Days before Florida's primary, failed Trump tower project emerges as campaign issue
The buyers at Trump International Hotel & Tower said they thought they were getting a ticket to an exclusive club, a high-rise developed by Donald Trump offering a five-star restaurant, $3 million penthouses and sweeping views of the Atlantic Ocean.
What they actually got: a hulking, empty concrete shell that was built by someone else, and ran out of money long before it was completed.
The collapse of the celebrated project four years ago cost buyers millions in lost deposits, sparked more than a dozen lawsuits, and has now emerged as a campaign issue that threatens to follow the GOP front-runner through the presidential race.
“It was an outright lie,” said J. Michael Goodson, a buyer and former Wall Street investment banker who has pending litigation against the real estate mogul. “I thought the last thing Donald Trump would do was walk away.”
The project’s massive downfall embodies both the power and the myth of the Trump brand, an aura of success and bravado that attracted condo buyers and now voters.
Just days before Florida’s primary, the long-running legal dispute over the 24-story development has become a focus of public scrutiny, raising questions about Trump’s character, business practices and his associates.
Last week, anti-Trump ads on television focused on his ties to Felix Sater, an executive on the Fort Lauderdale project who was once jailed for stabbing a man with a broken margarita glass in a barroom fight. In another case, Sater pleaded guilty to defrauding stock investors of $40 million with members of the Gambino crime family.
“Trump entrusted convicts to help him run his company,” states the ad by American Future Fund. “Who would he entrust to run the country?”
For years, Trump has distanced himself from the project, stating in a deposition in 2013 he barely knew Sater and would not know what he looked like “if he was sitting in a room right now.”
He said Sater might have introduced him to the Fort Lauderdale venture a decade ago, but that, ultimately, Sater “was not involved in this job very much.”
Despite a host of sales brochures referring to Trump’s “development,” he said he was not the developer in the project, but he merely lent his name to the resort and approved design motifs.
“The word develop, it can be used in a lot of different contexts,” Trump said in sworn testimony. “We work with the developer on trying to get a beautiful product built, but we were not the developers.”
In a phone interview, Trump’s attorney said the candidate won a jury verdict in one of the cases in Broward County, and that he had disclosed to buyers that he had only signed a licensing agreement to use his name.
“All you had to do was read” the purchase documents, said attorney Alan Garten. “The disclosures could not be any clearer.”
Though most of the cases were settled by buyers in the project, the issue over the deal was pressed two weeks ago by GOP contender Ted Cruz. During an interview with ABC, Cruz said Trump’s relationship with Sater, a 50-year-old Russian emigre who runs a development firm in New York, needed to be scrutinized.
“Republican primary voters deserve to know,” he said. “In the general election, Hillary Clinton is going to shine a light on all of this.”
Sater, a former executive with Bayrock Group, a developer of the project, said in an email to the Miami Herald that he has moved on from his convictions in the 1990s and that he had “repaid my debt many times over.” He said any attempts to draw on his past to malign Trump were “pathetic and disgusting.”
Sater, who once carried a business card showing he was a senior adviser to Trump — with a Trump Organization address and email printed on the card — declined to comment on questions about the candidate. The Trump Organization said he was never a company employee, but performed work as “an independent real estate broker.” Sater is now a real estate consultant and developer.
Several buyers said they should have been told about Sater’s involvement in the deal and his criminal past. “It certainly would have put me on alert,” said Goodson, the buyer and former investment banker.
Goodson, a Duke University benefactor whose name is emblazoned on the school’s law library, is appealing the Broward County court decision that ruled in Trump’s favor in 2014.
The 75-year-old owner of Crest Group, Inc., said Trump misled scores of buyers into believing he was the man behind the project. In the end, Trump’s name convinced Goodson to hand over a $345,000 down payment on a penthouse.
He said the brochures and sales materials clearly painted Trump as head of the 298-unit project that was supposed to turn Fort Lauderdale into an international destination. In a promotional, hard-bound book sent to Goodson, the first page reads: “A Signature Development by Donald J. Trump.”
The origins of the Trump International Hotel & Tower date back to one of the most vibrant periods in Florida real estate, when property values were soaring and the idea of condo-hotel projects was spreading across the country.
Trump helped pioneer the business model, which allows owners to rent their units like hotel suites. And he was eager to bring his brand to Fort Lauderdale’s fabled beachfront.
When the plan was unveiled, the Trump tower generated a host of publicity, glossy advertisements, and even a celebrity event featuring rapper Wyclef Jean in 2006 at a historic museum mansion in Fort Lauderdale.
Trump, who showed up in a black limousine, had just launched three similar projects in other cities in a media blitz that included Sater and Bayrock’s CEO, Tevfik Arif.
“THERE IS LUXURY...AND THEN THERE IS THE TRUMP EXPERIENCE,” boasted an ad for the Fort Lauderdale resort, which was designed in the shape of a 1920s ocean liner.
Because of the name, buyers paid a premium, spending an average 38 percent more per square foot for a Trump unit than the other condo-hotels on the beach, bank records state. Prices started at $500,000.
But over the next two years, the project would miss construction deadlines and, at a critical point, was strapped for loans from its top lender. Though the first wave of units sold briskly in 2006, by the following year, momentum had slowed.
The lead developer, Roy Stillman, who joined in a partnership with Bayrock, later said the downturn in the economy was having a devastating impact on the project. “The world ended in terms of the real estate economy,” the New York developer testified.
The entire structure was supposed to be completed by December 2007, but it wasn’t close. One buyer told the Herald that he drove by the site eight times to check on the progress, but finally gave up.
With the project stalled, the partners in Bayrock took a drastic step — cashing out much of their future profits while the building was still a shell.
In a transaction that would not become public until years later, the Bayrock team traded its interest in the Fort Lauderdale resort and three others projects to an Icelandic investment firm — receiving $50 million, according to a Delaware lawsuit against Bayrock by a former finance chief. The money was funneled through a Delaware shell company, the suit said.
A month after the deal, Sater purchased a 4,000-square-foot waterfront condo on Fisher Island for $4.8 million, records show.
By the following year, the Fort Lauderdale project was all but doomed: The real estate market had collapsed, and the project’s lender, Corus Bank, was in financial trouble. Trump later testified the lead developer missed too many deadlines.
“We put a lot of pressure on him to get that building finished,” Trump said of Stillman. “I told him to get on the ball.”
After tense negotiations, Trump decided to pull his name from the project and end his agreement with the developers in what was the final blow. More than $140 million had already been spent on the construction. He also fired off a letter to Corus Bank to disclose the developer was in default.
Stillman later testified that Trump’s decision was like shooting a “well-placed torpedo.” In May 2009, buyers were informed that Trump had stripped his name off the tower, all but ending the deal.
By then, buyers had already hired attorneys and begun a barrage of lawsuits, accusing the developers and Trump of widespread fraud. Many said they were stunned Trump was not the developer, citing the reams of brochures bearing his name and signature.
One buyer, 51-year-old Naraine Seecharan of Coral Springs, was in the midst of recuperating from surgery to remove a brain tumor. Along with the “excruciating pain” of his recovery, Seecharan said he was distraught over his investment turning sour.
“This was equal pain, thinking what was going on,” said Seecharan, who turned over $289,000 in a down payment. “It was very, very hard.”
Seecharan was among the scores to receive confidential settlements from Trump and the developers, but said he has never fully recovered financially. “I would have been able to almost retire,” Seecharan said.
All you had to do was read. The disclosures could not be any clearer.
Alan Garten, general counsel at the Trump Organization
Trump, Bayrock and others argued the real culprit was the downturn in the real estate market — one of the primary defenses in court. It didn’t matter whether buyers mistakenly believed Trump was the developer, lawyers argued. If the buyers had completed their purchases, they would have lost even more money.
“On this one, they got very, very fortunate that they didn’t put their money down, that they didn’t buy the units and that would have been worth a fraction of what they were [worth] when they signed at the all-time high in the market,” said Trump during a deposition.
Trump said the condo-hotel model was in serious trouble during the downturn — “the worst period since the 1920s,” he said — and banks even stopped lending to people who wanted to buy units. “Horrible, horrible conditions,” he testified.
However, Joseph Altschul, an attorney for scores of buyers, said several similar models survived in the same area and managed to keep their doors open, rattling off the names of three others that opened since 2004. “You had other condo-hotel deals that didn’t fail,” he said.
He said many of the buyers had invested to make money by renting out their units. Within three years of the project’s end, the market had already started to rebound. By 2013, CFLB Partnership bought the unfinished tower for $115 million to open as a condo-hotel.
“You had people who wanted a second home. They wanted an income stream. They weren’t looking to resell,” said Altschul, whose more than 70 clients turned over about $8 million in deposits to secure units.
In addition, many investors agreed to buy units only because they believed Trump had a stake in the project.
The Pembroke Pines lawyer points to dozens of brochures, letters with Trump’s signature and other promotional materials that gave his clients the impression the billionaire was in charge.
“Here,” he said in a recent interview. “The letter says, ‘It is with great pleasure that I present my latest development.’ How were they supposed to know he wasn’t the developer? He said this is ‘my development.’ I was representing them, and I even thought he was the developer.”
Miami Herald staff writer Chabeli Herrera contributed to this report.