The Trump Facade Is Cracking (Again); With It, The Licensed Condo-Hotel Model

Donald Trump and his businesses have had their share of financial problems over the years, typically the result of being over-leveraged at the wrong time. Now, the vaunted Trump name faces a new type of tarnishment: the kind that comes from branding a new condo-hotel as a “Trump” property, and then pulling off the “Trump” once the the going gets tough.  Left in the lurch are those who bought units in the preconstruction phase.

This may be the sad fate of the “Trump” International Hotel & Tower in Fort Lauderdale.  As reported in today’s South Florida Sun-Sentinel, buyers there just learned that the yet-to-open hotel — towards which they paid substantial deposits several years ago — may no longer carry the Trump name, owing to a possible cancellation of the licensing agreement by one of Trump’s entities.  Not only that, but the hotel may not even open if less than half of the units actually close (certainly a tough goal to achieve in this economy).  All of this worsens an already difficult situation at the project, whose principal lender — the notoriously over-extended Chicago-based Corus Bank — faces potential FDIC receivership if it doesn’t raise $390 million by mid-June.

The Trump bait-and-switch follows closely on the heels of the Trump Baja fiasco. There, a planned “Trump” resort in Mexico was cancelled without ever breaking ground, and some $32 million in deposits paid by buyers of units vanished into a black hole.  Trump’s response was neither remorse nor any attempt to make the buyers whole.  Instead, he vehemently distanced himself from the project and sued another company associated with developing the resort!

The recent spate of Trump troubles illustrates a fundamental problem with the condo-hotel model, which I addressed over a year ago on this blog.  While developing a new hotel as a condo-hotel grants developers ready access to investment capital in the form of preconstruction deposits from buyers, developers are incentivized to structure the marketing and sale of condo-hotel units in a manner which aims to avoid the disclosure and registration requirements of federal securities law.  The end result is that the disclosures made to condo-hotel buyers are relatively minimal when contrasted, for example, to the voluminous disclosures which investors get when they buy shares in a publicly traded company.  Accordingly, buyers don’t get vital information going to the project’s future viability — information that might include, to take just one example, Donald Trump’s precise role in a new development, and the terms of any agreement to license his name on the property.

Taking the long view, Trump’s latest failures should spur legislators, regulators, and courts to take a hard look at the condo-hotel model.  Condo-hotels are primarily investment vehicles and should be treated as such.  Investments offered to the public without full disclosure are nothing short of recipes for disaster.

By Jared H. Beck, Esq.

This article does not constitute legal advice or the formation of an attorney-client relationship, and is not for re-publication without express permission of the author.

Mr. Beck has a law degree from Harvard Law School. His law firm, Beck & Lee Business Trial Lawyers in Miami, is dedicated to the practice of business and real estate litigation, as well as pursuing the rights and remedies of consumers and investors. A significant portion of Mr. Beck’s practice is devoted to issues arising under purchase contracts for real estate, including condominiums, condo-hotels, single-family homes, and commercial property. Mr. Beck is a member of the Florida and California Bars, and litigates in other U.S. jurisdictions in conjunction with qualified local counsel. He can be reached at 305-789-0072 or



  1. Jason Kirk

    You just have had to watch a episode of the Apprentice to know you can’t trust anything he’s selling. Still remember an episode were contestants were selling sports goods at an inflated price to people by passing one of the contestants off as a basketball star. Think the “basketball star” was signing the items as well. Think several of his properties were in bankruptcy when the second season started.

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