Trump-Backed Baja Resort Condos Cannot Refund $32.2M Investor Deposits Due to Lack of Construction Financing
- Mar 09, 2009
By Anuradha Kher, Online News EditorBaja, MEXICO–Back in October 2006 when all was well with the economy, Trump Entertainment Resorts Inc., along with Los Angeles-based Irongate Capital Partners LLC, started selling Trump Ocean Resort Baja Condos in the pre-construction stage. S&P Destination Properties, which was handling sales for the property, sold 188 units for a total $122 million on the first day of the sale. Now, almost three years later, New York entrepreneur Donald J. Trump through a Mexican entity, PB Impulsores, has informed investors that there are no funds to refund investors’ deposits totaling $32.2 million.The 526-unit condo-hotel, 30 minutes south of Downtown San Diego, has failed to get financing from a German bank that it needed to start construction. Investors who had put down 30 percent deposits on units priced from $300,000 to $3 million, are left stranded. Trump Entertainment Resorts included a clause in the buyers’ contracts that gave Irongate the right to spend their deposits before construction was completed, something a developer could not have done on U.S. soil due to a laws that says funds can only be released to the developer when the project is complete, or a completion guarantee, is posted.Several lawsuits have already been filed in Los Angeles Superior Court.Trump is now claiming that his relationship to the project was merely for licensing his name for a fee and that he was not a direct investor in the project. He says Irongate violated a contract to license the Trump name and also missed deadlines to find construction financing. Finally in January this year, he announced that he was taking his name off the project.The project’s collapse comes at a time when Trump’s casino company, Trump Entertainment Resorts Inc., filed for bankruptcy protection last month. He also is embroiled in a lawsuit to avoid paying debt on the struggling Trump International Hotel and Tower in Chicago.