PDF Summary:The Plaza, by Julie Satow

The Plaza Hotel has stood at the corner of Fifth Avenue and Central Park South since 1907, serving as a witness to American history and culture. In The Plaza, Julie Satow traces the hotel's story from its origins as an architectural marvel designed to resemble a French chateau through its various transformations and ownership changes over more than a century.

Satow examines how the hotel adapted to major events like Prohibition and the Great Depression, housed eccentric residents and famous guests, and eventually faced the threat of demolition before landmark designation saved it. The book also explores the economic forces that reshaped the Plaza in recent decades, including its controversial conversion from a traditional hotel into a mixed-use property with condominiums, retail spaces, and fewer hotel rooms—a transformation that reflected broader changes in Manhattan real estate and raised questions about preserving historic landmarks while maximizing profit.

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(Shortform note: Wikipedia editors credit a Midwestern socialite with hosting the first documented “cocktail party,” not a Kentucky horsewoman. According to online encyclopedia articles, the first cocktail party was hosted by Mrs. Julius S. Walsh Jr. of St. Louis, Missouri, in May 1917. She invited 50 guests to her home for a one-hour gathering, where drinks were served in the living room. The event was so successful that it became a weekly tradition, and the concept quickly spread across the country.)

Economic and Political Forces Shaping The Plaza

Political and preservation efforts have influenced what happens to The Plaza. Satow notes that it has survived financial depressions, wars, and political turmoil. In the 1960s, the hospitality sector was struggling, and many major hotels were being demolished or converted into more profitable uses. The Plaza faced the threat of demolition, but preservationists and political leaders fought to protect it. In 1965, New York City enacted legislation to designate and safeguard historical buildings, and in 1969, The Plaza became a New York City landmark, so the city must approve any alterations to its facade. In 1986, it received recognition as a U.S. historical site of national significance.

(Shortform note: The Plaza’s landmark status reflects a broader shift in preservation philosophy. In The Once and Future New York, Randall Mason argues that historic preservation in New York evolved from a narrow focus on isolated monuments to a more holistic approach that sees historic places as concentrations of cultural, social, and economic capital. He explains that preservationists began to see historic buildings not just as relics of the past, but as active participants in the city’s present and future. This shift in thinking led to new strategies for managing change, balancing development with conservation, and using historic places to shape collective memory and identity.)

The Plaza is situated at the intersection of major New York streets, where the richest have gathered since the era of the Astor 400, making it a highly desired property. The hotel once had about 800 rooms, but it's now reduced to under 300, and the prime views have been converted into multimillion-dollar condominiums. The lobby, which was once grand, has been reduced by half to provide a private entrance for residents. Each proprietor extracted what was necessary, further diminishing the property. Maintaining a landmark structure, paying wages to thousands of workers, and running numerous restaurants and spaces for public use are prohibitively expensive. The hotel’s current owner, a hospitality company controlled by the Gulf state of Qatar, may reverse this cycle and restore the Plaza's previous prominence.

The Astor 400

The “Astor 400” refers to the 400 people who were considered the most elite members of New York society during the Gilded Age. The term was coined by Ward McAllister, a social arbiter, and Caroline Astor, a prominent socialite, who determined that 400 was the number of people who could comfortably fit into Mrs. Astor’s ballroom. This exclusive group included the wealthiest and most influential families of the time, such as the Vanderbilts, the Astors, and the Rockefellers. Being part of the Astor 400 was a symbol of social status and privilege, and it dictated who was considered part of the upper echelon of New York society. The concept of the Astor 400 reflected the rigid social hierarchy and exclusivity of the Gilded Age.

In this section, we will examine The Plaza's adaptations and transformations, responses to external pressures, internal restructuring and political mediation, as well as its ownership, finance, and identity.

The Plaza's Adaptations and Transformations

Responses to External Pressures

The establishment responded to external pressures by adapting to changing circumstances. Satow points out that the establishment adjusted to Prohibition by converting bars and increasing room rates. The Plaza and other hotels lobbied against Prohibition, but their efforts had little impact. When Prohibition went into effect, the Plaza and other hotels were too high-profile to risk breaking the law. They forfeited a major source of revenue and had to adapt. The Plaza repurposed its bars for other functions, such as leasing the Oak Room to a brokerage firm and turning the Rose Room into a car showroom. The Plaza and other hotels also raised their room rates to compensate for the loss of alcohol sales.

High-Profile Establishments and Prohibition

The Plaza and other hotels may have been too high-profile to risk breaking the law, but that wasn’t the case everywhere. In Dry Manhattan, Michael A. Lerner notes that some luxury hotels in New York City continued to serve alcohol during Prohibition by operating private clubs or back-room venues. He explains that these establishments often had connections with local law enforcement or politicians, allowing them to operate with relative impunity. This suggests that the Plaza’s decision to comply with Prohibition may have been influenced by its specific location and the political climate in New York City at the time.

Satow adds that the hotel struggled to stay afloat throughout the Great Depression. By 1932, the hotel's occupancy rate fell to 51%, and in 1933, the company running the Plaza reported a net loss of about $708,000. The hotel’s facade became dingy, its tapestries threadbare, and its infrastructure began breaking down. Employees often had to wait several weeks for their salaries, and guests had to manage their own luggage. The hotel shut down several of its popular meeting spots, such as the Grill Room and the Rose Room, and on most nights, there was just one restaurant open to guests.

The Economic Challenges of Running a Luxury Hotel

The Plaza’s struggles during the Great Depression highlight the economic challenges faced by luxury hotels during economic downturns. Even with a 51% occupancy rate, the hotel struggled to cover its fixed costs, such as mortgage payments, utilities, and maintenance. The hotel’s management had to make difficult decisions to keep the business afloat, such as closing popular meeting spots and delaying employee salaries. These measures were necessary to reduce operating costs and preserve cash flow, but they also had a negative impact on the hotel’s reputation and guest experience.

Internal Restructuring and Political Mediation

El Ad restructured the establishment to maximize profitability. Satow explains that El Ad leased the Plaza’s public rooms to outside operators, who paid high rents. The basement was partitioned into smaller vendor stalls and rented to food sellers. The restauranteurs and shop owners who rented these spaces operated them autonomously, with little guidance or supervision from the Plaza hotel. This marked a new development where the shared areas weren't managed by hotel staff.

El Ad aimed to reduce the hotel room count to 150, down from 805. The developer hurried to sell the condos despite the recession worsening, succeeding in offloading the apartments, although it took longer and some were priced lower than it hoped. Ultimately, the sales generated $1.4 billion. El Ad stated it earned a net profit of $1 billion from the overall Plaza venture, accounting for renovations and other expenses.

Extracting Value From the Plaza

El Ad’s restructuring of the Plaza into a collection of leased spaces and condos was a textbook example of how real estate developers can extract value from a property by transforming it from a business into a bundle of property rights. By selling off the condos and leasing the public spaces to outside operators, El Ad was able to generate a significant profit from the Plaza, even as the hotel industry was struggling. This approach is based on the idea that investors are willing to pay more for a property when they can own a piece of it outright, rather than just the right to operate a business on it. In the case of the Plaza, the condos and leased spaces represented a more tangible form of ownership than the hotel rooms, which were essentially just a stream of future cash flows. By converting the Plaza into a collection of property rights, El Ad was able to tap into a different pool of investors and generate a higher return on its investment.

Ownership, Finance, and the Plaza's Identity

The Plaza has changed ownership multiple times, reflecting shifts in its identity and financial challenges. Satow notes that the establishment has had many owners, including Conrad Hilton, Donald Trump, Subrata Roy, and Harry Black. During the 1970s, the Plaza made efforts to rebrand itself as a destination for the hip crowd. In the 1980s, Donald Trump acquired the Plaza, decorated its rooms with gold leaf, and appointed his wife Ivana to lead it. The hotel declared bankruptcy for the one and only time, and a prince from Saudi Arabia along with a Singaporean billionaire then bought it from Trump. A developer from Israel later sold it to Subrata Roy, an Indian owner. In 2018, a Qatari-owned hospitality company took possession of the building. Satow adds that some apartments function as discreet financial repositories, where the wealthiest people in the world store and, in some cases, clean their funds.

(Shortform note: In 2018, Oliver Bullough published Moneyland, a book that explores how the world’s wealthiest individuals use complex financial systems to move and hide their money. Bullough describes how these elites, often from countries with corrupt governments, transfer their wealth into Western countries through a network of lawyers, accountants, and bankers. He explains that these individuals often buy expensive properties in cities like London and New York, using them as safe places to store their money. Bullough argues that this system allows corrupt leaders to steal from their own countries and live luxuriously abroad, while ordinary people suffer from poverty and lack of services.)

Changes to the Plaza were unavoidable. It’s less logical now to have large upscale hotels in NYC. Real estate in Manhattan is extremely valuable, and the hotel industry is too volatile to justify it.

(Shortform note: Research from Cornell’s School of Hotel Administration shows that hotel investments are highly cyclical and often yield lower risk-adjusted returns compared to other real estate assets. In land-constrained cities like New York, this makes large hotels a less attractive investment, explaining why they may no longer make financial sense.)

Key Terms and Concepts

The Plaza experienced changes in ownership and underwent a significant renovation and transformation into a multiuse property. Satow explains that the Plaza underwent a $450 million renovation, transforming it into a multiuse space with a limited amount of hotel rooms, luxury condominiums, and an indoor shopping mall. The new Plaza owners assumed they could do as they pleased with the property, but they underestimated the challenge.

(Shortform note: The new owners’ assumption that they could do as they pleased with the property was likely based on the idea that they had the financial resources and legal authority to make changes. However, the reality of renovating a historic building like the Plaza is far more complex. The building’s age, structural limitations, and the need to comply with modern building codes and accessibility standards created a web of constraints that often clashed with the owners’ vision.)

Those who study architecture and enthusiasts of historical New York expressed their worries, cautioning that making major modifications to the famous hotel would cause a PR catastrophe. The New York Hotel and Motel Trades Council, a union of 35,000 people such as bellmen, doormen, banquet waiters, and maids, also opposed the plan. The Plaza held special meaning for Ward as the city's most renowned hotel and a leading employer for the union. Ward's union faced difficulties because of the surge in real estate and the condo trend overtaking Manhattan. In 2004, six of the seven hotels that changed hands were turned into apartment buildings, resulting in the elimination of almost 1,100 hotel rooms and more than 1,000 union jobs in a year-long span.

The Origins of the Real-Estate Surge

The real-estate surge and condo wave that undercut Ward’s union was the result of a decades-long shift in New York City’s economy and politics. In the 1970s, the city faced a severe fiscal crisis, with declining manufacturing jobs and a shrinking tax base. City leaders responded by courting the financial sector and luxury real-estate developers, offering tax breaks and rezoning to encourage high-end construction. This strategy transformed Manhattan into a global hub for finance and luxury living, but it also created powerful incentives to convert centrally located buildings into upscale residences, regardless of the impact on unionized hotel workers.

In this section, we will discuss financial structures and transactions, ownership models and wealth flow, and hidden ownership and transactions.

Financial Structures & Transactions

Ownership Models & Wealth Flow

The Plaza's ownership structure shifted from a unified hotel to a fragmented condominium and retail space. Satow describes how the Plaza was divided into 130 traditional guest rooms, 152 hotel condominiums, and 181 apartments (later reduced to 167). The hotel condominiums were sold to buyers who could use them for a maximum of 120 days annually, with the units either returning to the hotel or staying unoccupied during the rest of the year. The apartments were sold as private residences, and public spaces were leased to retailers and restaurateurs.

Satow argues that the Plaza was no longer able to control its destiny. The approach led to massive gains for El Ad, which earned money from each part of the hotel by selling or leasing it. El Ad earned $1 billion, but the grand old lady was crippled.

The Plaza as an Anticommons

The Plaza’s new ownership structure created what the legal scholar Michael A. Heller calls an “anticommons.” In an anticommons, multiple owners have the right to exclude others from using a resource, but no one has the right to use it themselves. This leads to underuse and inefficiency, as each owner can block others from using the resource, but no one can use it themselves. In the case of the Plaza, the division of ownership among hotel guests, condo owners, apartment owners, and retailers created a situation where no one had the right to use the building as a whole. This made it difficult to make decisions about the building’s future, as each owner had the power to veto any changes they didn’t like.

Satow adds that transforming the Plaza into condominiums attracted wealthy buyers, including those using shell companies. Affluent people owned most of the previous guest rooms, while the shared spaces were leased to businesses, including a clothing store, a restaurant, a bakery, and an event planning company.

The transformation coincided with a surge in Manhattan's condo market. The newly transformed Plaza's condominiums attracted wealthy buyers from around the world, including many Russians, Mexicans, and buyers from Spain, Italy, Turkey, Kazakhstan, and Kuwait. Many purchasers employed shell companies to buy their units, allowing them to hide their identities and the source of their funds. The Plaza's developers and brokers did not investigate the source of their clients' funds, focusing instead on generating as much profit as possible.

The Financialization of Housing

The use of shell companies to purchase Plaza condominiums reflects a broader trend in global finance known as the “financialization of housing.” This term describes the process by which housing is increasingly treated as a financial asset rather than a place to live. In The Financialization of Housing, Manuel B. Aalbers argues that this shift has transformed urban real estate markets worldwide, making them more susceptible to global capital flows and speculative investment. He explains that financialization has led to the creation of complex financial instruments and investment vehicles that allow investors to profit from housing without ever living in or even seeing the properties they own. This process has also contributed to rising housing costs and increased inequality in many cities, as homes are increasingly viewed as commodities to be traded rather than as essential human needs.

Obscured Ownership & Transactions

Satow points out that many Plaza apartments were acquired via shell companies, obscuring the actual owners. Shell companies don't have a physical location and are generally valueless beyond the specific purchase for which they are created. They're frequently employed for legal tax purposes, but they can also serve to conceal illegal funds. Over half the people purchasing Plaza units were unidentified shell companies. Brokers at the Plaza's sales center couldn't take cash payments in bags, but otherwise faced few rules.

(Shortform note: A shell company is a business entity that exists only on paper, with no physical operations or employees. It’s a legal entity that can enter into contracts, own assets, and conduct financial transactions, but it doesn’t engage in any significant business activities. In the context of real estate, shell companies are often used to obscure the true ownership of properties. They can be set up in jurisdictions with lax disclosure requirements, making it difficult to trace the actual individuals or entities behind the company.)