|By Rick Daysog, The Honolulu
AdvertiserMcClatchy-Tribune Regional News
July 14, 2009 - In a further sign of the struggling economy, the developers of the upscale Trump International Hotel & Tower Waikiki have been hit by two lawsuits by buyers wanting to get out of their purchases.
The first suit, filed in state Circuit Court yesterday morning on behalf of 11 Mainland and local buyers, alleged that California-based Irongate Capital misled buyers by describing mega dealmaker Donald Trump in its press releases as a co-developer of the 464-room condotel even though he is only licensing his name to the project.
A separate lawsuit, which was filed in Honolulu federal court about an hour after the first, nine other buyers accused Irongate of defrauding buyers by misleading them about who is going to manage the rentals of condotel units to tourists.
Promotional material stated that rentals are supposed to be managed by a third party when Irongate "will, in fact, control and administer the rental program."
"These suits are a function of the times," said Robert Hastings, president of the local real estate appraisal firm of Hastings, Conboy, Braig & Associates.
"And there will be other litigation like this."
Irongate said the allegations were groundless.
"A small group of individuals filed suit today. We believe that all of the claims are without merit and we intend to vigorously defend ourselves," Irongate said in a news release.
"Furthermore, we intend to pursue all of our own claims against these individuals. The vast majority of buyers are moving towards closing and are looking forward to their first visit to Trump Tower Waikiki Beach Walk later this year."
Scheduled for completion in September, the Trump Waikiki is one of the most expensive residential projects ever built in Hawai'i.
Irongate locked in sales for all 464 units for a total of $700 million in November 2006, in what the developers then described as the largest-ever one-day sale in real estate history.
Many of those buyers put down 20 percent deposits -- or roughly $90,000 to $1 million -- to secure their units.
The federal court lawsuit, which was filed by local attorney John Perkin, said that promotional material for Trump Waikiki stated that buyers could "obtain optimum rental income and occupancy" through the hotel owner's management of their apartment units.
But in reality, buyers were relegated "passive investors" whose returns would be wholly dependent on the developer, the suit claimed.
The suit also alleged that Irongate also controls the Trump Waikiki's parking facilities, its spa, its commercial units as well as the board of its condominium association, "thus locking in its control of the hotel units and the entire property."
Warren Price, who filed the Circuit Court lawsuit, said his clients just want their deposits back.
Price said his clients aren't suffering from buyer's remorse, but are worried that Trump may terminate Irongate's license to use his name on the project, diminishing the value of their investments.
Details over how Trump or Irongate can terminate the license agreement were not disclosed to buyers, he said.
Price added that Trump and Irongate are in litigation over a similar licensing agreement for a hotel project that was being built in Baja Mexico. According to the Los Angeles Times, Trump sued Irongate in U.S. District Court in New York over the troubled project, which is called the Trump Ocean Resort Baja Mexico.
"If this (termination) were to occur, our clients' investment in a one-of-a-kind Trump project would instantly turn into an investment in just another Brand X condo/hotel in Waikiki that is not on the beach -- which was not the investment our clients intended to make," Price said.
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