Toronto's Trump Tower sales tactics face probe as buyers revolt
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Developers of Toronto’s Trump International Hotel & Tower were given explicit instructions by the Ontario Securities Commission back in 2004 not to sell units in the luxe project as lucrative investment opportunities.
But buyers tell Torstar News Service they were wooed into putting down payments on pricey hotel-condos through slick marketing by rookie developer Talon International Inc. that focused largely on the project’s revenue-generating potential.
“Sales staff had actual spreadsheets. They could tell you the rate of return unit by unit, floor by floor,” said one buyer who termed those financial details “critical” to his decision to buy a $700,000 unit.
“It was very much sold as an investment (that would actually generate revenue) — there were no ifs, ands or buts,” said the investor, one of more than 50 now desperately trying to get out of deals set to close Nov. 29.
Lawyers for close to a dozen buyers allege that Talon’s marketing campaign violates a special exemption granted, at the developer’s request, by the Ontario Securities Commission as sales launched eight years ago.
“We are looking into this matter to determine compliance with the order and will take regulatory action as warranted,” said the commission in a statement to the Star on Tuesday.
Talon said through its public relations firm that the ruling “was in the usual form granted by the commission in respect of similar applications for commercial condominium units. Talon has complied with the terms of the ruling.”
The exemption is critical in that it means Talon didn’t have to meet key conditions commonly demanded by the securities commission before investment offerings can be sold to the public.
Most importantly, Talon was able to avoid filing a prospectus — a $1 million-plus document that gets reviewed by the securities commission and outlines the financials of any commercial enterprise trying to attract investors.
But the commission ruling makes clear that the exemption was granted on condition that Talon market the project’s 276 hotel-condos “primarily as first-class luxury hotel condominium units to be used for short-term transient hotel occupancy or for longer-term occupancy.”
Nothing in any of the documents prohibited buyers from flipping units for a profit on completion, as many investors have done during Toronto’s condo boom.
But the 10-page ruling stipulates that prospective purchasers “not be provided with rental or cash flow forecasts or guarantees or any other form of financial projection or commitment.”
“That (exemption) left buyers faced with very complex purchase agreements that the average person — even the average lawyer — might not be able to navigate,” said Toronto lawyer Javad Heydary.
“I don’t think we can blame the commission. They proceeded on the understanding that Talon would undertake the terms of the order.”
Heydary heads a team of eight lawyers who’ve been trying to unravel the complex purchase agreements on behalf of investors who bought through Talon sales staff or realtors to whom Talon paid commissions.
Trump not only licensed his name, which graces the top of the 65-storey project, but Trump International Hotels oversees the day-to-day running of the hotel.
At least one other lawyer is also looking at the ruling as grounds for helping clients who’ve notified Talon they want to rescind their offers on units ranging from $600,000 to well over $1 million.
About a dozen investors have talked to Torstar News Service, but on condition their names not be used because they have yet to be sued by Talon and don’t want to draw attention.
Talon has been facing an escalating buyer revolt because of fees and taxes that inexplicably skyrocketed on the units as the hotel finally opened last February, at least two years behind schedule.
A London, Ont., doctor who took part in a promotional video for the project filed a lawsuit last week seeking $750,000 in damages for “misrepresentation” unless he gets back deposits on his $913,000 hotel-condo.
Dozens of buyers are now trying to get deposits back and renege on final payments averaging more than $500,000 that are due to Talon Nov. 29.
Even buyers too frightened of the legal ramifications of walking away from deals penned up to seven years ago are finding themselves in a crippling Catch-22 — unable to sell the high-priced hotel units in a softening condo market or secure mortgages on balances due.
Buyers trying to back out are using a proviso of the Condominium Act that allows purchasers to cancel deals within 10 days of a “material change.”
Talon has launched lawsuits against seven of those investors and is seeking a declaration from Newmarket’s Superior Court of Justice that the new fees aren’t a material change and that the deals must go ahead.