Dumped by Trump At The Donald's tower, 'friends and family' buyers see deals nixed
By Alby Gallun
The Donald wants it all.
So say some buyers in Donald Trump's downtown condominium tower who are in a standoff with the celebrity developer over his plan to cancel their purchase contracts and take back their condos, along with millions of dollars in paper profits.
The move allows Mr. Trump to recapture profits he gave up by selling the units at a discount through a special "friends and family" program back in 2003.
It was an opportunity for people who worked on the 90-story project — mostly lawyers, architects and brokers — to buy in early at a discount, with the chance to sell for a big gain as condo prices rose. And prices in the building have soared, in some cases doubling over the past three years. Total condo sales at the tower are expected to top $1 billion.
"This guy is just jerking us around," says Nathan Diamond-Falk, who signed a contract to buy a condo with his wife, an interior designer who worked on the project's sales center. "It's just tacky. It may be the way they do business in New York, but I certainly don't think it's the way they do business in Chicago."
Mr. Trump is presenting the discount buyers with a stark choice: pay more for their condos or give them up. He makes no apology for the hardball move.
"They are profits we're entitled to," says Mr. Trump, who contends that he can legally terminate the deals.
One disgruntled buyer who asked not to be named agreed to buy a condo for about $1.3 million in 2003 and estimates it is now worth $2.2 million, based on recent sales. In a letter last summer, the Trump Organization told the buyer that the contract was "null and void" and that Trump was returning the down payment, erasing a nearly million- dollar gain.
Trump sold 32 condos and 11 condo-hotel units through the friends and family program in 2003, when it began marketing the 758-unit high- rise at 401 N. Wabash Ave. A letter to prospective buyers called the program "our way of thanking you for your continued hard work," offering a 10% discount off list prices and a rare opportunity to "flip" units to another buyer even before closing.
PROMINENT BUYERS
Buyers included David Radler, former president and COO of Hollinger International Inc., then-parent of the Chicago Sun-Times, which owned the development site and was once a partner in the project; prominent real estate attorney Theodore Novak, whose firm, DLA Piper, represents the Trump project; several brokers at Koenig & Strey GMAC, the brokerage firm hired to market the development, and several architects at Skidmore Owings & Merrill, the architecture firm that designed the skyscraper. Efforts to reach Mr. Novak, Skidmore Managing Partner Richard Tomlinson and Mr. Radler's attorney were unsuccessful.
It looked like a good deal for both sides. Buyers got a price break and Mr. Trump got early sales needed to land bank loans for the project. With the help of the friends and family plan, Trump sold enough units to secure financing and break ground in 2005. Buyers have signed contracts for 79% of the 472 residential condos and 77% of the hotel units, according to Tere Proctor, the Koenig & Strey broker in charge of sales.
Yet Trump executives last year started notifying friends and family buyers that their contracts would be cancelled or renegotiated at a higher price. Some buyers agreed to pay more, while others, like Mr. Diamond-Falk, are still considering their legal options.
Ms. Proctor, who signed a contract for a condo and a hotel unit, declines to discuss her situation, other than to say she still has contracts to buy both and has no complaints. She and most of the other friends and family buyers still count Mr. Trump as a business client, giving them incentive to accede to his wishes.
So far about three-quarters of the 43 contracts either have been terminated or renegotiated, estimates Jason Greenblatt, the project's in-house attorney. Only "a couple of bitter people" have complained, he says. Trump's other buyers are unaffected, he says.
"Why should we sell things for a lower price when the project is so successful?" Mr. Greenblatt says. The original buyers are "not entitled to a huge windfall. They understood that from day one."
Chicago developer Daniel McLean says he's "never heard of" developers canceling early contracts with friends and family.
"It seems to me that they're not going to be your friends and family anymore if you throw them out of the deal," he says.