The Trump brand hasn’t always translated well overseas
▶ The real estate mogul came out ahead, even as deals soured ▶ “I don’t think there is a hotter brand in the world than … Trump”
Donald Trump promises that, if he’s elected president, he’ll apply his dealmaking savvy to international relations. An examination of Trump’s operations abroad suggests that, while he’s made millions selling his name overseas, he’s also chosen inexperienced partners, disappointed customers, and ended up in litigation. “Not everything is perfect,” says Trump, the front-runner for the Republican nomination. “Sometimes you find out that people aren’t what you thought they were, and sometimes you find out they are phenomenal.”
One of Trump’s early forays abroad was in Toronto, where he donned a hard hat in 2007 to mark the start of construction on a hotel- condo tower that would become one of Canada’s tallest buildings. He licensed his name to Alex Shnaider, a Canadian billionaire who set up Talon International Development to build the tower. Shnaider, who’d made a fortune in the Ukrainian steel industry,
had never developed a major real estate project.
After extensive delays, the building opened in 2012. Occupancy didn’t reach the Trump-talon projection of 55 percent to 75 percent until room rates were slashed. About 20 investors sued Talon and Trump for suggesting in marketing materials that returns could run as high as 21 percent. In July an Ontario judge dismissed the case, saying the investors should have been more cautious. Two of the buyers are appealing.
Talon is trying to cancel its management contract with Trump and unload 280 remaining hotel-condo units, according to court documents. “Both Talon and the board want new management because they’re not happy with the Trump management,” says Symon Zucker, the lawyer representing Talon. “He’s not providing the value. There are other brands that will enhance the property.” In December, Trump asked a Toronto court to block Talon from terminating their deal; the two parties are now in mediation. Instead of seeing the project sold, “I’d rather buy it,” Trump says.
As he was getting the Canadian project off the ground, Trump also turned his attention to Panama, where he agreed to license his name to the Trump Ocean Club, a hotel-condo complex in Panama City. Panama’s then-president Ricardo Martinelli attended the ceremony when the building opened in 2011. The developer, Newland International Properties, agreed to a deal that could have earned Trump about $75 million under a licensing agreement, based on sales price assumptions.
Newland had never attempted such a big project, and construction was plagued by delays. By the time the Ocean Club opened in 2011, when the economy was still weak, the market was already flooded with high- end condos. Some buyers walked away from their down payments. Single-room units being offered for $350,000 were reduced to about $180,000.
Newland filed for bankruptcy protection in 2013 and has continued to struggle since reorganizing; in early 2015 it missed a payment to bondholders. Newland’s Roger Khafif, the lead developer on the project, attributes the building’s problems to the decline of the Panamanian economy. “It would have been much nicer and much better if we’d have finished the building before the crisis,” Khafif says. “It probably would have been the best real estate project in Latin America.”
In financial disclosure forms filed in connection with his presidential bid, Trump said the Panama deal generated more than $5 million in royalties and $896,440 in management fees from January 2014 to July 2015. The condo owners’ association at the Ocean Club moved to dismiss Trump’s management company last year, claiming it exceeded budgets and used condo fees to cover hotel operating costs. Trump, in response, is seeking $75 million in damages through a claim with the International Chamber of Commerce court of arbitration in Paris.
In Scotland, rather than license his name, Trump invested his own money in golf courses. In his candidate disclosure forms, Trump claimed income of $20.3 million from Trump Turnberry, a course he bought for about £41 million ($58 million) in 2014. Yet records filed with Companies House, the regulatory agency overseeing corporations in the U.K., show a loss of £3.6 million in 2014 for Golf Recreation Scotland, the registered owner of the course. There’s a similar discrepancy with the accounts for two other courses. On his disclosure forms, Trump claimed income of $4.3 million from Trump International Golf Links Scotland, a course he built north of Aberdeen; yet Companies House records show it lost £1.1 million in 2014, its third consecutive annual loss. In Ireland, Trump reported income of $10.7 million from Trump International Golf Links in Doonbeg. The course, which he bought in February 2014, reported a loss of €2.5 million in 2014 to Companies House.
According to Trump, the reported losses are due to construction on the golf properties. He says he’s spending $58 million on Turnberry, which he closed last September for refurbishment. He also adds that he has yet to unlock the value in developing housing on the Scottish and Irish properties. “They’re only losing money because they’re not open,” he says. In fact, his golf course and hotel in Aberdeenshire are open. So is his hotel in Ireland, though part of the attached golf course is under renovation.
Trump says the amounts listed in his campaign disclosures are based on “projected future income” from the golf courses. Campaign finance experts say the rules require candidates to report payments they’ve received, not estimates for future income. “This is supposed to be what you own and the income you made,” says Larry Noble, general counsel at the Campaign Legal Center, a nonprofit watchdog group.
Trump says his business record speaks for itself. “I’ve done very well internationally,” he says. “I don’t think
“It would have been much nicer … if we’d have finished the building before the crisis. It probably would have been the best real estate project in Latin America.” —— Roger Khafif
there is a hotter brand in the world than the Trump brand.” Whatever becomes of his presidential bid, Trump says he thinks it’s all been worth it. “Generally, what I’m doing has been helpful for the brand,” he says. “The heads of the countries all dig Trump.”
The bottom line Trump claims he’s profited on deals abroad, even where he’s shown losses on paper or where projects have run into trouble.