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Trump Baja venture goes south

Written by editor

TIJUANA, Mexico — Waves crash against a rocky shore, while a couple strolls on the beach. Poolside, a bartender is mixing up a batch of margaritas.

TIJUANA, Mexico — Waves crash against a rocky shore, while a couple strolls on the beach. Poolside, a bartender is mixing up a batch of margaritas.

Then comes Donald Trump, smooth and confident, singing the praises of the new Trump Ocean Resort Baja Mexico north of Rosarito Beach, an area he touts as “the next Cabo.”

“I’m very proud of the fact that when I build, I have investors that follow me all over,” he says in the eight-minute video produced for potential buyers. “They invest in me. They invest in what I build, and that’s why I’m so excited about Trump Ocean Resort.

“This is going to be something very, very special.”

So special that 80 percent of the first phase sold out within hours in a 2006 pre-sale. But three years later, the only progress is a gigantic hole in the ground and a heap of dirt.

Instead of a 525-unit luxury vacation home complex with pools and tennis courts, this project is shaping up to be a legal battle of Trump proportions.

Dozens of angry buyers have sued Trump for failing to complete the project. He, in turn, sued the Los Angeles-based builders, saying he only lent his name to the project, and it was the developers who allowed the project to fail.

At the heart of the dispute is this question: If Trump markets himself as a project’s builder is he liable if the actual builder fails?

Yes, says Hamed Hoshyarsar, a Los Angeles accountant who bought one of the units.

“That’s the reason why we went with this project: Trump’s name was on it,” said Hoshyarsar, 30. “If we would have known he just licensed his name and he wasn’t the developer, then we wouldn’t have bought it.”

Now, he changes the channel when Trump appears on television.

“I can’t believe a person with the reputation of Donald Trump and all that he represents on ‘The Apprentice,’ that he let this happen to us,” Hoshyarsar said. “It’s unbelievable.”

Trump said in an interview that sales contracts made it clear that he was not the developer. He said he licensed his name because the developer had a “good reputation” and had been a reliable partner in a similar project in Honolulu. The Trump International Hotel & Tower Waikiki is on track for September completion.

‘Not the developer’
“The documents state very clearly that we were not the developer,” Trump said. “We’re looking into the whole situation because it doesn’t make me happier than it makes them. I don’t like to see people lose money.”

Before the reality-TV hit “The Apprentice,” the premium vodka and signature clothing line at Macy’s, Trump made a name for himself actually building luxury office towers, hotels and casinos. Over time, the Trump name became a symbol of glamour and success.

In his newly released book, “Think Like a Champion,” Trump wrote about the power of his name.

“My buildings sell out before they are built,” Trump wrote. “People recognize the brand name and know what they will be getting: the best for their money.”

Developers pay handsomely to stamp that Trump cachet on their projects. Such deals have proved profitable for both Trump and builders who paid to use his name.

The Baja project was developed by Irongate Wilshire and PB Impulsores, which both operate from offices in Los Angeles. Irongate principals Jason Grosfeld and Adam Fisher did not respond to requests for comment.

Irongate and PB Impulsores have not filed a response to the buyer lawsuits. In an e-mail to buyers in February, the developers blamed the project’s failure on the “global melt-down of the credit markets,” making it impossible to obtain financing.

abandoned project
But the buyers say Trump’s liability is clear. “Nobody ever said anything about this being a licensing deal,” said Daniel J. King, a lawyer for the buyers. “None of them would have bought if they knew the real arrangement.”

In February, the developers notified buyers that they had spent their deposits — $32 million — and were abandoning the project because they could not obtain financing to finish it.

Sixty-nine people who paid for units at Trump Ocean Resort Baja Mexico filed their suit in March in Los Angeles County Superior Court against Trump and the developers, accusing them of falsely portraying Trump as the builder. Although the project was to be in Mexico, the suit seeks to apply U.S. law because the properties were marketed and sold here.

Trump sued developer PB Impulsores in U.S. District Court in New York, accusing it of failing to make good on its promise to build the project and demanding an accounting of how the buyer deposits were spent.

Bart I. Ring, another lawyer for the buyers, said he considered Trump’s suit a “publicity stunt” that will not relieve him of culpability in the Baja project.

“If Trump is truly interested in the best interests of the buyers, he could reach in his pockets and make the buyers whole,” Ring said.