As many as 50 disgruntled and disillusioned investors are now scrambling to get out of deals that are set to close this month. Final payments, averaging over $500,000 are due to the developer by November 29.
Investors snapped up the condo-hotel suites in the luxury Trump International Hotel & Tower, Toronto, but now claim they were sold on the unit’s cash-flow potential in spite of a ruling from the Ontario Securities Commission in 2004 that forbid it. A 10-page ruling stated that potential buyers should “not be provided with rental or cash flow forecasts or guarantees or any other form of financial projection or commitment.”
Just a week before final payments are due, investors are coming clean about how they were presented with all the ways the condo-hotel units were revenue-generating cash cows.
“Sales staff had actual spreadsheets,” said one anonymous investor. “They could tell you the rate of return unit by unit, floor by floor.”
Many purchasers now feel they bought under false pre-tenses when signing up for units seven years ago, and are now unable to sell the units or secure mortgages for the full agreed-upon price. In addition, mounting maintenance fees and property taxes are coming in far higher than Talon’s initial predictions, leaving many investors simply unable to fork out the cash.
According to one investor, maintenance costs jumped as much as 40 percent, resulting in monthly fees of $2,500. The project is now suffering with reduced occupancies and lower room rates than were projected and, indeed, it may well need to offset costs.
The Trump is currently running with an occupancy rate of 1 per cent to 50 per cent, with room rates on average $300 lower than projected. A costly incident of a window falling out from the 34th floor last week has also challenged investor confidence.
Is this star-powered development heard the end of Toronto’s hotel-condo dreams? Or is it simply the casualty of poor planning? Post a comment with your thoughts.
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