Trump and company.

Maverick Real Estate Investing: The Art of Buying and Selling Properties like Trump, Zell, Simon, and the World's Greatest Land Owners

BY STEVE BERGSMAN

John Wiley & Sons Hoboken, New Jersey 2004, 292 pages, $24.95, hardcover

MAVERICK REAL ESTATE INVESTING PROvides

an entertaining and informative foundation for someone interested in learning the art of real estate investing from some of the best in the business. The author, Steve Bergsman, a veteran real estate journalist, presents the 12 Golden Rules for success in real estate investing and then portrays some of the mavericks that embody them.

Some of these mavericks are very well known while others are less dominant figures in American popular culture. They include Donald Trump; Sam Zell; Eli Broad; Dick Dusseldorp; Gerald and Jeffrey Hines; Stuart Hornery; Bruce Karatz; John Kukral; James, Richard and Samuel LeFrak; Frank, Peter and Steven Lowy; Hamid Moghadam; Paul and Philip Reichmann; Doug and Walter Shorenstein; and David and Melvin Simon.

Written in an informal, conversational style, each chapter explains the art of the investment and how to avoid common, costly mistakes. As Bergsman states in the introduction, "Reading this book will not suddenly transform a Clark Kent of real estate investing into a land-owning superhero, but it will help you lessen the risks involved in buying and selling property."

Bergsman explains why this book may prove useful to many: "There are so many ways a real estate investment can go bad, especially if you don't know what you're doing."

His recounting of his own investment failure reminds the reader about the bottom line of real estate investing; Knowledge is power. It is not enough simply to have the resources to invest in real estate; it is also important and necessary to have the knowledge to reduce the risk of failure.

Bergsman stresses that, despite the monumental success of the mavericks featured in the book, real estate will always remain a gamble. It is up to the investor to boost the odds in his or her favor by adhering to the 12 Golden Rules, he notes.

Donald Trump, for example, is featured in the first chapter, entitled "Make a Good Deal." According to Bergsman, Trump is one of the most "successful real estate deal-makers of them all," and by following this first Golden Rule of making a good deal, Trump has built one of the most impressive real estate empires in the world.

It was his impressive negotiating skills that put him on the map with his acquisition of the Commodore Hotel, across from Grand Central Station in Manhattan. As Bergsman says, "Once they [the mavericks] have ... nailed down the formula for success, they use it over and over again to keep adding to their holdings."

The 12 Golden Rules of real estate investing are examined in each chapter, and Bergsman relates how they have been successfully applied to create a substantial fortune for the featured investors. Each investor exemplifies a specific trait.

According to Bergsman, Trump illustrates the art of the deal; the Shorensteins understand real estate cycles; Kukral employs other people's money; Dusseldorp and Hornery establish cash-flow targets; Moghadam understands being in alignment with the market; the Hineses find perfect locations; Zell benefits from someone else's disasters; the LeFraks make safe gambles; the Lowys know how to hire savvy managers; Broad and Karatz get good legal and tax counsel; the Simons can overcome negative responses; and the Reichmanns know how to sell to their advantage.

Bergsman's book examines specific deals. It also explores the visions of each of these mavericks, their early beginnings in the business and the project that put them on the map.

Each of Bergsman's Golden Rules is listed as a chapter. His sixth chapter (and Rule No. 6), "Find a Nearly Perfect Location," explores the real estate cliche of "location, location, location." About this rule, he stresses that a good location is never constant and the best one is constantly migrating.

Bergsman discusses a common mistake made by novice investors of over-paying for an area or location and losing sight of a favorable deal. "Believing the most important part of any deal is location, they [investors] overpay for the land, the building and the rights, or they over-leverage or strike a deal that is unfavorable," Bergsman writes.

The reader learns there are many factors that must be included along with location for an ideal agreement to be struck. The investors featured in this chapter are Gerald Hines, founder and chairman, and Jeffrey Hines, president and chief executive, of Houston-based Hines. The Hineses epitomize Rule No. 6 through investments that span more than five decades. Bergsman traces their successes, beginning with Gerald Hines' first project in 1952 and ending with the current achievements of his son, Jeffrey, who has taken the company global.

According to Bergsman, about 50 percent of the company's projects are now outside the United States. "It [Hines] benefited from high rental rates in the major cities, little or no competition and some very good deals," Bergsman writes. Bergsman notes that the lesson is not to focus on the location mantra itself, but to realize that is only a small part of a larger picture of success.

From the stories told in the book, it seems it is not possible to become a true success without a taste of failure. The mavericks profiled by Bergsman realize the way to succeed in real estate is to recognize that big-time real estate investing is a game and one of the consequences of playing is the possibility of loss.

Bergsman shares details on tough times in the careers of several of real estate's biggest competitors, including Trump. "Not every deal Trump completes works out in the end," Bergsman writes. "By 1990 Trump was facing bankruptcy. He couldn't meet payments on more than $2 billion in loans. In fact, he was $975 million in debt, which he personally had to guarantee." Bergsman maps out where the mavericks' investments went sour and how to recognize the signs of impending disaster in order to head off failure before it occurs.

Some problems are not simply financial or structural, but can be traced to the management style of the individual. For example, Paul Reichmann of Olympia & York Developments Ltd., Toronto, suffered from his personal shortcoming of "not being able to let go of anything he owned," according to Bergsman. Even the best investors have their flaws, and Reichmann, even when facing massive debt, refused to sell any of his buildings.

The story of Olympia & York is traced in Golden Rule No. 12, "Sell to Your Advantage," which follows Paul and Philip Reichmanns' success with the world's largest real estate company in the 1980s to the company's bankruptcy in 1992. Despite heavy losses, mavericks such as Trump and the Reichmann brothers were able to reconstruct their businesses into the thriving powerhouses they are today.

Maverick Real Estate Investing is a book for the novice investor or someone simply fascinated with the high-stakes game of real estate investing and the real estate tycoons who have mastered it. As Bergsman says, "The book in some regards is really Real Estate 101. In other words, it's for people who are thinking about investing in real estate, have begun to invest in real estate or are already investing in real estate but need to turn the volume of business up a notch."

Despite its solid explanations and support for the 12 Golden Rules of real estate investing, it is important to remember Bergsman's underlying thesis: "Real estate is--and always has been--a gamble." So bring your poker face and get ready for a good read, and maybe the odds will be better when you make your next move in real estate investing.

Reviewed by Susan Besaw, an editorial contributor to Mortgage Banking and a member of the Communications and Marketing Department at the Mortgage Bankers Association (MBA).