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”

Bloomberg Businessweek (Asia) - - CONTENTS - −Stephanie Baker and Tim Hig­gins

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.


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