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Donald Trump Objects to Settlement Reached over Tijuana Project

By October 3, 2012 No Comments

Two years after a high-profile sales event, Baja project stuck in red tape, slow market

January 17, 2008
TIJUANA – Donald Trump’s decision to lend his name to a lavish coastal condo-hotel project in Baja California brought worldwide visibility to the region’s unprecedented building boom.

But two years after a San Diego sales event that drew hundreds of would-be purchasers, the planned three-tower Trump Ocean Resort has yet to break ground and development has slowed along the Tijuana-Ensenada strip known as the Gold Coast.

A 10-mile drive from the border, a half-dozen workers poured concrete into a trench yesterday. Orange fencing surrounded a large deep hole. A wind-tattered billboard displaying a giant photograph of Trump rose over the 17-acre site overlooking the Coronado Islands.

Tijuana officials say the developer received a land use permit in 2005, allowing 526 units to be built on the property that juts out into the Pacific Ocean at Punta Bandera. But the developer has yet to receive a construction permit from Tijuana’s Urban Development Department, the key city agency that gives the go-ahead for new projects.

“Going through the files, we can’t find an application,” said director Miguel Angel Zavala.

Trump’s Los Angeles-based partner, Irongate, said the much-publicized project is moving forward, despite delays, and that they are in the final stages of presenting documents to City Hall. Tijuana’s Municipal Planning Institute, which conducts initial reviews and submits recommendations to the Urban Development Department, received plans earlier this month, the developer said.

So far, U.S. buyers make up more than 90 percent of the project’s clientele, said Carlos Palafox, director of development for Irongate. To date, 167 units have been pre-sold in the first tower, which will have 232 units on 26 stories and is scheduled to open at the end of 2009, about six months behind initial projections, Palafox said.

About 40 percent of the space has been spoken for in the second 26-story tower.

Buyers who sign a contract agree to put down 30 percent of their unit’s cost over a specified time period, Palafox said.

Trump said in an October 2006 interview that the Trump Organization will be a “significant” equity investor in the $200 million project. But Palafox said Trump has yet to invest in Trump Ocean Resort in Baja. Palafox described Trump as a “branding partner,” meaning that he has lent his name.

“The only thing I am at liberty to say now is that we are working with Irongate on a project there,” Rhona Graff, Trump’s executive assistant, wrote in response to a written query.

Palafox said Trump’s participation is significant for the project, as “Trump has become a highly recognized brand,” Palafox said. “With branding comes a very serious partnership. Trump has to protect their quality standards.”

Trump, a celebrity real estate developer known for his TV show “The Apprentice,” has found success in becoming the public face for many developments that carry his name but not his investments.

Like other developments along the Tijuana-Ensenada coastline, Trump Ocean Resort has suffered from the U.S. real estate downturn, as fewer buyers have the equity to purchase second homes in Mexico.

“I think that all U.S. projects that target U.S. buyers have been significantly impacted by the U.S. housing markets,” Palafox said. Another factor accounting for the delay has been finding banks willing to lend the capital for the project, Palafox said, as “almost all U.S. and European banks are going through a much stricter authorization and underwriting process.”

Palafox said the financing agreements are confidential.

Construction on the first tower is set to start in March and the second tower in July.

Palafox said that work has been going on: Workers have been grading the land and installing utilities. “The reason it’s not visible is that it’s all underground.”

Just two years ago, a booming U.S. housing market was a key factor fueling a frenzy of purchases along northern Baja California’s coastline. The chance to own oceanfront property at a fraction of U.S. prices lured many baby boomers to take equity from their U.S. homes to invest in Mexico.

But with the downturn in the U.S. market, Baja California’s coastal real estate sales have fallen. Rafael Liceaga, a well-known Baja California real estate broker, said sales have fallen about 40 percent to 50 percent since the height of the boom but remain above pre-boom levels.

“There continues to be much movement, many transactions,” said Eduardo Rosales, president of the Rosarito Beach branch of AMPI, a national realty agents group.

Despite recent setbacks, “the location is strategic,” said Rosales. “People are investing and are going to continue to invest.”

But now a new market is developing, as buyers have begun scouting for foreclosure properties and “properties that people are trying to sell ASAP,” said Gustavo Torres, a broker in the Rosarito Beach area and vice president of the local AMPI branch.

At Trump Ocean Resort, “we have not reduced prices at all. Our sales have had a slowdown, but we are still selling,” Palafox said. Prices now range from the mid-$300,000s for a studio on the lower floor to $2.5 million for a penthouse.

A saleswoman said amenities will include four infinity-edge pools, tennis courts, a full-service day spa, five-star restaurants, bars and convention space.

Tom Pfleider, an Inland Empire entrepreneur, purchased a one-bedroom unit in the first tower during Trump’s 2006 San Diego sales event.

“We relied a lot on Trump’s name and the fact that he was doing due diligence,” Pfleider said. “We remain excited and expect it to be a first-class property.”

Staff writer Lori Weisberg contributed to this report.

Sandra Dibble: (619) 293-1716; sandra.dibble@uniontrib.com

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