office tower near Rockefeller Centre. But court documents and interviews with people involved in the deal tell a very different story of how he ended up with it.
It began when a group of Hong Kong billionaires, including one who has been called the Donald Trump of China, helped rescue Trump from the verge of bankruptcy by investing in one of his properties in Manhattan.
For years, the carefully cultivated relationship between Trump and his Hong Kong partners proved lucrative for both sides, and stands out as perhaps the closest that Trump has come to international diplomacy.
To strike the deal, Trump had to attend elaborate dinner parties featuring foreign foods he did not want to eat. He delayed the closing because of Chinese spiritual beliefs and hunted around New York for a "feng shui" master to help with the building decor, instead of indulging his tastes for marble and gold, according to former associates of Trump who were involved in the deal.
But when his Hong Kong partners sold the property without his support, Trump waged a bitter, long-shot legal battle against them. And far from winning his share of the Bank of America building, according to court documents, he had to settle for it after losing in court. In the end, Trump's alliance and eventual rivalry with some of Hong Kong's richest men proved to be a tale of Trump at the extremes. It showcased his unflagging confidence in his ability to turn a bad financial situation around. But it also underscored his willingness to destroy a fruitful relationship with aggressive litigation.
Their partnership began in 1994, after the collapse of the real estate market left Trump deeply in debt. He could not afford to make the bank payments on a 77-acre swath of land near Lincoln Centre known as Riverside South, let alone to develop the property.
In need of cash, he agreed to meet with intermediaries from a consortium of Hong Kong billionaires who were willing to buy the land, assume Trump's debts and pay him 30 per cent of the profits, as well as fees for helping to manage the development of the site, which they agreed to finance. It was by far the best offer he received. The group included Henry Cheng Kar-shun, one of the world's richest developers, and Vincent Lo, who is Trump's Chinese counterpart in more ways than one.
Like Trump, Vincent Lo comes from a wealthy family. He is well known for creating a hip restaurant area in Shanghai called Xintiandi, or "new heaven on earth," an upscale brand he has replicated across China. His life has been chronicled by tabloids and society pages, especially his divorce from his first wife and his marriage to a beauty pageant winner, Miss Hong Kong of 1977.
Despite their similarities, Trump hesitated when he received an invitation to travel to Hong Kong to negotiate the deal. He does not like to travel, and he feared that negotiating on the Hong Kong developers' turf would put him at a disadvantage and make him appear weak, said Abe Wallach, Trump's executive vice-president of acquisitions and finance at the time.
But face-to-face meetings are crucial in Chinese business culture, where personal bonds and political connections, collectively known as guanxi, are relied upon to avoid and resolve business disputes, sometimes more than the legal system. Eventually, Trump's aides convinced him that he had to make the trip.
In Hong Kong, the golf games, dinner parties and intensive talks featured the awkwardness and cultural miscues that can crop up in any high-stakes international negotiation. Lo and Cheng invited Trump to play golf, but Trump was appalled when they told him they usually bet more than $1,000 on each hole. They ended up betting $100 per hole, and Trump wound up losing more than he won, Lo recalled in an interview this month.
"He's a good golfer, but we had the local knowledge - he probably was jet-lagged," Lo said.
Lo and Cheng invited Trump to dinner at the home of Cheng's father, an uncommon honour in Chinese culture. But the evening was a trying experience for Trump.
"He didn't like the food, and couldn't use chopsticks," recalled Wallach, who was there. "The first course was a whole fish, with the head still on. You could see the face of the fish and the teeth, which really looked grotesque. The servant put the fish in front of Donald. Donald said, 'The honour belongs to Abe.' I took my chopsticks and began to pick at it."
Cheng and Lo also half-jokingly proposed an informal drinking contest, which Trump, a teet-o-taler, declined.
The Hong Kong partners were wary of Trump's well-earned reputation for litigiousness. But for more than a decade, Trump avoided conflict with them. Indeed, he often deferred to them. Chase Manhattan Bank, which held Trump's mortgage, initially scheduled the closing of the deal during China's Ghost Month, during which some believe the spirits of the dead roam the earth.
"The Chinese told me that we would have to wait until after the fifteenth of September to close the deal," Wallach wrote in a chapter of an unpublished book he is writing about his years with Trump. "Trump went apoplectic." But he said that Trump went along.
(Lo said that any delay had been caused by a need to complete paperwork, and that he and his business partners were not superstitious.)
The project proved extremely profitable, as the New York real estate market rebounded. In 2005, the Hong Kong partners sold the development for $1.76 billion. Although it was believed to be the largest residential real estate transaction in the city's history, Trump was furious, and contends to this day that his partners did not consult him first.
"I said: 'Why didn't you come talk to me? Whatever price you got, I could have gotten more money,'" Trump recalled in an interview this month.
Lo said that Trump had been informed of the decision, and that in any case it would have been very hard to shop such a large property around without Trump's becoming aware of it.
Instead of accepting his share of the proceeds, Trump sued his partners for "staggering breach" of fiduciary duty in a lawsuit that demanded $1 billion in damages. Lo, who felt that Trump should have been appreciative of the deal he had received, called the lawsuit "a shock."
And when the Hong Kong partners sought to invest the proceeds from the sale in Bank of America buildings in San Francisco and New York, Trump sought an injunction to scuttle the deal.
The judge ruled against him. Instead of receiving the cash he wanted, Trump had to accept a 30 per cent share in the profits from the two Bank of America buildings, tied up in a partnership that is slated to last until 2044. But today, Trump counts that legal defeat as a victory.
"Through more luck than talent, I ended up much better because the buildings have increased in value," he said. "In the end, it was fine."
Nonetheless, Trump's litigation over Riverside South dragged on for at least four years. He forced his partners to produce more than 166,000 pages of documents in court and accused them of various transgressions, including fraud and tax evasion.
During the litigation, Lo was forced to keep his trips to the United States secret, out of concern that Trump's lawyers would serve him with court papers that would force him to remain in the United States.
Outside court, Trump's battle seemed to take the shape of a personal rivalry with Lo, who had just bankrolled a Chinese reality television show called "Wise Man Takes All." It loosely resembled Trump's show "The Apprentice," although Lo appeared just once on the show and handed out start-up capital to the winners instead of jobs.
Trump announced that he was going to take a version of "The Apprentice" to China to compete with Lo's show, although Trump's show there does not appear to have gotten off the ground. In an interview, Trump asked a reporter how Lo's show had turned out, then answered his question, "Let's put it this way. It wasn't 'The Apprentice,' which was a big success."
Lo said his show had met his real goal of promoting entrepreneurship in China.
After the lawsuit, the Hong Kong partners moved swiftly to cut all ties to Trump. Lo sold his shares in the partnership to the Cheng family, which sold to Vornado Realty Trust, now the owner of a 70 per cent interest in the Bank of America buildings.
But in the interview, Trump sounded almost wistful about his former partners, marveling at the money they had made together and at the fact that they no longer spoke. He acknowledged that his former partners might have gotten the best deal possible on Riverside South, after all.
"It's too bad that this happened," Trump told a reporter.
"If you speak to Vincent and Henry, tell them I think they are fantastic people," he said. "You let them know that Donald Trump has great respect for them, OK?"
Eight thousand miles away, in his penthouse office in Hong Kong, Lo laughed when told of Trump's comment. He made clear that he had not forgotten being sued for $1 billion.
"Well, that's him," Lo said. "To file a lawsuit is nothing. It's just like having lunch."
© 2016 The New York Times News Service