Saturday, February 24, 2018
Business

Buyers still feel burned by Donald Trump after Tampa condo tower failure

TAMPA — Jay Magner was watching the noon news one day when he heard that real estate tycoon Donald Trump and a group of local developers were planning a 52-story condo tower on the river in downtown Tampa.

"It changed the course of my life, literally,'' says Magner, who at the time owned a dollar store. "I thought, 'Oh my God, I could finagle that and live there.' "

Magner put down a deposit, joining dozens of other buyers eager to own part of what Trump called a property "so spectacular that it will redefine both Tampa's skyline and the market's expectations of luxury.''

A decade later, the city's skyline has indeed changed but not because of Trump Tower Tampa. Magner often walks or cycles by the acre and a half site, still weedy and empty.

"I lost $130,000,'' he says. "I didn't know people could take your money and not build the building.''

• • •

Among the scores of Tampa Bay projects doomed by the real estate crash none was as grandiose as the $300 million Trump Tower Tampa. Announced while the market was at its zenith in 2005, it was buoyed by Trump's star status as host of TV's The Apprentice but quickly fell victim to soaring construction costs and a lack of financing.

Now, with the economy recovering, plans for a similar size tower on the same site have been filed, but with far less braggadocio than the Trump project. Trump himself has long since moved on to other endeavors — among them running for president — while many of the buyers remain convinced they were badly misled about the extent of his involvement in the project.

"The main reason we went into this was Trump,'' says Jay McLaughlin, a physical therapist from Connecticut. "We had no idea he was just putting his name on it and not backing it financially.''

It was the Trump name that five bay area developers hit on in 2004 as a seemingly surefire way to market a more ambitious project than any of them had attempted before.

Real estate broker Patrick Sheppard and dentist Harry Howell had been developing strip shopping centers and other commercial properties. They teamed up with Jody Simon and Frank Dagostino, who had made a windfall from the sale of a medical education company, and their partner, builder Robert Lyons.

The five men, incorporating under the name SimDag/Robel, paid $16 million for a small office building in downtown Tampa and a nearby vacant lot on the Hillsborough River.

What should they do with the lot?

"What if we call it Trump Tower?" Dagostino suggested.

Through Dagostino's contacts in the New York area, the five reached out to the Trump Organization. It responded favorably, and the men met with Trump himself at his Fifth Avenue office.

"He introduced us to all of his TV team, all of his legal team, and he had a management team just for condos,'' Sheppard recalls. "He was very professional, nice and courteous. It's almost like he's a different person on stage than in his office.''

On Oct. 27, 2004, SimDag/Robel and Trump signed a licensing agreement. In unusually effusive language for a legal document, it called him a "worldwide renowned builder and developer of real estate who enjoys the highest reputation in these fields among others.''

In return for the right to use his name, SimDag agreed to pay Trump $2 million plus a percentage of condo sales. The document also contained a clause that would later spark outrage:

"Licensor and Licensee covenant and agree that … they will not under any circumstances disclose or permit to be disclosed the existence of this agreement.''

On Jan. 10, 2005, Trump issued a news release announcing he would "partner'' with SimDag on what would be the tallest, most luxurious building on Florida's west coast. Five weeks later, he and his new wife, a Slovenian model, swept into town for the sales launch.

At a gala reception attended by 600 dignitaries and well-heeled guests, Trump continued to give the impression that he was actively involved in the project. He had a "substantial stake,'' he told reporters, and would have increased it but for the fact that the tower was selling so well.

By then, buyers already had put down deposits on all 190 units, priced from $700,000 to $6 million.

"The marketing pretty much reflected the Trump brand, it was exquisite,'' Sheppard says. "We had a video where people could see the tower (as if they were) flying down the river. We could show them exactly what the view was going to be from each unit. We had total mock-ups of what the bathrooms and kitchens were going to look like. The entire enterprise was sold out in less than a week.''

Buyers, who included doctors, NFL coaches and the developer of a bestselling video game, lived as far away as Sweden. Most, though, were locals like lawyer Mary Ann Stiles, who sold another condo she owned to put down $400,000 on a unit in Trump Tower.

"I really wanted to be in that condo, it was going to be magnificent, something new for Florida and right near my office,'' Stiles says. "I thought if (Trump) is behind it, it's going to be good.''

• • •

Despite the hoopla, signs of trouble soon emerged. The 52-story tower at 111 S Ashley Drive was to be supported on shafts socketed deeply into the limestone underlying the site. Pilot borings showed that the limestone in one area dipped far below that of the surrounding areas. As a result, the shafts were redesigned in that part of the site and a mat foundation was also incorporated to better distribute structural loads to the shafts.

The expense of the redesign, along with soaring construction costs, pushed the project from the initial $227 million to nearly $300 million.

At the same time, Florida's condo craze had started to cool. Even as the developers held a ceremonial ground-breaking in 2006, they had yet to obtain financing. At one point, they were so desperate they sought a loan from a self-proclaimed pastor who had served prison time for fraud.

"If it doesn't have financing now, it won't,'' warned a real estate manger for Key Bank, which had backed other condo projects.

In 2006, the licensing agreement was modified to increase Trump's fees to $4 million in exchange for a concession in the amount of money he would get from condo sales. Nonetheless, SimDag stopped paying and in May 2007 Trump sued, claiming he was owed $1.03 million in licensing fees.

That was the first time most people — including the now-frantic buyers — realized Trump was part of the tower in name only.

The developers counter-sued, alleging Trump had damaged the project by breaching the confidentiality agreement and going public with his complaints. The two sides settled in 2008, with SimDag's attorney effectively pronouncing the project dead.

SimDag declared bankruptcy the same year. About all that it had to show for the "spectacular'' tower were two scale models and some office furniture.

Total value: $3,500.

• • •

Under terms of the Trump Tower Tampa sales agreements, the developers had put half of each deposit into escrow and used the other half to help pay construction costs. Buyers got back the amount in escrow but not the rest — which in some cases amounted to more than $250,000.

In 2009, several dozen buyers sued Trump, alleging they had been misled through "fraudulent and negligent misrepresentations'' into thinking the tower was a Trump project. His lawyers argued that the sales agreements made it clear SimDag was the developer and solely responsible for financing.

Within three years, settlements were reached. Some buyers got as little as $11,115, records show.

Other buyers who did not join the suit have never received anything but their escrowed amount. When Trump boasted how rich he is — he pegs his wealth at $10 billion — in announcing his run for president, some wondered whether he could have done more to help them.

"I don't know if he could have created a situation where us owners got our money back, whether he had the power to do that,'' says McLaughlin, the Connecticut buyer.

McLaughlin wanted a condo in a warm climate and thought Trump Tower would fit the bill, both as an investment and as a way to be near his son, who lived in Tampa. He lost close to $90,000 and has since moved to Sarasota.

Stiles, the attorney, is out $200,000. She acknowledges she should have read the sales agreement more closely but remains convinced the project would have succeeded if the economy hadn't tanked.

"Everything in 2005 and '06 was going great guns,'' she said. "I didn't think the bottom would fall like it did.''

Two other projects that Trump was involved in at the time he announced the Tampa tower are now reality — the 64-story Trump Hotel Las Vegas and Chicago's 98-story Trump International Hotel and Tower. But several others never materialized, including towers planned for Atlanta, Phoenix and Charlotte.

Trump did not respond to requests for comment made through his New York office. Of the five bay area partners in the project, the Tampa Bay Times was able to contact only Sheppard. He said he and Howell, the dentist, had been bought out early on by the others.

Lyons, whose Largo construction company remains active, did not return phone calls nor did Simon nor Dagostino.

Magner, the former dollar-store owner who first heard about Trump Tower on the TV news, blames many for the project's demise, including Trump.

"He's clearly just a giant egomaniac, he's all about self-promotion. He got paid for coming to Tampa one time. If it were me, and people invested in my name and had faith in my name, I would have made sure every one of those people got their money back out of my own pocket."

Today, Magner lives in SkyPoint, a 33-story condo in downtown Tampa that started construction the same year Trump Tower Tampa was announced. When he rides by the vacant lot, he has mixed feelings about news that another 52-story tower is planned for the site.

"I was kind of hoping they'd put a park there so I could go and say, 'gee, I spent $130,000 to stand on this land.'''

Times researchers John Martin, Caryn Baird and Carolyn Edds contributed to this report. Contact Susan Taylor Martin at [email protected] or (727) 893-8642. Follow @susanskate.

 
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