Reggie Middleton's Boom Bust Blog

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Ideal Environment

...It proved to be an ideal environment for battered developers to stage their comebacks. To be sure, they couldn't do business with some of the lenders who backed them previously. But there were plenty of others.

"If I or anyone else needed money, you could call up the bank and they would send a Brinks truck over to your office," says Donald Trump, who admits to have put "some hurt on banks" in the early 1990s, during the prior cycle. "There was so much money flowing, so much money." Mr. Trump, having bounced back, in recent years built residential towers in Manhattan and forged lucrative licensing deals that added his name to dozens of luxury buildings around the world.

For Mr. Eichner, who brags that he finished last in his law-school class at the University of Cincinnati, the 1990s brought plenty of trouble. Besides giving back the Times Square building, called 1540 Broadway, he lost CitySpire, billed at the time as Manhattan's tallest apartment house, to his creditors in 1992. In 2000, subcontractors who hadn't been paid forced his Park Central Hotel, another New York project, into bankruptcy-court protection. Yet because Mr. Eichner relied heavily on debt and contributed little of his own money, the failure of the projects didn't lead to ruinous personal losses, people familiar with the projects say.

At least one lender vowed never to lend to Mr. Eichner. Bernd Knobloch, chief executive of Eurohypo AG, a bank based in Eschborn, Germany, recalls a meeting in the late 1990s in which Mr. Eichner handed him a book by Jerry Adler that chronicled the Times Square failure: "High Rise: How 1,000 Men and Women Worked Around the Clock for Five Years and Lost $200 Million Building a Skyscraper." Mr. Knobloch says he was astonished. "He handed me the book that talked about how he lost $200 million," he recalls. "To his prospective lender. I said to myself, 'This is not a man I'm going to work with.' He never saw me again."

Mr. Eichner says he doesn't recall meeting Mr. Knobloch. He concedes that some lenders likely blacklisted him. "The first couple of deals, I was under a microscope, and not surprisingly. There are people to this day who won't deal with Harry, won't deal with Donald, and won't deal with me."...

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Soaring Values

By the middle of this decade, fueled by low-interest rates, easy credit and soaring values, commercial real estate was hot once again. Developers were building and selling at significant profits. And lenders were competing to make big loans that brought big fees. Charlotte, N.C.-based Wachovia Corp., for example, jumped from near the back of the pack in 2002 to take the lead in commercial lending by 2007, by combining attractive terms with aggressive marketing on loans of $50 million and up.