Donald Trump's well-publicized financial difficulties, while headline-grabbing, are not unique.
"The Donald" may be in "The Hot Water" right now, but the lessons of his rise and potential fall aren't limited to the canyons of New York City, the Florida Coast or Atlantic City's boardwalk. A Trump-like tumble, on a smaller scale, is possible in Buffalo.
Developers of all sizes rise, fall and rise again. Debt is relative to a developer's size; $2 billion or $2 million can choke a dealmaker -- it depends on his or her debt capacity.
Some developers can't recover from their excesses, but many do, if they return to the basics, say experts in the local real estate industry. And, if developers and lenders don't lose sight of cash flow.
"Can something like what has happened to Trump happen here? Yes," said James Militello, owner of J.R. Militello Realty Inc. "It's already happened to some local developers, where they've run into trouble, but were able to work out their problems." Militello would not be more specific.
Trump's penchant for chasing the media spotlight also hasn't helped him as he attempts to sell portions of his ailing empire. To paraphrase the dealmaker himself in his autobiography, "Trump: The Art of the Deal," a smart dealmaker never lets the competition know his financial situation.
Apparently, Trump didn't read his own copy. He telegraphed the need for cash at least a month before he missed $73 million in bond and loan payments. Now, no one is willing to pay a premium for the Trump Shuttle or the Trump Princess yacht since it's known the owner is desperate for money.
Trump's problems are more than just a huge case of jumpy financial institutions worried about how secure their loans to various parts of the Trump empire remain. The brash dealmaker has been taking risks on deals since 1976, when he paid $10 million for a run-down hotel in mid-town Manhattan, tore it down and four years later opened the 1,400-room Grand Hyatt.
Risk, and a downturn in the real estate industry, now have turned deadly.
"A lot of major developers are experiencing difficulties, and it's because of their development philosophy," said Robert B. Engel, Marine Midland Bank's group executive for the Real Estate Industries Division. "Their philosophy was 'the market is good, and will continue to get better. We'll pay today's bills with tomorrow's profits.' "
Developers and lenders, Engel said, forgot that the real estate business is a cash-flow business, and that appraised values don't pay bills.
"We as lenders, in our drive for more assets and gross income, were lending on a project-by-project basis, rather than analyzing cash flow and the integrity of the builder," Engel said. He said developers in this area have paid stricter attention to cash flow, rather than appraised property values.
Some say Trump overdiversified, gambling -- literally -- that he could succeed in all things. Most Buffalo developers have stuck to developing -- forgetting gambling casinos, a shuttle airline and yachts.
"I don't know of any local developer who even on a smaller scale is as diversified as Trump," said Richard Baumann, executive vice president of Wilrock National of Buffalo Inc.
Foregoing diversification in favor of concentrating on developing and leasing property has saved many a developer from Trump Syndrome. So has keeping your mouth shut and not drawing attention to yourself, attorney-developer Carl Paladino believes.
"What's happening with Trump? He's dealing with start-up costs and short-term losses -- that's business, that happens to developers everyday," Paladino said. The reference to start-up costs alluded to Trump's recently opened Taj Mahal, a $1.1 billion Atlantic City casino and hotel.
"This man, Trump, made his own bed, called attention to himself, so that everyone knows when he changes his shorts," Paladino said.
Nobody locally is as flamboyant as Trump, he added, but some developers have been able to cultivate profitable development niches.
"Look at Nate Benderson, owner of Benderson Development: no publicity, very quiet, but he's recognized nationally for his developments," Paladino said.
"Trump's real estate development deals seem to be pretty good," said Paul Snyder Sr., a local developer who owns various properties, including the Hyatt Regency Buffalo. "I know his Hyatt Hotel in New York generates annually about $40 million in positive cash flow. It's his acquisitions which have caused problems."
Not only are local developers more low key, more conservative than Trump, but local financial institutions also can be extremely cautious. And banks and thrifts will only get more reluctant to dispense funds, due to the government's higher capital requirements and tightening of lending practices.
"Lenders here are just more conservative," said Frank Ciminelli, president of Ciminelli Development. "If I told the banks that I deal with that I could double the rents on all my properties, I seriously doubt that they would double my mortgages. And that's fine. The tougher the banks get, the better I like it."
Ciminelli pointed out that the more money available, the more developers enter a market. The new developers put up a building, go bankrupt, but the building remains, Ciminelli said.
"The bank takes over the building and it wants to fill space, so it cuts rents, which hurts everyone," he said.
The one dominant message Trump's troubles have brought home to the local real estate community is: stick with what you know best. If developing real estate is what made you successful, don't stray far from office buildings, retail centers -- bricks and mortar. And remember, if a deal looks bad, sounds bad and feels bad -- regardless of potential return -- it's bad.
"Don't be a pig with deals," said Wilrock's Baumann. "Pigs get slaughtered."