Friday, March 6, 2009

Trump + Mexico = Disaster

For buyers purchasing properties outside the U.S. -- and especially in Mexico -- the term 'caveat emptor' (buyer beware) is ringing more and more true. In a PR disaster for Donald Trump and his company, buyers who put down over $32 million in deposits at his Ocean Resort Baja project are now out of luck. From an AP story:

Stephen and Linda Drake cast aside concerns about owning property in Mexico because they believed in Donald Trump.

The Southern California couple paid $250,000 down payment on a 19th-floor oceanfront condo in Trump Ocean Resort Baja in 2006 before the first construction crew arrived.

But admiration for the celebrity developer and star of "The Apprentice" has now turned into anger and disbelief as Trump's luxury hotel-condo plan collapsed, leaving little more than a hole in the ground and investors out of their deposits, which totaled $32.2 million...

All that remains of Trump Baja is a highway billboard with a large photo of Donald Trump that advertises condos for sale. It hovers over a closed sales center and showroom, a paved parking lot, a big hole that cuts a wide swath, drainage pipes and construction equipment.

The failure of Trump Baja is a big blow to a real estate market just south of the border from San Diego that was booming two years ago with U.S. buyers looking for second homes and easy profits but is now similarly swooning. The market has been hammered by Mexico's drug-fueled violence and the global economic crisis.

Other developers completed big projects nearby in recent years and the area remains home to thousands of Americans, but the cliff-lined coast is pocked with partially built towers. The steel frame of one oceanfront high-rise is rusting, with air ducts hanging from one floor and an idled crane out front. A wind-tattered sales sign hangs outside twin towers nearby, one that appears almost complete and the other a much shorter steel skeleton.

Trump Baja demanded about 30 percent down for units that sold from less than $300,000 to $3 million, buyers said.

Deposits on abandoned projects are also at risk in the U.S., even in states like California that prohibit developers from spending the money on construction, lawyers say. The risk may be higher in Mexico because consumer protection laws are generally weak...

In response to a request to interview Donald and Ivanka Trump, the Trump Organization issued a statement that said its partner violated an agreement to license the Trump name, missing deadlines to obtain financing and begin construction...

Yah. Uh-huh. Sure, that's it. Nothing to do with the economy!

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