The Toronto Star reports: Let’s say you’re Donald Trump.
It’s 2002 and you’ve agreed to have your name emblazoned across the top of the tallest residential tower in Canada, a $500-million, five-star condo-hotel in downtown Toronto.
Here’s the thing: Only months into the project, your lead developer is publicly exposed in the pages of the Toronto Star as a fugitive fraudster on the run from U.S. justice. Your major institutional partner — the Ritz-Carlton Hotel Company — bails shortly after.
Your remaining partners in the deal — a group of investors assembled by the criminal who was just outed — include a New York camera store owner, a former Chicago nursing-home administrator, two small-time landlords in Britain and a little-known Toronto billionaire who earned a fortune in the former Soviet Union.
The one thing they all have in common — no experience in condo tower development.
Do you pull out? For Trump, the answer was no. The billionaire dug in, repeatedly told the world he was investing his own money in the project — claims that would prove false — and gushed about its spectacular promise, knowing his profits were guaranteed.
“Nothing like this has ever been built in Toronto,” Trump said in 2004 as he relaunched the stalled project. “It is going to be the ultimate destination for business, pleasure and entertainment.”
Fast forward to 2016 and Trump’s Toronto tower is built but bankrupt — a rare failure in Toronto’s booming downtown condo market.
In the last decade, more than 400 condominium towers of 14 storeys or more have been successfully built in Toronto, according to records at City Hall. Among those, the half-dozen industry insiders and analysts interviewed for this story could identify only one that went bankrupt after completion: the Trump International Hotel and Tower Toronto.
An investigation by the Toronto Star and Columbia Journalism Investigations in New York reveals the tower that until recently bore the U.S. president’s name was so hamstrung by inexperienced partners and an unorthodox foreign financing deal that it couldn’t be saved by Trump’s public assurances of excellence.
“It’s pretty hard to make a mess of a real-estate investment (in Toronto),” said Toronto lawyer Marc Senderowitz, who represented four of the project’s minority investors. “In retrospect, I could have taken their money, bought a small commercial building and sat on it for 15 years … Things just went off the rails.”
A review of bankruptcy documents and public records in three countries, as well as interviews with the rotating cast of players involved in the deal over more than a decade provides new insights about Trump’s business approach, the unconventional partners he works with and the risks for those who bet on the Trump brand.
In the end, every investor lost money on Toronto’s Trump Tower. Everyone except Trump, who walked away with millions.
“Trump never put money in; he just took money out,” said John Latimer, a former Toronto developer who worked briefly for the project.
Now that Trump is U.S. president, his conduct during the Toronto project gives an indication of how he might manage challenges with far higher stakes than a mere real estate deal.
“As I understand it, in Toronto, Trump made inaccurate statements” that may have influenced people who invested in the project, said Kathleen Clark, a law professor at Washington University in St. Louis who specializes in legal and government ethics. “He has shown a willingness to speak inaccurately and encourages people to rely on his inaccuracies, even when that ends up causing harm to them.”
“In the case of the Toronto deal, the harm was financial. In the case of the presidency,” she said, it could be “apocalyptic.” [Continue reading…]