Faced with bankruptcy, indifference from its own government and an emasculating deal that would virtually hand its car business to General Motors, the troubled Daewoo Group of South Korea now has a new nemesis: Walter Cronkite.
The newsman and his merry men of Beekman Hill are targeting the corporate giant in their mounting campaign to stop construction of a monstrous new residential high-rise near the United Nations.
The group’s logic: If it can’t pressure Donald Trump to scale back his plans for the 861-foot Trump World Tower, it will go after his financial bedfellow.
That’s Daewoo, the second-largest conglomerate in Korea, whose mammoth enterprises range from agriculture to shipbuilding to electronics-and New York City real estate. Its wholly owned subsidiary, Daewoo America Development Inc., owns 60 percent of Trump World Tower, according to loan documents filed for the project, obtained by The Observer . (Mr. Trump insists it’s a 50-50 partnership.) In any case, for Mr. Cronkite and friends, that makes Daewoo, not Mr. Trump, the party to be reckoned with.
“Mr. Trump is only the name behind [the tower]. The real source of equity is Daewoo,” said Lee Silberstein, publicist for the anti-Trump clan, which calls itself the Coalition for Responsible Development. “That’s why it makes sense to go behind the mask.”
In their latest attempt to stump Trump, the coalition is appealing to the Korean Government to step in and stop Daewoo from participating in this “illegal monstrosity,” which when built will “denigrate the status and stature of the United Nations” by pretentiously hovering 300 feet above the Secretariat Building at 47th Street and First Avenue.
“The Korean Government has been very close to the U.N. both as a contributor and beneficiary, so we would hope that would carry forward into this [issue],” said Seymour (Sy) Flug, co-chair of the coalition. “We just want Daewoo to understand that what they are doing hurts the people of this neighborhood, this city, the country and the world who all believe in the United Nations.”
The group has left no stone unthrown in their effort to knock down what would be the world’s tallest residential skyscraper. In the past few months, the group has accused Mr. Trump of illegally obtaining his building permit by transferring air rights from adjacent zoning districts, failing to file required documents with the Federal Aviation Administration regarding potential plane navigation interference, and ignoring hazardous air pollutants that might cause problems for elderly residents living on the highest floors.
So far, nothing has stuck. The city’s Department of Buildings has held up the validity of the tower’s building permit. And the city’s Board of Standards and Appeals is not expected to issue rulings on the zoning until September. At the rate Mr. Trump’s tower is rising, that may be too late. Construction crews have already completed the first and second floors. That’s only 70 to go.
But the coalition is playing one more trump card. In a letter addressed to South Korean President Kim Dae Jung on Aug. 2, with copies hand-delivered to Korea’s ambassadors to the United States and the United Nations, Mr. Cronkite writes: “I respectfully urge you, with the sense of history and perspective that you, as a great leader have, to prevail upon Daewoo Corporation not to build in excess of the height of the United Nations building. This gesture of respect by Korea for the institution of the United Nations will be remembered and appreciated by the world community and responsible New Yorkers forever. The alternative, that each of the thousands of visitors and representatives of the nations of the world who come to the United Nations headquarters each year will see a huge Daewoo building committing its daily offense against the United Nations, would be an eternal embarrassment for Korea and a grievous injury against an institution critically important to the future of the world.”
Talk about guilt.
To drive their plea home, Mr. Flug, the retired chief executive of Diners’ Club and a former managing director of Citibank, met with the Ambassador to the United Nations, Lee See Young. “I asked him what would happen if a U.S. company went and put up a 90-story building right next to the most important building in Seoul. He said it would never happen because the Government wouldn’t let them do it. And I said, ‘Well, welcome to New York.’”
According to Mr. Flug, Mr. Lee said he would look into the situation and get back to him. Mr. Flug hasn’t heard a word since that July 12 meeting and the Ambassador did not return calls to The Observer . “Why they would want to denigrate the U.N. complex, I just don’t understand,” said Mr. Flug.
If the coalition does not receive a favorable response from President Kim and the Korean Government, Mr. Flug told The Observer , they will take their sour grapes to the streets and picket the New York and New Jersey Daewoo offices. “We will go through the diplomatic channels first. But this cause has started to take on its own life … We can’t control people if they’re up in arms and want to rally,” he said.
Mr. Trump isn’t concerned. “Rich people don’t picket very long. And besides, a vast majority of people are in favor of this job,” he told The Observer .
But timing may be on the side of the tower-bashers. Daewoo’s finances are shakier than the truce between North and South Korea. And that fact could presumably make the company more vulnerable to complaints about their overseas investments. On the verge of bankruptcy, Daewoo is at the mercy of the Korean Government, which approved a several-billion-dollar emergency credit bailout in July. The Government-and creditors-are urging the conglomerate to shed itself of some assets. Already, Daewoo has made a deal with General Motors Corporation that will allow the American carmaker to virtually absorb its car-making operation.
Mr. Flug said Daewoo’s financial position had little to do with the timing of their pleas to South Korea, although he didn’t rule out the possibility that it could help. “Regardless of whether they are or aren’t [having money problems], they have no right putting up this building. But the fact that they are in financial trouble certainly casts more doubt on whether it will ever go up at all,” he said.
Abe Wallach, executive vice president of the Trump Organization, said that Daewoo’s financial problems will not affect construction. “Our opposition is trying to paint the picture that Daewoo is in financial straits and therefore the project must be in financial straits. One has nothing to do with the other. Daewoo funded its part of the equity when the project was conceived a year ago. The funding for the project is fully, and I repeat, fully, there.”
In fact, he said, even if the Korean Government or the financial situation somehow did force Daewoo out of the project altogether, the tower would still be built as planned. “The worst that would happen would be that we’d buy the whole thing and we’d love to do that. The project is hugely successful,” Mr. Wallach said. Sources within the industry have told The Observer that in light of Daewoo’s recent financial problems, preliminary negotiations are under way to explore that very possibility.
For now, Daewoo is on board. So the question remains: Can the coalition get the Korean Government to knock down a few dozen stories? Can Walter really woo
It’s not likely, said Mr. Trump. From his cell phone in Monte Carlo, he called this latest strategy a “desperate” attempt by Sy, Walter and gang. He referred to Mr. Cronkite’s letter as “irrelevant” and said that no appeal to the Korean Government could possibly do any good.
Mr. Wallach called the entire strategy “ludicrous.” “No foreign government can dictate zoning policy in the United States or even tell Daewoo what it should do about the height of this building,” he told The Observer . The decision to build the tower at its current height was made a long time ago with Daewoo’s fully signed consent and approval, he said. “They cannot suddenly say ‘The Korean Government told us we can only do a 60-story building.’ That defies logic, let alone the legal system.”
Aby Rosen, a New York real estate developer with R.F.R. Holding, L.L.C., told The Observer Daewoo’s pecuniary predicament may actually strengthen their resolve to let the deal stand as is. “They’re going to hurt themselves if they try to reduce the square footage on that building, because they’ll have less square footage to sell, which means less profit,” he said.
Mr. Rosen, calling the coalition’s tactic “a weak attempt,” said the $40 million to $50 million he understands was invested by Daewoo is just a drop in the bucket compared to the other problems they have. “They will fight for every penny they have in this deal to make sure they get their return on it,” he said.
According to Mr. Wallach, and confirmed by papers filed with the Attorney General’s office, Daewoo is the limited partner and Mr. Trump’s company is the general partner and manager of the project. In other words, Daewoo, regardless of the amount or percentage of money put into the project, has very little, if any, say in key management or operational decisions, according to Mr. Wallach.
Joonha Lee, vice president of Daewoo America Development (N.Y.) Corporation, confirmed that partnership structure. “We are just the limited partner. Our obligation is just to put up the money and that’s it,” said Mr. Lee, whose office is conveniently located within the Trump Organization building at 725 Fifth Avenue. “We are totally dependent on what Trump is doing, what Trump has done and what Trump will do.”
And as for appealing to the Korean Government to levy a heavy hand on Daewoo, Mr. Lee told The Observer he didn’t understand the logic. “Why should the Government of Korea be involved in this kind of project? In the United States, does the President use his leverage in the construction and investment projects of a private company? No.… I don’t know what Mr. Cronkite wants from Daewoo. If he wants to resolve the matter, I think he needs to talk with Mr. Trump, not by using the country name, Korea. It’s not fair.”
The Korean Embassy was similarly confused. The Deputy Permanent Representative to Korea, Suh Dae Won, told The Observer that he didn’t know if President Kim had the power to influence private enterprise. But even if he did, Mr. Suh wasn’t sure it could help. “If Daewoo is only a limited partner, then that would mean they are limited in their decision making, right? … If Daewoo has no influence over decisions like the number of stories in the building, then Mr. Cronkite’s efforts to push Daewoo doesn’t make any sense.”
But according to the Attorney General’s file folder, Daewoo, in addition to being the limited partner, is also the construction manager for the deal. Doesn’t that mean it must have at least some control over the height and construction of the building?
“Not at all,” Daewoo’s Mr. Lee told The Observer . “Yes, the [construction-manager title] is under the name Daewoo, but it is just the paper … We are the limited partner. We don’t have any control.”
Mr. Flug doesn’t buy it. “I don’t know what the arrangements between Mr. Trump and Daewoo are, but I do know that if I owned a majority of a company, I could influence that company significantly. I don’t think you have to be a genius or a scholar to understand that,” he told The Observer .
Mr. Wallach doesn’t see it that way. “It’s a nice try,” he said. “But like all the other tries, it’s words crafted to sound good, but in the end mean nothing.”
And that’s the way it was.
Follow Rebecca Gardyn via RSS.