It takes enormous patience to finance real estate development in New York City. Patience and true grit.

Just ask Chase Manhattan Corp. It recently sold its position in the old West Side Rail Yards after 12 years of involvement. And garnered between 30 and 40 cents on the dollar for its trouble.

Workout experts say the bank is not smiling about this. But one New York-area bank chairman says that after the amount of time Chase spent watching its investment lose value, it was better off getting out when it did. "Something," he says drily, "is always better than nothing."

Because the West Side Rail Yards deal has been around, yielding no returns, for so long, it is interesting to trace just how a bank gets embroiled in a fiasco of this kind.

In Chase's case, it started back in 1979, when New York parking garage magnate and one-time political hopeful Abraham Hirschfeld exercised an option to buy the old rail yards. He teamed up with Francisco Macri, the owner of Argentina's largest construction company, and purchased the site for $45 million.

Often touted as "the largest piece of undeveloped land in Manhattan," the 62-acre parcel (another 14 acres are under water) was owned by the Penn Central Railroad, which collapsed in the mid-1970s.

Even then a young Donald Trump had his eye on the site. He commissioned a master plan for the rail yards, a riverside extravaganza of hotels and luxury apartments including what was supposed to be the tallest building in the world. But the plan would lay fallow for several years.

"It's not that it didn't work out," Mr. Trump says now about his original design. "It's just that I decided not to pursue it. I had too many other things going on."

Enter the bank. In 1982, Mr. Hirschfeld and Mr. Macri formed a limited partnership called Lincoln West Associates and took a mortgage from Chase for $50 million. By the following year the loan had grown by another $25 million.

Two years later, there were still no buildings on the site and the development partners were busy suing each other. Opposition from civic groups and environmentalists held up badly needed city approvals. Disgusted with the lack of progress, Chase refused to shell out further cash. In early 1984, the bank began foreclosure proceedings, forcing the Lincoln West partners to find someone who could quickly ball them out.

In the bank's rush to get out of its $75 million loan to Lincoln West, it wound up lending an even greater amount, $125 million, to the ever-willing Mr. Trump. The Donald, who had been waiting patiently on the sidelines, bought Mr. Hirschfeld and Mr. Macri out by assuming their mortgage. Chase, which refused to offer an executive to talk on the record for this article, had gone from the frying pan into the fire.

Six years slowly passed and the yards were no closer to becoming luxury condos than they had been 10 years earlier. But at this point, Chase, along with nearly 200 other banks that had lent money to Donald Trump, was faced with a near-bankrupt developer.

At the time of the great Trump restructuring in the summer of 1990, the fall yards mortgage totalled $200 million in principal, $4 million in accrued interest, and another $5.8 million in property taxes. Chase had put together a syndicate during the 1980s to carry pieces of the loan, but it still held 45%. By the time the syndicate was bought out by a Hong Kong group in June 1994, another $50 million in interest had accrued, bringing the total amount to $260-odd million. Chase's syndicate partners in the mortgage included Marine Midland Bank N.A., Societe Generale, and Yasuda Trust & Banking Co., with 10% apiece. National Westminster Bancorp took the remaining 2.5% of the loan.

The syndicate partners, particularly those with no other outstanding loans to Mr. Trump, turned on Chase to find a way to resolve the situation. Chase, in turn, started to squeeze Mr. Trump to find either someone to buy him out or back him so that mortgage payments could be made.

This was no mean feat. Mr. Trump first had to make peace with the various civic and environmental groups that had been fighting the rail yard development for a decade. He accomplished this by turning most of the protestors into board members of a Riverside South Development Corp. He made a well-respected city planner its executive director, and held long negotiation sessions with the groups to redesign the project. The result was a 16-building apartment and condo project with a small amount of middle- and lower-income housing, as well as a 25-acre extension of the West Side's Riverside Park.

The city of New York, meanwhile, extracted an $80 million spending package that includes expansion and renovation of two nearby subway stops, park maintenance, and the building of a public school if necessary.

Protests continue against the new Riverside South on grounds that it will overburden the city's sewage treatment facilities. Also pending is a lawsuit filed by those who live in apartments which will no longer have river views when the new buildings go up.

But by late last year, Mr. Trump had enough city and neighborhood support to go out and court investors. At a total price tag of $2.5 billion, and with increasing pressure from the banks, Mr. Trump knew that if he didn't move quickly, Chase might sell the mortgage without his involvement. And by this time, Mr. Trump's reputation was not what it had been.

Said one banker close to the process, "We are always concerned whether the prospective buyer is real. They have to bring financial capacity to the table. No matter what Donald says, he doesn't, have the money to finance this project. And given its size, there was not a universe of potential players out there."

In the fall of 1993, Mr. Trump initiated talks with Thomas Barrack, a distressed mortgage buyer, whose Colony Capital Inc. was one of the astute bottom fishers that benefited from the collapse of the savings and loan industry. What looked like a good marriage between him and Mr. Trump fell apart by the end of the year, apparently because one of Mr. Barrack's partners, a Japanese company, went bankrupt.

Mr. Barrack refused to comment on the near-deal but Abraham Wallach, an executive vice president at the Trump Organization, says Colony Capital "couldn't get comfortable with the cost."

Colony Capital was not alone. Aides to Mr. Trump contacted a long and stellar list of possible investors, including Goldman Sachs & Co., the Reichmann brothers of Olympia & York, Morgan Stanley, the DuPont Co. pension fund, George Sores, Dillon Read & Co., and Lehman Brothers. The only person in real estate they didn't see, it seems, was Chicago-based Sam Zell, famous for his skill at buying properties and mortgages at rock-bottom prices.

"We did not talk to Mr. Zell because I perceived him as going around our back to buy the debt and squeeze Donald out," Mr. Wallach says. "Every one of the others had the money. But none of them understood development and none of them were willing to make a deal that would be satisfactory for the Tramp Organization."

When American sources ran dry, Mr. Trump turned his attention to Asia. Carrie Chiang, a broker with the Corcoran Group, who had been selling Trump Palace condominiums to buyers in Hong Kong, was tapped for a list of contacts. One that came immediately to mind was New World Development Co., one of Hong Kong's largest development conglomerates.

Run by the Cheng family, father and son, New World owns hotels across the globe, among them the Ramada International Hotels and Resorts, which includes the Stouffer and Renaissance hotel chains. Mr. Trump had previously tried to do a casino deal with New World in AuCkland, New Zealand, but it never got off the ground.

"We put together a blue book on the project and set up 20 appointments with shipping companies and developers in Hong Kong. People with lots of money. New World was one of them," Mr. Wallach says. "They had done lots of projects like this in Hong Kong. Huge apartment buildings."

Mr. Wallach flew over on a Friday in March. A week of negotiations ensued. Mr. Trump came over the following Thursday. After a round of golf with the senior Mr. Cheng and New World's general manager, Paul Tong, a tentative agreement was made. Mr. Trump's Hudson Waterfront Associates would get a 30% equity ownership in the project that would ratchet up to 50% "if it is successful." Mr. Trump would run the project on a day-to-day basis and get a $1.2 million annual management fee in return.

New World and its syndicate of Hong Kong Chinese partners will commit $2.5 billion in financing. Mr. Trump must get a building permit by July 1, 1996 (which is about the same time his $200 million in personal recourse debt to various banks comes due), and he must resolve the lawsuit over views of the Hudson which are now on appeal. Phase One - three buildings with 1,600 rental units - is scheduled to begin construction next year.

Because this deal involved Donald Trump, there were, of course, 11th-hour fireworks. Two nights before the papers were to be signed, in a meeting with Mr. Tong, New World adviser Daniel Yieu and a representative of ShuiOn named Vincent Lo, Mr. Trump exploded over some contract wording that dealt with his liabilities to the Hong Kong syndicate if the project failed. According to a lawyer close to the negotiations, Mr. Trump "used a string of foul language, including racial epithets regarding Asians."

Mr. Yieu refused to comment on the matter other than to say, "doing business with Mr. Trump is anybody's guess. We are linked up with Mr. Trump purely because of this piece of and. The U.S. economy has bottomed out. We think we're going into the market at the right cycle. New York is a place that cannot be substituted."

Meanwhile, the banks that finally sold out of the nonpaying Penn Yards mortgage have their own ax to grind. Societe Generate, angry with what it viewed as a slack takeout price, demanded a premium from the other banks in the syndicate to go along with the deal.

"The group received $83 million in total," said a lawyer representing one of the banks. "The participants got pro rata shares, except for Societe Generale, which got more. You don't go out and celebrate 40 cents on the dollar and we definitely didn't want to celebrate with Societe Generale."

For its part though, Chase finally got to put the Penn yards behind it. The bank and its syndicate partners did walk away with a $9 million lien, collateralized against Trump Tower. But Chase has its own $18.7 million mortgage on the Tower already, as well as another $68 million loan that it holds with another group of banks.

Says one banker, summing up the process, "It was decided that this was the best for us. We're not happy, but it closed, so we have to be satisfied. Because with Donald, anything is possible."

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