So a lot of people don't have much experience with real estate developers. Donald Trump is basically a walking cliche. I'll explain.
First, remember that at a certain scale, developers aren't pitching land or location. They're pitching themselves.
What this means is that as far as their mouths are concerned, they always produce fantastic improvement and they always have giant wallets.
Their first job is to get investors to buy into them -- their vision, their capability, their magic. They sell themselves first and always.
But the next developer who doesn't hit a snag will be the first. Trump has hit a lot of snags in his life.
So Trump falls back on one of the traditional escape routes: Make this all about the investors and not him.
This works more often with sophisticated investors than you'd think, because they are still composed of humans.
So the problem isn't the project and never the developer, it's a lack of investment, a stingy attitude, pick your horse-hockey.
"If you won't back this project enough to get over the ordinary bumps, I'LL DO IT MYSELF."
Invariably, when you hear that, it means a few things. (1) The project is in danger. (2) There's no easy way out. (3) The developer is thin.
Having represented more than a few developers and banks, I've gotten to see this in real time and forensically. It's a cliche.
Now, the next step -- when the investors don't immediately fall for this garbage -- is something showy to prove the dude still can throw.
Maybe he puts $1m of his own money (NOTE FACE VALUE; $200M; PERSONAL GUARANTY) down to show he's not afraid to commit.
The likelihood of that million ever showing up is roughly half.
The point isn't to cover 1/12 of the shortfall. It's to convince the investors that the brave developer sees a bright light ahead.
Why else would he have invested [$1M/the first tranche of $250K] if not?
This is in itself a surprisingly effective tactic, which is to say, it sometimes works at all.
Rational humans recognize what a sunk cost is. Trump, like most developers, is betting that he's not dealing with that kind of human.
A lot of [bankers/investors/elderly/middle aged marks] will be moved both by the personal investment and sunk costs and double down.
This gives the developer room to do one of three things. (1) Structure for bankruptcy/exit. (2) Turn it around. (3) Keep screwing up.
Remember: At this point, his goal isn't seeing the project to a successful conclusion. That would be great, but it's not his goal.
It's to stay alive and keep himself viable for the next project.
If you step back and look, he's saying that if you won't give him money, he'll give himself money and you won't be part of him.
That's the real tell: This isn't about paying the note or mitigating damage. It's about him. It's always about him.
We are at that stage with Donald Trump now.
Mr. Trump is falling back on his playbook because he invested in a bad project and got a lot of marks to buy in with him.
He may or may not launch his own Hannity News Channel, he may or may not do anything in particular the rest of the race.
What I guaran-damn-tee he's not going to do is liquidate $750M of his own assets in a fire sale and push through to the end.
As far as he's concerned, that's our job.
This, right here, is what's so depressing about the Trump phenomenon. It's just a mixed-use project in a far outlying county.
The whole project was sold on the idea that people would go out of their way to exist around something they never wanted anyway.
Our nominally expert-level political class was outpaced and out-maneuvered by a penny-ante real estate developer on autopilot.
This proves either that they're not controlled by bankers (who know this game) or that they're just really bad bankers themselves.
So now we have to somehow get a 1/3-done shopping center to market for the big season because foreclosure ain't gonna do jack.
And the developer has already structured himself to file a Chapter 7, skip the guaranty, and still own his yacht.
Of course, the shopping center/condo complex is three counties away from the nearest major suburb and there are no roads to the site.
So even if we get the thing built up, the locals don't want it and can't afford it, there are no anchor tenants and no accessibility.
The only bright spot: Sean Hannity will TOTALLY buy one of those condos.
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