The Panic of 1837 was one of the worst years ever for property values in New York City. Many New Yorkers lost their homes to foreclosure, and so many others were in default on their mortgage payments that the state passed a bill granting a year’s grace period for them to catch up on what they owed.
According to economist Milton Friedman, the five-year financial crisis was comparable in severity to the Great Depression.
But while investors throughout the city were losing their proverbial shirts, John Jacob Astor, the founder of the Astor dynasty, was prospering.
In the midst of a freefall in property values, Astor snapped up $224,000 in Manhattan real estate, according to “John Jacob Astor: America’s First Multimillionaire” by Axel Madsen.
Later, when interest rates climbed to 7 percent and property owners could no longer make payments on the mortgages he controlled, Astor promptly foreclosed on scores of them.
Critics said that Astor was such a hardnosed speculator that he built his empire with no thought at all toward community improvement. They noted that he would acquire vacant plots of land from the city and leave them undeveloped or unmaintained.
In some cases, Astor was buying properties for such low prices that the now-defunct Court of Chancery made him pay more money for some of the lots. In one case he picked up an entire city block in Harlem, which was estimated to be worth $1 million, for $2,000.
Astor’s appetite for New York real estate appears to have had no limits. On his deathbed in 1848, he is said to have exclaimed, “Could I begin life again, knowing what I now know, and had money to invest, I would buy every foot of land on the island of Manhattan.”
Astor was born in 1763 in the small town of Waldorf, Germany, the fifth and youngest son of a local butcher.
At age 17, he moved to London, where he worked in his older brother’s flute-making shop. Sensing more opportunity in the newly independent United States, in 1783 Astor moved to New York and got his start toiling in the dirty business of scraping and cleaning undressed fur pelts in Lower Manhattan. Yet by the time of his death in 1848, he was the city’s most powerful real estate magnate and the richest man in the country.
Astor did not make his first fortune through any sudden windfalls or lucky breaks. His early successes came from perseverance and frugality; through the fur and flute shops, he was able to build up enough capital to establish his own fur trading company. Good connections also helped: He married Sarah Todd, who while impecunious was related to a prominent Dutch family.
As Astor’s business grew, eventually he was able to establish the American Fur Company, an empire that stretched across the country.
However, while his riches allowed him to advance to the pinnacle of New York society, he never bothered to develop good graces and was known for his shocking table manners, which included occasionally using the sleeves of dining companions to wipe his mouth, according to “When the Astors Owned New York” by Justin Kaplan.
After fur, Astor made his second fortune by establishing an international shipping business that participated in the profitable China trade, which was the basis of so many other early American financial dynasties. He not only traded in tea and silk, but also trafficked opium from India to China, flouting the efforts of Chinese authorities to curtail the trade, according to several books.
By 1810, Astor was one of the wealthiest men in America, and began to loosen up his unrelenting schedule. He made extended trips to Europe, where he socialized with relatives of Napoleon Bonaparte and bought a villa on the shores of Lake Geneva. However, despite his riches, Astor didn’t scale back his business dealings. Instead, he intensified his investments in New York City real estate, which ultimately made him an even larger fortune than his earlier ventures.
Real estate bull
Astor’s initial real estate investments had been confined to short-term speculation as a means to finance his other businesses; he bought land and sold it sometimes without realizing that much of a profit. But around 1819, Astor withdrew from his other businesses and began to focus on real estate.
Astor acquired most of his holdings in a fast-developing area on the West Side of Midtown at an especially auspicious time. When Astor arrived in Manhattan in 1783, New York’s population was at 25,000 inhabitants. But at the end of his life, it had shot up to about 500,000.
He presided over his growing holdings from an office building on Prince Street that was, to say the least, formidable. In Kaplan’s book, the structure is described as having “massive masonry walls, an iron roof, doors of iron, iron-grated windows and heavy iron braces thrown from wall to wall.”
Unlike many real estate entrepreneurs today, Astor was not primarily a developer. There are several blocks of Greek revival and Federal-style row houses remaining today in Downtown’s Charlton-King-Vandam Historic District, south of Houston Street, that were built starting in the 1820s on a former estate in the area that Astor razed for redevelopment.
But in general, Astor preferred to buy or lease land and then rent it to developers whose projects he sometimes financed. Many of his profits came from acquiring large tracts of land and then subdividing them into smaller lots, which he would lease for short periods of time. This arrangement left the tenant responsible for the property’s upkeep and taxes.
When a tenant’s lease ran out, Astor would either raise the rent or buy the buildings that had been constructed.
“The chief way of getting rich was to buy up tenements, keep them that way, and extract rents,” Kaplan told The Real Deal. “His guiding principle became, ‘Never sell anything, just hold onto it and suck the blood out of it.'”
Astor might not have been much of a builder, but his lasting influence can be seen today in the way certain neighborhoods were developed, according to Francis Morrone, the New York City architectural historian.
“West of Fifth Avenue [on the streets that now comprise the 30s], it was all owned by the Astors, and they just wanted maximum return on the land, whether it was industrial use or whatever,” Morrone said. “Whereas in the Murray Hill neighborhood [east of Fifth Avenue], it was a matter of the Murrays subdividing the land with all sorts of restrictive covenants to ensure that that area would remain residential. So in that sense, had someone other than the Astors owned what is now the Garment District, it might today look like Murray Hill and not the Garment District.”
According to published accounts, Astor usually got whatever he went after. One deal involved obtaining a $25,000 interest in a mortgage on financially troubled Eden Farm, a 22-acre parcel around the area that is now Times Square.
When the farmer defaulted, Astor foreclosed and took possession of the property. He then subdivided part of the farm into 141 lots, which he sold for approximately $5.1 million.
On another major deal, Astor connived with Aaron Burr, the infamous Revolutionary War figure, to acquire the 51,000-acre Putnam County estate of Robert Morris, a Tory who had fled to England.
In 1809 in London, Burr, acting on Astor’s behalf, convinced Morris’ heirs to part with their claim for $100,000. When Morris’ widow died in 1825, Astor lost no time in sending eviction notices to the hundreds of tenant farmers who lived there.
The resulting uproar ultimately concluded in a case before the Supreme Court, which found in Astor’s favor. Finally, in 1830, Astor consented to sell the property to the state for $520,000.
One notable exception to Astor’s buy-and-lease business model was the Astor House, the city’s first grand hotel, which the tycoon spared no expense in building. The Astor House, which stood near the present-day City Hall Park, introduced the city to an unprecedented level of luxury, with carpeted corridors, free soap and maid service. At $2 a night, the six-story, 300-room hotel built in a Greek Revival style was beyond the reach of all but the wealthiest.
The New York Herald regularly published a list of its guests, including celebrities like Davy Crockett, Charles Dickens and Daniel Webster.
Today, Astor House is gone, and the strongest traces of John Jacob Astor are the places that bear his name throughout the city, including Astoria in Queens and Astor Place in Manhattan. (To commemorate Astor and the fur trade by which he made his first fortune, there are bas-relief plaques of beavers installed in the Astor Place subway station.)
He also left a marked impact on New York society. Since Astor left most of his money to his immediate family, his fortune enabled his heirs to live the high life for generations. His last direct male descendant, Vincent Astor, made his wife, Brooke, the grande dame of New York’s social set.
John Jacob’s one great civic endowment was the $400,000 he left for the construction of the Astor Library and the establishment of its book collection, the largest at the time. However, despite this beneficence, the library did not loan out books to the general public. In 1895, the library’s book collection merged with other collections to form the New York Public Library.
Much of the remaining family fortune ended up going to the Vincent Astor Foundation, which has contributed tens of millions of dollars to institutions such as the New York Public Library and the Metropolitan Museum. Still, 19th-century biographer James Paxton described Astor’s mission this way: “To get all he could and to keep nearly all he got. The love of accumulation grew with his years until it ruled him like a tyrant.”