More from the Star today on the lawsuit. I have mixed feelings. I don't take pleasure in people losing money but I do think people need to do their due diligence when making investment decisions. I also want Trump hotel to be successful because it brings jobs and adds to the economy. However, if the allegations are true that misrepresentations were made and securities laws broken, then I don't think you can completely blame the investors. Trump and the Developer should play by the rules. It will be interesting to see if more investors join the lawsuit.
Trump, Talon International focus of $2.7 million lawsuit by investors
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By Susan Pigg Business Reporter
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Lawyers for four investors have launched a multi-million lawsuit against Donald Trump and Talon International Inc. alleging that buyers in one of Toronto’s glitziest hotels were “victims of an investment scheme and conspiracy.”
With just days to go until deals are set to close on dozens of pricey hotel-condo units in Toronto’s Trump International Hotel & Tower, the lawsuit is seeking to have four plaintiffs’ deals rescinded and deposits of more than $173,000 returned.
It’s also seeking more than $2.7 million in damages for the four buyers of the $700,000 to $867,000 hotel-condo units, alleging that Trump, through his marketing clout and partnership with rookie developers Talon International, was integral in convincing novice investors to buy based on “reckless and negligent misrepresentations.”
It goes on to allege that Trump, Talon International and its two principals, Russian billionaire Alex Shnaider and Val Levitan, misled buyers with overly optimistic financial projections about the money-making potential of Toronto’s Trump International Hotel & Tower.
They are also accused of breaching securities laws by violating explicit instructions from the Ontario Securities Commission that the hotel-condos not be sold as lucrative investment opportunities.
When asked for comment, a Talon spokeswoman told the Star: “Now that this matter is before the courts no statement will be made as the court shall deal with this matter in due course.”
“Talon shall vigorously defend this matter,” Dorenda McNeil stated in an email.
Trump Organization litigation counsel Alan Garten stressed that “the project was developed by Talon.
“Trump is not the owner or the developer of the project, it just manages the hotel, which is open and operating and has received rave reviews. This sounds like a case of buyers’ remorse to me.”
The 53-page lawsuit, filed Wednesday, pulls back a massive blackout curtain on a project that seems to have been ill-fated from the start.
While it was actually developed by Talon, “at all material times” buyers were led to believe “it was Trump who would be developing, supervising, overseeing and/or otherwise operating the Trump Hotel,” says the lawsuit.
The 65-storey project, a mix of 261 hotel-condo suites and 118 residential condos, was plagued by a four-year construction delay. Since the hotel opened in March, it has had lower-than-touted hotel occupancy, discounted room rates and a growing tide of investors trying to renege on deals set to close Nov. 29.
At least 40 buyers, many of whom still owe at least $500,000 on their units, have been consulting lawyers, desperate to rescind deals they say no longer make financial sense and retrieve deposits of more than $150,000 before they are turned over to Talon next week.
Lawyer Javad Heydary, who has launched the suit and had a team of eight lawyers examining the complex sales agreements and financial documents over the last three weeks, has discovered about a dozen legal proceedings that are pending or have been completed involving the high-end hotel.
“It was an absolute shock to us to find out that these buyers were of limited means. They, like everyone else, were riding the boom in the condo market and took comfort in the Trump name.”
The four buyers named in the lawsuit — with at least seven more investors likely to join later this week, says Heydary — are 27 to 55 years old. Three live in the GTA, one in Alberta.
They bought units between early 2007 and 2011. Some of them purchased directly from Talon, while others bought that were flipped by earlier buyers as so-called “assignments.” Some were bought on the advice of a realtor.
Plaintiffs Ilsan Kim, 27, and Michelle Park, 35, hadn’t bought real estate before, the suit says. Husband and wife Nahm-Hee Park, 55, and Soon Keon, 53, took money from the sale of their convenience store and bought two $700,000 units which buyers were assured would not only appreciate in value, but produce far more income from nightly stays than the monthly maintenance fees, taxes and other incidentals charged to owners.
Lots of rich sophisticated investors also bought units, many of them U.K. and European investors who are also trying to renege on deals that, in many cases, were recommended as sound investors by financial experts.
According to the lawsuit, Talon has been largely mum since a 2008 financial disclosure document about how the project was doing, other than to tell buyers repeatedly that the opening, originally slated for March 2007, was delayed.
It was just after that time that owners were stunned to find out the units weren’t quite the Hollywood gold they’d been promised, according to details laid out in the lawsuit.
Back in 2004, Talon marketing materials used to launch sales for what was at the time celebrated as Toronto’s first true five-star hotel were full of tables showing what buyers stood to make each year if the hotel was 55 per cent, 65 per cent or 75 per cent full.
Room rates would be $600 a night, sales staff boasted, and likely more “because of the Trump name.”
Last spring, Talon produced the first real financials in years, according to the suit — but only on a suite-by-suite basis, making it difficult for buyers to piece together the bigger picture.
When some did, they were alarmed to discover hotel occupancy was averaging less than 50 per cent much of the time and room rates just $300 or so per night, the lawsuit claims.
At the same time they were hit with maintenance fee increases and commercial property taxes at least 40 per cent more than originally promised.
For those four investors alone, that’s meant losses over the last seven months of anywhere from $28,000 to more than $31,000.
