There is a lot of confusion around these days around the Bay and Adelaide streets in downtown Toronto, the site of the highly impressive 65 five story tall Trump International Hotel and Tower. The tower, completed over a year ago, and containing 261 luxury condos, has only managed to find buyers for 20% of them. And to make matters even worse for Shnaider, Levitan and their partner “The Donald” Trump, some of the owners of the fifty condos that have been sold, are demanding their money back and are on the verge of taking legal action against the developers, claiming that the investment opportunities offered to them were grossly exaggerated.
Four indignant buyers, who are due to begin litigation against Shnaider and Trump within the coming weeks are basing their case on assertions that they had fallen victims to an investment scheme and conspiracy based upon reckless and negligent misrepresentations of the luxury hotel’s financial prospects.
Messrs Shnaider and Levitan, who till now have remained tight lipped, have come out in public to insist that they will be keeping up with their promise to deliver exactly returns on investments for those who purchased a condo unit in the five-star hotel, while reminding owners, potential or current, that the return on investment on such projects had to be gauged over the long term, and those who were looking to make serious returns after two or three months were taking a very short sighted approach.
According to the four plaintiff’s legal counsel, the aggrieved condo owners are not only seeking to recoup the hundreds of thousands of dollars that they had already paid out on deposits for their dream condominium, but also more than $2.5-million each in compensation for what they claim as loss of opportunity and consequential damages, negligent misrepresentation and conspiracy.
According to the claim, the plaintiffs claim that the defendants ( which includes Donald Trump) had limited or no practical experience investing in real-estate when they opted to purchase hotel/ condo units on the top 33 stories of the Toronto Trump tower, with the ground to 32nd floor being devoted to either retail or office space.
The aggrieved condo owners have already stated that marketing people on behalf of Talon substantially violated a ruling from the Ontario Securities Commission by blinding potential investors with complicated financial projections which showed exaggerated returns from subletting the properties, with implausible figures such as room rates of $600 a night and total occupancy rates of between 55% and 75%. However, when it came to the crunch, the plaintiffs discovered that these projections were far from reality, with occupancy rates well below 50% and room rates averaging around $300 a night with peak prices of a maximum of $400. Thanks to these disappointing figures, condo buyers rapidly discovered that instead of making a reasonable return on their investment, they were instead generating substantial losses.
The terms of the buying agreement, were that the hotel/condo units were available for buyers to use for a certain number of days or months during the year, with the owners then eligible to enjoy a share of the income, if and when the unit is rented out by the hotel operation. Hotel/condo units in the Toronto Trump tower were typically priced between $600, 000 and $1 million.
In addition, according to the plaintiffs, the easy mortgage financing promised to them during negotiations, were far from forthcoming, contrary to the representations made by Trump and Talon representatives. In their defense, Shnaider and. Levitan hastened to point out that buyers had multiple opportunities to extricate themselves from any preliminary agreements, as hotel construction had been delayed for a number of years, but very few cancellations were received.
In addition, Talon maintains that they never, at any stage in their marketing process or pre-purchase negotiations, guaranteed any specific and certainly not inflated return on investment, going on to add that their sales staff as well as that of Trump’s had received very specific instructions never to speculate the project’s moneymaking potential.
According to Val Levitan, the project’s profitability can only be assessed in the years to come when the hotel will stabilize itself. “When the profits will become a testament to the quality of the product.” He summed up.
A spokesperson for the Trump Organization had also rushed to the Toronto Trump Tower’s defense stating that the Trump Organization is neither the owner nor the developer of the project. “The company has been retained to manage the hotel’s operation, which is open and operating to rave reviews, with the court case increasingly sounding like a classic case of “buyer’s remorse.”
According to Alex Shnaider, since launching the project in 2004, Talon has made it its mission to ensure that Trump International Hotel & Tower, housed in a world-class building will stand the test of time. “Nothing has changed in that regard, and the company continues to provide the highest level of service and amenities for both residents and guests to the hotel.” He concluded.
To show that he puts his money where his mouth is, Shnaider has wholeheartedly reinforced his intention to keep the $20 million value penthouse suite for his personal use.
Alex Shnaider was born in Russia, but grew up in Toronto, going on to study at the York University in the city. Shnaider made his initial fortune in commodities trading as co-founder with Eduard Shifrin of the Midland Group.