On Tuesday, a Canadian bankruptcy judge placed the glass-and-granite building into receivership, just four years after Trump and his children cut the ribbon at its grand opening. Once it’s auctioned off, whether or not Trump is the leader of the free world by then, his name may well vanish from its marquee.
Trump is not the project’s developer or even an investor; one of his partners, a Russian-born billionaire who got rich in Ukraine’s steel industry, controls the firm that’s in default. The Trump Toronto is still a posh hotel, and even though nearly two thirds of the tower’s condo units remain unsold, they’re still upscale residences. Still, the saga of the property’s glittering rise and rapid fall is classic Trump, featuring a tsunami of litigation and bitterness, money with a Russian accent, and a financial wreck that probably won’t hit its namesake particularly hard.
Trump has vowed to run the country the way he runs his businesses, and Trump Toronto is yet another reminder that his businesses do not always run smoothly. Even before the bankruptcy, the Trump Organization was already mired in litigation over management issues with the project’s owner, Talon International—led by Alex Shnaider, the steel magnate who is perhaps better known for buying a Formula One racing team and hiring Justin Bieber to sing at his daughter’s Sweet Sixteen. The project also faced lawsuits filed by middle-class investors who claim they were suckered into buying time-share-style units in the hotel with wildly overstated projections of Trump Toronto’s performance. Now it’s in receivership, which will produce new ownership and, quite possibly, a new brand.
Trump Organization spokeswoman Amanda Miller noted that the company still has a long-term deal to manage the Toronto property, no matter who controls it after the auction. “This has been a record year for the hotel, and we look forward to its continued success,” Miller said. “Guests can expect to receive the same superior level of service and quality that is synonymous with our brand around the world.”
But it’s not clear that Trump Toronto will keep its name, much less its management team. Toronto is one of the world’s most multicultural cities, and Trump’s run for the presidency, especially his provocations against immigrants and Muslims, have made his hotel a target for protests. And one insider familiar with the bankruptcy proceedings said that local rivals in the luxury condo and hotel market, notably the Four Seasons and the Ritz Carlton, have dramatically outcompeted the Trump property.
Court documents show that even though investors in the hotel units were told the “worst case scenario” for occupancy rates would be 55%, they’ve ranged between 15% and 45%. The average room rate, despite the snazzy crystal sconces and in-mirror bathroom TVs and floor-to-ceiling windows overlooking Lake Ontario, has been nearly $100 below the initial projections.
“The whole business model has been overpromise and underdeliver, and it’s Trump’s name on the thing,” the insider said. “You can’t put all the blame on him and his people. But if they did a terrific job, do you think it would be in bankruptcy?”
Trump first got involved in the project 15 years ago, when he held a press conference with Toronto’s mayor to announce his plan to build a new Ritz Carlton downtown. That plan fell apart when it came out that his development partner was a fugitive who had been convicted of bankruptcy fraud and embezzlement in the U.S. Trump then forged a licensing and management deal with Shnaider and another Russian-Canadian named Val Levitan, whose name comes up a lot in the documents because he had no development experience.
Talon pre-sold 85 percent of the units at near-Manhattan prices before the groundbreaking in 2007, but most of the buyers backed out after the global financial crisis ravaged the real estate market, and Levitan was eventually forced out.
It is clear from affidavits in the fraud cases and the bankruptcy case that the buyers have taken a financial beating. A warehouse supervisor named Sarbjit Singh, who was earning about $55,000 a year, testified that he borrowed money from his father, a retired welder, for the deposit on his hotel unit; he never closed on the deal, but he says he still lost $248,000. Se Na Lee, a homemaker who was married to a mortgage underwriter, borrowed money for her deposit from her parents; she did close, and ended up losing $990,000 through December 2014, she says.
A judge later described Talon’s prospectus and other “deceptive documents” as “a trap to these unsurprisingly unwary purchasers,” and ruled that they could sue Trump as well as Talon.
The surnames in the court filings reflect the global diversity of the people who put their trust in the Trump brand and the Talon sales representatives: Ayeni, Surani, Yuen, Rhee, Okwuosa, Gupta, Radhakrishman, Varadarasa, Akinkuotu. Some said they were assured that Trump’s involvement would make it easy for them to get mortgages, but banks have shied away, even as the local real estate market has become one of the hottest on the planet.
These problems were already simmering when Trump—along with his children Eric, Donald Jr. and Ivanka, who oversees his worldwide hotel operations—stepped out of a Cadillac Escalade for the hotel’s ribbon-cutting in April 2012. There are snippets of the event on YouTube, where you can see Trump smiling dutifully as he congratulates hotel staffers, accepting a Maple Leafs jersey with his name on the back, and watching a speech by Toronto’s late mayor, Rob Ford, who would later become a household name after a crack-smoking scandal.
By 2015, Trump and Talon were suing each other, with the Trump team alleging a Talon scheme to take over the management, Talon alleging a Trump scheme to devalue the property in order to buy it at a discount, and both sides accusing each other of shoddy financial record-keeping. Talon also disparaged Trump’s performance running the hotel, but the dispute is now in mediation. It probably won’t matter, because Talon is about to lose the property, most likely to JCF Capital, a U.S. investment firm that purchased its $225 million construction loan.
Talon’s attorney, Steven Rukavina, would only say that the company is cooperating with the restructuring, and views the court’s appointment of a receiver as “a positive step forward toward achieving that objective.” JCF declined comment, though it has said in its filings that it intends to honor Trump’s contract if it assumes control of the property.
But Trump’s campaign, with its hostility towards foreigners, progressives, and others, has not played well in Toronto. A city councilor has called for the property to change its name. Hollywood types reportedly blackballed the hotel—along with its 31st-floor restaurant, which is actually called America—during this summer’s Toronto Film Festival. There have been protests outside the building by union workers, women’s groups, and Muslim groups. The Trump brand is under siege, which has delayed the opening of a similar Trump-licensed hotel and condo project in Vancouver until after the election. The colorful mosaic celebrating multiculturalism at the entrance to Trump Toronto, titled A Small Part of Something Larger, now seems to clash with the nominee’s white-backlash message.
Trump has presided over four corporate bankruptcies, and the flurry of lawsuits and countersuits over Trump Toronto’s broken promises is rather typical for a Trump property. But this is Talon’s bankruptcy, not his. The project was built with other people’s money; he just got paid for the use of his name and his hotel management team. It’s not clear how much he ever knew about Talon’s high-pressure sales tactics. It’s also not clear how much he ever knew about his Russian-Canadian partner’s business activities in Eastern Europe.
“We heard fantastic things about [Shnaider],” Trump told a Forbes reporter by phone from his 2005 honeymoon. “But sometimes people say wonderful things whether they mean them or not.”
Then again, Trump did license his name and his brand to Talon. This isn’t his main concern this week, but he can’t deny all responsibility for the failure of a Trump project, especially when the Trump Organization is running the Trump hotel. The project’s partners, investors, and lenders all got a Trump Experience, one that isn’t available from the concierge.
Politico: A Trump Tower Goes Bust in Canada added by Peter Lance on
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