After years of problems, the Trump hotel in Toronto is put up for sale
OTTAWA – Toronto’s Trump International Hotel & Tower, a glitzy development that has been plagued with construction delays, financial problems and lawsuits since its opening in 2012, is for sale. And there is no guarantee the new buyer will keep the name of the U.S. president-elect on the building.
CBRE Ltd., the Canadian unit of the global real estate brokerage firm, said it is offering the 65-story property in Toronto’s financial district at a minimum price of $298 million (Canadian) – or about U.S. $225 million – under a sale procedure approved by a court-appointed receiver. The developer had described it in the past as a $500 million (Canadian) project.
The receiver, FTI Consulting Canada, was appointed after the developer, Talon International, headed by Russian Canadian businessman Alex Shnaider, defaulted on its loan payments. Trump and his family have no ownership interest in the building but license the Trump name and manage the 261-room luxury hotel.
The project has had a rocky ride since its inception 16 years ago, when Donald Trump flew to Toronto to announce plans for a Trump Tower in partnership with the Ritz-Carlton hotel group and another developer. That deal collapsed. In 2004, Trump was back in town after Talon took over leadership of the development. Groundbreaking was in 2007.
Construction delays plagued the project, and the Toronto luxury hotel market became crowded with the construction of competing projects. Soon after the Trump project opened, glass panels began shattering on the building’s upper floors.
Shnaider, Trump’s partner, is a Russian-born entrepreneur who arrived in Canada as a teenager and built a fortune based on trading steel from Ukraine and other former Soviet republics.
To build the Trump Tower, Shnaider turned to a friend, fellow Russian Val Levitan, to be president and chief executive. An Ontario court later noted that Levitan had “no previous experience in construction, hotel management, or operations.”
In addition to marketing the building’s 118 residential condos, Talon decided to sell the 261 hotel rooms to investors. Many of them borrowed heavily to buy the suites, which cost as much as $850,000 (Canadian) each, only to discover that the occupancy rates were much lower than expected and that rates had to be discounted.
Investors owning 27 units sued the developer, alleging they were misled. Two test cases were taken to court. Talon won an initial ruling, but the judgment was reversed on appeal. The investors have been awarded damages, but Talon is attempting an appeal.
Mitchell Wine, the lawyer representing the investors, said the saga may not be over soon. If Talon loses its final appeal, there may be not enough cash available in a trust account to satisfy his clients’ claims, in which case he may revive a case against Trump for misrepresentation.
Sales of the hotel rooms and condos went poorly, despite Toronto’s surging real estate market. That means the package of assets being offered for sale includes 211 unsold hotel units and 74 condos.
If the building does not attract the minimum bid, JCF Capital, the firm that holds the debt on the property, will keep it.
Symon Zucker, Talon’s lawyer, said it will be up to the new owners of the building to decide whether to keep the Trump brand. Zucker declined to comment on the Trumps or their management expertise.