Trump sued by condo buyers on new project

Bloomberg

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Donald Trump, the U.S. real estate developer, and his partners in a defunct hotel and condominium project near Tijuana, Mexico, were sued by condo buyers who claim to have lost as much as $18 million in deposits.

Trump and Los Angeles-based Irongate Development allegedly induced buyers with marketing materials touting Trump’s involvement when he had merely licensed his name to the project, known as Trump Ocean Resort Baja, according to the complaint filed last Thursday on behalf of 69 condo buyers in state court in Los Angeles.

Buyers were led to think that Trump played an active role in development and held an equity stake, and that his children Donald Trump Jr. and Ivanka Trump, executives in his company, had bought condo units, the suit claims.

Irongate also concealed from condo buyers that it failed to obtain construction financing after credit markets unraveled last year, while continuing to withdraw their deposits from escrow accounts, according to the complaint. The defendants allegedly set up a shell company in Mexico to deflect liability.

"They were taking money out as late as November ’08 without saying ’boo,’" said Bart Ring, a lawyer for the plaintiffs. He said the condo buyers weren’t formally notified until last month that the project wouldn’t go forward.

Trump rebutted the plaintiffs’ claims. "This was known by everybody that we merely licensed the name," Trump said in a telephone interview. "I’m not the developer," he said. "I have never been to the site."

Trump said the condo buyers might have lost money regardless, because they couldn’t get loans with the collapse of lending markets and falling property values.

"If you look at it from a practical standpoint, people would have been unable to get their financing and the apartment prices would have been different than what people agreed to," Trump said. "In all fairness to the developer, the market did collapse. I know they spent a lot of time and money on this development, including land purchases, architects and lawyers."

Trump Ocean Resort Baja was announced in October 2006 as "a partnership between the Trump Organization and Los Angeles-based real estate development and investment company Irongate," according to a press release at the time.

In an April 2007 press release, Trump said the project set a "one-day real estate sales record for Mexico of $122 million in December 2006." That initial success spurred the developers to build a second tower, according to the release.