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creative_cpa
Posts:86
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| 10/31/2008 8:21 PM |
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"Trouble for Donald Trump: The money for a condo project didn't come through
When investors gather at a downtown San Diego sales event in 2006, the Trump Ocean Resort was sold as a can't-miss opportunity: three 26-story towers on the Pacific Ocean only 30 minutes south of San Diego in Baja California, with condos priced from the mid-$200,000s to more than $1 million. Steep, but a bargain compared with comparable oceanfront real estate in the States.
Investing in Mexico sounded risky, given its crime rate, drug wars and weak property laws. But if Donald Trump was willing to put his name on a project, some figured, it meant that it was legit. "I've invested with him lots of other places and made millions doing so," says Michael Mikelic, who runs King Penguin Properties, a property management company with $30 million in assets. Mikelic bought a two-bedroom condo for $750,000. The project sold 70% of the units in the first tower in one day, worth $122 million, bringing in $25 million in deposits. The second tower sold a third of its units the first day it was on the market.
There's only one thing missing: buildings. There are only holes in the ground. Adam Fisher, a former principal of Irongate who led the project, says a $150 million construction loan from German bank WestLB fell through this year, not long after the state-owned bank had to receive a $6.4 billion bailout from the government to cover its losses on tanking subprime mortgages in the U.S. "We weren't speculating with other people's money," he says. "If you went to a construction lender last year and said that you had a project that was 70% sold and had 30% nonrefundable deposits like ours, 99.9% of the time you would get a loan."
The folks who laid down their deposits, however, are now planning on taking Trump's company and its partner, Irongate, a Los Angeles developer, to court in a breach-of-contract action. They say that they were promised that their building would be completed by last spring. They say they haven't heard from the Trump Organization or Irongate in months. Mikelic says that he wants his $225,000 deposit back, now sitting in a non-interest-bearing escrow account.
The Trump Organization referred questions to Irongate. Irongate won't say whether Trump put money into the project or just licensed his name. In October 2007 Trump was scoffing at the notion that the real estate slowdown could affect him. "Though it may be true that some of Baja's developments could see a slowdown, these market conditions simply do not apply to Trump Ocean Resort," daughter Ivanka Trump wrote in a newsletter sent to investors.
Trump has seen other early investors try to get out of their contracts as well, though it's hard to say if they are just running scared of the housing bust. In a suit in Miami, for example, 132 buyers want to cancel $146 million in contracts because they claim that a condo project, called the Trump Towers, was misrepresented as a Trump investment. The developers say the case is without merit."
http://www.forbes.com/forbes/2008/1117/034a.html
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ElPato
Posts:378
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| 10/31/2008 8:36 PM |
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| For those of you unfamiliar with the trump property location, it sits at the end of a creek that empties out of Rosarito beach. The creek contains untreated sewage and other nasties. Gross. |
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ElPato
Posts:378
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| 11/01/2008 11:01 AM |
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http://www.signonsandiego.com/news/mexico/tijuana/20081101-9999-1b1trump.html
The UT chimes in. |
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ElPato
Posts:378
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| 11/01/2008 11:11 AM |
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snips from article
“With a name like Trump, we figured it was good,” he said. “There were other developments that we could have paid a quarter of that for, but we figured with Trump, you can't go wrong.”
"While the project bears megadeveloper Donald Trump's name, the Trump Organization is merely a licensor, said Rhona Graff, Trump's assistant, and is not involved directly in developing the project. "
Do your homework folks. Trump is in it for Trump. I wonder if there will be any recourse back to Trump for suckering all these folks? |
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Brian
Posts:2614
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| 11/01/2008 11:15 AM |
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The problem with the market is that the government has been bailing out everyone.
We need to let fear reign for a while so that people think twice before speculating. |
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ElPato
Posts:378
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| 11/01/2008 11:24 AM |
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>> We need to let fear reign for a while so that people think twice before speculating.
I agree. But it's not happening. So I'm gonna climb on the gravy train until I see it happen. I doubt it will be in my lifetime, so be it. |
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dipr
Posts:19
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| 11/01/2008 2:54 PM |
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| i think the big issue is that the deposit money is not in escrow. it was spent to dig the holes. it's gone. |
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creative_cpa
Posts:86
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| 11/01/2008 5:07 PM |
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Posted By dipr on 11/01/2008 2:54 PM
i think the big issue is that the deposit money is not in escrow. it was spent to dig the holes. it's gone.
I can pretty much guarantee you they did not spend $25 million digging two little holes in Mexico. That money is lining a lot of people's pockets. It will be interesting to see how this shakes out. Because the contracts were signed in San Diego, the developers actually have some skin in the game because this is going to end up in a US court of law. Had the buyers done all this in Mexico, they would have been up that sewage-filled creek without a paddle.
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ElPato
Posts:378
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| 11/01/2008 5:31 PM |
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http://trumpbaja.com/
This is the web site for this project. It is worthwhile to reflect on the marketing spin compared to the 2 holes in the ground next to a sewage filled creek.
creative_cpa, you raise excellent points. I wonder if somehow there was a transfer of ownership last year which will somehow move this into the Mexican court system. If so, these folks are hosed. |
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lonnyzone
Posts:57
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| 11/03/2008 9:28 PM |
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| The Donald's mug is still on the website. |
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ElPato
Posts:378
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ElPato
Posts:378
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