March 14, 2009 - Trump Ocean Resort, Baja Mexico

Update April 10, 2009

Trump Files Lawsuit Against Developer Irongate Wilshire

Trump Sued by Investors Over Failed Trump Ocean Resort

Trump Ocean Resort - Rendering

Nearly 70 plaintiffs who invested millions of dollars in the Trump Ocean Resort, a planned luxury oceanfront development in Baja California that was never built, are now suing Donald Trump, his son and daughter, and the project's developers on a fraud claim.

The lawsuit was filed yesterday in Los Angeles Superior Court. It alleges, among other things, that buyers who put down deposits on the planned development's 526 condo-hotel units were deceived into believing they were buying into a Trump development when the Trump name was merely licensed by the developers.

Included among the defendants are Trump, Donald Trump Jr. and Ivanka Trump, as well as principals of the project's Los Angeles-based developers, Irongate Development, its partner company Punta Bandera Investors USA, and its real estate brokers S&P Destination Properties.

Among the 41 causes of action listed are allegations of fraudulent inducement, negligent misrepresentation, deceit and breach of fiduciary duty.

The developers of the Trump Ocean Resort lost their financing after a construction loan of about $150 million from a German bank fell through last summer. Late last year, buyers learned their deposit money had been spent; last month, they received a letter saying the project had been scrapped because of the poor condition of the financial markets.

Aside from some ground preparation and foundation work, there is nothing on the site, 10 miles from the border.

The Trump Organization terminated its license agreement with the developers in January, after the project had gone belly-up.

However, beginning in 2006, the project was marketed as a Trump development, said Bart Ring, an attorney representing 69 plaintiffs.

“The Trump name appears ubiquitously in marketing for the project, including on advertisements, on billboards advertising the project, on letterheads, stationery, and cover letter,” the 197-page complaint says.

A DVD was taken from the project's Web site of Donald and Ivanka Trump plugging the development, Ring said. The Trump brand name provided a sense of security for buyers who would not have otherwise considered investing in Mexican real estate, he said.

“None of these people would have done a thing without Trump being substantially involved,” Ring said.

In a phone interview yesterday, Donald Trump maintained his distance from the developers, saying he was “not happy” with what occurred.

“I have never been there,” he said of the site. “They licensed my name.”

Trump, who had not seen the complaint, said buyers were informed in writing, on a project fact sheet, that he was a licensor and not the developer. Trump had already partnered with Irongate for a project in Hawaii; he said he decided to work with them in Baja California because he considered the Hawaii project a success.

He said he terminated his licensing agreement with the developers because they were in default.

“They did not live up to the terms of the agreement,” Trump said.

An attorney for Irongate and a former company principal did not return phone messages seeking comment.

Nearly 200 buyers are believed to have deposited more than $32 million for ocean-view units priced at $300,000 to $2.5 million.

Tammy Willis, 38, a city employee in Oakland, put down three installments totaling $150,000 for a one-bedroom unit costing $525,000. She said she paid her last installment in early 2008.

By that time, the developers were already in financial trouble, Ring said.

Willis, who has not yet taken legal action, traveled to San Diego for a sales reception in December 2006, where prospective buyers were served appetizers and drinks as they chose color schemes. She paid her first $50,000 then.

“I was never told the (Trump) name was only licensed,” she said. “It could have been in the legal documents, but I didn't know that. I thought it was what it said, Trump.”

Original Story - San Diego Union - Tribune

Update April 10, 2009

Donald Trump sues developer of Baja California condo project bearing his name

The tycoon accuses Irongate Wilshire's principals of failing to follow through on promises to build a five-star resort called Trump Ocean Resort Baja Mexico.

A billboard advertises the site of Trump Ocean Resort Baja Mexico about 10 miles south of the border.

Real estate tycoon Donald Trump filed a lawsuit Thursday against a Los Angeles developer that paid to use his name for an oceanfront condominium project in Baja California but then failed to build it.

Filed in federal court in New York, the lawsuit comes one month after dozens of buyers sued Trump and Los Angeles developer Irongate Wilshire, demanding return of $32 million of down payments they made in 2006 and 2007 for the planned luxury condos.

The earlier lawsuit accused Trump and Irongate of misleading buyers about Trump's role in the project, having described him as a co-developer when he had merely accepted a licensing fee to lend his famous brand to the 525-unit project.

In his $40-million lawsuit, Trump accuses Irongate principals Jason Grosfeld and Adam Fisher of failing to follow through on promises to build the five-star resort, at which units sold for $275,000 to $3 million. Grosfeld and Fisher could not be reached. Trump declined to comment.

The legal battle centers around plans for a three-tower project to be built on 17 oceanfront acres about 10 miles south of the U.S. border. Trump Ocean Resort Baja Mexico was intended to achieve a five-star rating, with a fine-dining restaurant, full-service spa, swimming pools, tennis courts and hiking trails.

Buyers lined up at a San Diego hotel in 2006 for the first opportunity to buy, snapping up 80% of the available units. Many units in a second tower were sold in 2007. Buyers were required to make 30% down payments to secure their purchases.

In February, Trump announced that he had withdrawn from the project because the developer had run out of money and was not able to complete the job.

A month later, the developer disclosed that it was not going to complete the Baja development.

Trump said in an interview Monday that he was unfairly targeted in the buyers' lawsuit. He said he played no role in managing the development and was unhappy with what happened.

"We're looking into the whole situation because it doesn't make me happier than it makes them. I don't like to see people lose money," Trump said.

His lawsuit seeks $40 million in compensatory and punitive damages and a full accounting of what the developer did with the $32 million in down payments it collected from condo buyers. Trump has told associates in his organization that he wants to use the lawsuit as a mechanism to help buyers recover those down payments, according to a source familiar with the lawsuit.

"Defendants, as the developers of the project, were entrusted with ensuring that the project would be constructed and developed in accordance with the buyers' purchase contracts and in keeping with the high standards of luxury, quality, reliability and dependability associated, throughout the world, with the Trump name," the lawsuit said.

Concerns about the project surfaced in mid-2008 as buyers started to grumble about a lack of progress. In December, Irongate's subsidiary, PB Impulsores, disclosed in a letter to buyers that Trump did not invest in the project and had no role in managing it. The company said it had spent all of the deposits and was unable to secure additional financing to complete the job.

In a one-page accounting provided to buyers, the developer said it had spent $45.3 million and was out of money. The accounting said that $8.7 million went to advertising and marketing, $8.3 million to acquire the land, $6.9 million on architecture and engineering, $6.4 million on loan fees and $2.6 million on "site and building costs."

An attorney representing dozens of buyers in the lawsuit against Trump and Irongate said he hoped that Trump's efforts would make it easier for buyers to recover their down payments.

"We would welcome any and all efforts by anyone, including Donald Trump and his organization, to rightfully return the deposits that were made," said Bart I. Ring, one of the attorneys representing buyers.

"It doesn't matter where the money comes from. If Mr. Trump was able to do that, it would be good for everyone."