Trump and His Baja Resort Fiasco – ‘Just a Giant Hole in the Ground’

by on July 6, 2017 · 3 comments

in San Diego

By Frank Gormlie

Ever since Donald Trump announced he was running for president, reports began circulating in the press about all the various failures of his businesses, which included the bankruptcy of his Atlantic City, N.J., casinos, the defunct Trump University here in San Diego where students successfully sued him, and particularly the troubles of his Trump Towers.

For instance, in the saga of the Trump Tower in Tampa, Florida, Trump sold the use of his name to developers of the $300 million condo project for $2 million. The developers collected down payments from investors but after the project went south in 2008, the snookered buyers sued Trump for misleading them. Trump did settle the suit, but plaintiffs lost hundreds of  thousands of dollars. Rolling Stone Also Trump defaulted on a $640 million construction loan for Trump International Hotel & Tower in Chicago in 2008. Newsweek

And in 2009, Trump along with a developer plotted to build Trump Hollywood, a $355 million 40-story luxury oceanfront condominium. But given the collapse of the real estate market, sales were slim. A year later in 2010, lenders foreclosed on the project. Trump immediately withdrew claiming he had only licensed his name, even though his name was listed on the project’s website as the developer.

Newsweek reported on another failed Trump enterprise:

In Fort Lauderdale, Florida, people who thought they were buying into a Trump property lost their deposits of at least $100,000, with Trump saying it was not his responsibility because he had only licensed his name.

These instances where Trump has defrauded or ripped off investors and individual buyers have formed a definite predatory pattern where buyers were led to believe they were purchasing condos or apartments in buildings being developed and managed by Trump, only to find out later when troubles hit that his only involvement was getting paid for the use of his brand. This has occurred not only around the country but, shockingly also right here on San Diego’s doorstep. Newsweek

Indeed, San Diegans have their own failed Trump Tower when eleven years ago Trump made plans with developers to build a huge resort at Punta Banderas, to be titled the Trump Ocean Baja Resort, a mere 10 miles south of the US-Mexico border.

In 2006, two Los Angeles-based real estate developers named Jason Grosfeld and Adam Fisher announced they had formed a partnership with Trump to develop a three-tower condo and hotel project in Baja. Grosfeld and Fisher had successfully partnered with the Donald on his Trump International Hotel Waikiki in Honolulu.

The Baja projfect was to include 525 luxury condos on 17 acres of oceanfront property, high on bluffs overlooking the sparkling Pacific. The resort’s emphasis was on luxury living featuring swimming pools, spas, tennis courts and fine dining. The condos cost between $275,000 to $3 million.

The developers, as Irongate Wilshire, began a two-year effort of aggressive marketing.  They set up a sales office next to the project site, they handed out slick brochures bound in blue suede describing a resort where residents “relax by the infinity-edge pool, margarita in hand, as the cabana boy brings fresh towels.”

The brochure showed a smiling Trump sitting in a French gold-leaf chair, claiming no words or pictures “can possibly describe what is about to take shape here, but it is certainly going to be the most spectacular place in all of Mexico.”

Screen capture from promo video.

“VIP” cocktail receptions and lavish parties were held at hotels like L’Auberge in Del Mar, the Manchester Grand Hyatt and the US Grant in downtown San Diego to promote the resort project. At these parties potential investors were told or led to believe that Trump was one of the developers.

Buyers were shown a promo video on the Trump Baja website, where Ivanka Trump states:

“We are developing a world-class resort befitting of the Trump brand. I’m very excited about it. I actually chose to buy a unit in the first tower.”

Trump, on the same video, says he was proud “that when I build, I have investors that follow me all over. They invest in what I build, and that’s why I’m so excited about Trump Ocean resort.”

In another promotional video, Trump appeared and praised the project and its location in Mexico, saying:

“One of the things I most love about the project is the fact that it’s in Baja, Mexico, and Baja is one of the really hot places.”

Trump’s son, Donald Trump Jr., also got into the act. He met potential buyers at one VIP reception held at the U.S. Grant Hotel.  In a Trump Baja newsletter sent by the sales team, investors were told Donald Jr. “flew in from New York to purchase a suite at the event and meet with fellow buyers.” Yet, Jr. did no such thing; he never purchased a condo at the resort. Neither did Ivanka.

With dreams of living in their luxury condo high over the ocean, even possibly neighbors with Ivanka, about 250 people bought into the scheme. In time, the developers collected $32.5 million in buyer deposits, with most of the condos being sold in San Diego County.

However, no one was told that the proposed resort site was in near proximity to a Baja sewage treatment plant.  It was right across the highway. Yet, that was just one wrinkle. (See satellite map)

In July of 2007, the sales team sent a newsletter to condo buyers, which clearly stated that the Baja resort was being “developed by one of the most respected names in real estate, Donald J. Trump.”

In August of that year, Trump personally signed a letter mailed to condo buyers that identified him as a developer of the project. The letter was on the letterhead of P.B. Impulsores, the Mexican company set up by Grosfeld and Fisher to act as the resort site developer. It was also co-signed by Grosfeld, and it included a sheet of “Frequently Asked Questions” about the project, listing Trump and Irongate as the developers.

Investors were able to go to a webcam in Baja which allowed them to monitor construction at the resort site. Outside the sales office in Punta Banderas stood a billboard right off the nearby highway, with a giant photo of Trump; it read:

“Trump. Owning here is just the beginning. Phase One — 80% sold in one day. Phase Two — Now available.”

When word got out that Trump was building a resort in Punta Banderas, the local Mexicano real estate community became excited, as they saw this as a sign of hope that finally the Northern Baja coastline would become a lucrative area of development.

Meanwhile, investors who dug into their life savings and made deposits in 2006 were promised by the sales team they would receive their luxury condo units in 2008. Buyers continued to receive updates from the sales team throughout 2007 and 2008 implying the construction had begun on the resort project.

Then the newsletters stopped coming to buyers; phone calls and emails to the sales team office or developers were not returned or answered. Investors began getting very nervous. Some even traveled down to Punta Banderas to see for themselves what progress had been made. But what they found was very disturbing: an empty sales office without furniture. And when they looked at the site, all they saw was a big hole in the ground and a large pile of dirt.

The giant hole still is there, via google satellite map.

One investor who lived in Baja would go check on that property’s progress, and he noticed the dwindling staff and the frozen construction next door. “They were just moving dirt around,” he said.

Then the developers disappeared.

It became crystal clear that nothing at all was going to be built at Trump Ocean Resort. Forbes called them Trump’s “Ghost Towers”.

In the end, Grosfeld and Fisher were never able to secure financing for the project. Every penny and peso of the $32.5 million collected in buyer deposits had been spent by the partners and Trump.  And as the housing and credit crisis hit, letters were sent out to the buyers in January 2009 notifying them Trump had cut ties with the developers. In February early investors were told they would not be getting their deposits back. Forbes

Proximity of the resort site with Baja sewage treatment plant. Black circle is the project site and red circle is the treatment plant.

Then in March, the entire ocean bluff project at Punta Banderas was permanently scrapped.  The 250 investors began to realize they had lost all their money. Shock, grief, anger, embarrassment and denial set in among them. Local media on both sides of the border ran sad and tragic stories about the hapless buyers.

Later in 2009, nearly a hundred of the prospective condo buyers who had laid out thousands in deposits for the units filed suit against Trump, his children and the developer. They claimed they were deceived into believing they were buying into a Trump project, and because of that, had paid deposits totaling approximately $20 million for 71 units.

Despite his promo videos and inducements, Trump asserted he had only licensed his name-brand to the failed enterprise; he was just a spokesperson for the project – not a developer -, and disavowed any financial responsibility for its collapse. The Trump family pointed their fingers at the developers, Irongate and P.B. Impulsores, and claimed they had collected and spent all the deposit money, then failed to get a construction loan.

Ivanka Trump told CBS News that her family had “lived up to our obligation under a license agreement.” She said:

“We were never the developer of this project, and that was made clear. We never took anyone’s deposit.”

Trump was just the brand, she said.

“I am sorry for everyone, but we are in the same boat.”

One investor told the LA Times:

“When the project went south, no one from the Trump organization even contacted us to take responsibility. We were misled — all the marketing materials, the brochures, the name of the building, the fact that Trump’s daughter was at the event, saying she and her brother bought units.”

Another stated:

We totally got ripped off. We just never thought it wouldn’t get built.

The Trumps did collect $500,000 in licensing fees from the developers Grosfeld and Fisher.

Yet, it wasn’t only condo buyers who lost. The collapse of the Trump Ocean Resort sent shock waves through the real estate community in Tijuana and Rosarito. Victor Loza, the president of the Baja California Real Estate Council a decade ago when the project was first announced, told the LA Times:

“It did a lot of damage for the real estate community here. If you went to a coffee shop, that’s what people were talking about — Trump is coming, great! Everybody was excited. Everybody was like, we need that. Trump is coming.”

The Trump project had been used, Loza said, by government officials and local business leaders to market the region to tourists and investors. The sense within the Baja real estate community was that property values near the Trump site had gone crazy. Even the Baja California Tourism Ministry issued a certificate of praise to the Trump resort.

When news of the collapse of the Trump resort spread, a chill went through the local real estate market in Baja. Other projects planned for the area also failed in that period due to the American housing crash, but it was the fall of the 3-tower Trump project that had the most negative effect. Loza said, “Absolutely, it did damage the reputation of Baja.”  Since the Trump project failed, Baja California has passed legislation to further formalize the real estate industry.

Finally, in November 2013, Trump settled the fraud lawsuit filed against him by most of the buyers for a confidential, undisclosed amount – four and a half years after the initial filing. Earlier, the Irongate developers Jason Grosfeld and Adam Fisher had reached a settlement with the investors for $7.25 million.

And like the Trumps, they admitted no wrongdoing.

News Sources:

Forbes

SanDiegoRed.com

Mexico News Daily

San Diego Union-Tribune

Los Angeles Times

KPBS

Newsweek

{ 3 comments… read them below or add one }

avatar john July 7, 2017 at 4:39 pm

Excellent story. Trump’s bulls**t past keeps piling up!

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avatar W July 11, 2017 at 1:29 pm

Trump will not be satisfied until all of the USA is a giant hole in the ground and he and his criminal family walk away unscathed.

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avatar Frank Gormlie July 12, 2017 at 8:13 pm

Hat tips to Mary Marchetti and Tim Molinare who turned me on to this story – both former OBceans living the good life up in San Fran. Thanks guys.

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