Buyer beware anybody?
http://www.thestar.com/business/art...tled-investors-to-close-deals-they-now-regret
Trump Tower developer suing 7 disgruntled investors to close deals they now regret
AARON HARRIS FOR THE TORONTO STAR
Javad Heydary, centre, leads an eight-lawyer team including Min Kim, left, and Mitch Wine, right, who have been looking at the Trump deals on behalf of some investors.
Developers of Toronto’s Trump International Hotel & Tower have launched lawsuits against seven investors in an effort to force them to close on deals for condo-hotel suites some claim haven’t turned out to be the Hollywood gold buyers were expecting.
The legal move by Talon International Inc. comes at the same time that a London, Ont. doctor is seeking $750,000 in damages for “misrepresentation,” unless he can get back deposits on the hotel suite he bought in the ill-fated project back in 2009.
The court wrangling is just the latest round of problems to curse the celebrity hotel and condo project at Bay and Adelaide Sts.
Dozens of purchasers of suites in the 65-storey luxury hotel are now trying to get deposits back and renege on final payments averaging over $500,000.
Other buyers, some too frightened of the legal ramifications to walk away from deals penned up to seven years ago, say they are finding themselves in a crippling Catch-22 — unable to sell the units or secure mortgages on balances due to Talon Nov. 29.
“One mortgage company asked me, ‘How could I give you a mortgage on a property that is losing money every single day?” said one devastated buyer, a blue-collar worker who borrowed the $175,000 down payment from his immigrant parents and owes $750,000 at month’s end.
“It’s very scary,” says the GTA resident, one of about a dozen investors who spoke to The Star on condition their names not be used.
Most were caught up in the get-rich-quick mentality of Toronto’s booming condo market and intended to flip the units or use them to generate retirement income.
Talon has been facing an escalating buyer revolt since last February as the glitzy Trump Hotel set to open and buyers found out that maintenance fees, property taxes and other incidentals on the project’s 276 hotel-condo units had skyrocketed from Talon’s earlier projections.
Emergency doctor Ganesh Ram alleges in his lawsuit that his costs jumped 40 per cent, with property taxes alone (the hotel-condos are considered commercial rather than residential units) now at $30,000 a year. While revenues from the hotel were meant to more than offset those kind of costs, buyers say they’ve been told hotel occupancy is running anywhere from 10 to 50 per cent and room rates are averaging about $300 per night instead of the $600 and up Talon had originally touted.
Based on the startling new numbers, buyers have alerted Talon they plan to rescind their deals, citing the fee hikes as a “material change” under the Condominium Act.
Talon’s lawsuits, filed in Newmarket’s Ontario Superior Court of Justice in the summer, are seeking a declaration from the court that they aren’t a material change and that deals must stand.
Talon refused to discuss details of the lawsuits. None of the buyers named in the suits would speak publicly.
“Purchasers that entered into agreements of purchase and sale with Talon are not amateurs. The purchasers made these commercial investments in the light of day and presumably on the advice of their legal counsel,” Talon told The Star in an email through its public relations firm.
“We have full confidence in the court’s wisdom to interpret and enforce the terms and conditions of the agreements that were entered into by those few purchasers which have chosen to resile from their binding obligations to Talon.”
While domestic and international investors have largely fuelled the condo boom since 2007 — buying up units and renting them out — the Talon/Trump project is very different. It has 379 suites, some 118 of them residential condos, the other 261 being hotel-condos that go into a rental pool.
Owners of those hotel suites pay commercial, rather than residential taxes, “common element” and other fees, including $87 every night there is someone sleeping in their bed. According to financial estimates in online promotional material, graced by The Donald’s smiling face, those costs would be more than offset by Trump Tower’s revenues.
Toronto lawyer Javad Heydary has been advising eight Korean purchasers and has been contacted by representatives of more than 40 other buyers seeking to rescind offers. He’s had a team of eight lawyers examining the deals.
What Heydary found came as a shock, especially to some buyers who readily admit they were so blinded by the flash and cash of Donald Trump that they didn’t do proper due diligence: Buyers weren’t purchasing so much a condo as a share in a high-end hotel that, so far at least, is losing money.
Some buyers are sophisticated investors. But many others are hard-working immigrants who just want their life savings back — 20 per cent deposits now sitting in trust and due to be released to Talon on closing.
“Everybody on their own or through advisors — financial advisors, real estate brokers or pension administrators — heard about this opportunity and was attracted because of the name Trump,” says Heydary.
“They were not only buying into what they thought was a good investment, they were buying a piece of Hollywood.”
