From UK Sunday Times Paper
http://business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article4231620.ece
The Sunday Times June 29, 2008
Trump kids bet on rich Europeans to back New York hotel/condo
Property tycoon Donald Trump's children strike out on their own with a SoHo hotel where buyers have the use of a room for only 120 days a year Ivanka Trump, daughter of property tycoon Donald Trump
Dominic Rushe in New York
JUST west of New York’s SoHo in downtown Manhattan a 45-storey hotel is rising above a neighbourhood of cobbled streets and converted warehouses. Once hip and edgy, SoHo used to attract struggling artists and musicians looking for a cheap place to live. They are long gone, replaced by the rich, very rich and foreign tourists using the weak dollar to snap up designer goods at bargain prices.
The owners of SoHo’s new hotel are hoping that they, too, have a designer brand that will appeal to rich visitors: Trump. When completed, Trump SoHo promises to be the flashiest hotel in downtown Manhattan. Each room will be fitted out by Fendi.
At 480 ft above the city, the top floor bar (SoHi) will look down on the rest of Manhattan with spectacular views of all the landmarks from the Statue of Liberty to Central Park. The building will have his and her Turkish baths and a library. The local residents who campaigned against the development are now waiting for Donald Trump to emblazon his name in gold across the building, as he has done on others from Panama to Palm Beach.
Although Trump SoHo has all the swank expected of a Trump project, it also marks a departure for the organisation. Trump, the world’s most famous property mogul, is taking a back seat. This building is being promoted by Donald Junior, 30, Eric, 24, and Ivanka, 26, his children by former wife Ivana.
“It’s appropriate for this building. It much more appeals to our aesthetics,” said Ivanka. “From a marketing perspective we seem to resonate a bit more.”
However, the three are keen to say they are intimately involved with all the company’s projects. Very intimately.
Eric said: “Often people think we are just the face of these developments but when you get down into it, the level of details we get into, whether it’s going through 30 different mattresses, picking out the ticking on sheets, working on the layout of the rooms, working with the architects, we live and breathe these projects every single day.”
Though they deny it — the Trump juniors are as irrepressible as their father — the three seem to have their work cut out. Their SoHo project has been dogged by tragedy: a decapitation when sheets of glass fell off the building, and work halted when a slave graveyard was uncovered. The worst property slump to hit New York in a generation is not their only challenge.
Trump SoHo is a so-called “hotel /condo” project. Buyers will own a hotel room but have the right to live there only 120 days a year. The rest of the time it will be rented out by the hotel, generating income for the investors. Property zoning laws mean that Trump SoHo owners will have to abide by the rule. No matter who the resident or how much has been paid, they will be barred from living there for more than 120 days a year, the Trumps insist.
Recent reports in New York newspapers suggested there were loopholes but Julius Schwarz, executive director of Bayrock Group, Trump SoHo’s financial partner, said the rule would be strictly enforced. Many buyers were in any case unlikely to spend 120 days in residence.
The Trumps are targeting visiting businessmen and rich foreigners who divide their time between several homes and can afford the $3,000 a square foot starting price in a building where the cheapest studio will cost $1.2m.
The hotel /condo concept has had notable failures in recent years, but the Trumps insist that SoHo will be different. “In the past couple of years there have been certain people who have not been responsible. We cannot afford to do that. We are not in this for one deal,” said Ivanka. People from “independent and unrelated fields” had tried their hands at property development, she said. “Those people are starting to disappear but they are leaving behind a little bit of a mess. Our database trusts us. They trust us to build to a quality better than advertised.”
She said that so far 60% of the units had been sold. “We are in a very fortunate position where we have enough sales and now we are very strategically targeting certain buyers,” said Ivanka.
While the Trumps admitted that American buyers were harder to come by, they said foreign buyers were still keen to own a piece of New York.
Trump SoHo is not the only local project targeting foreign cash. Another, SoHo Mews, has been hawking itself at road shows in some of Europe’s most fashionable cities, including Milan and Rome.
“It’s great for us in high-end real estate,” said Donald Jr.
“People in the UK and continental Europe are buying at a 30%-40% discount. It’s probably not benefiting at the low end and the middle of the housing market but, certainly, for us it’s a big benefit. You’re really talking here about the top one tenth of the top 1% of people in terms of wealth. They are a little less susceptible to the liquidity crisis. Perhaps it’s not quite as convenient to buy real estate but they are still able to buy.”
Other New York property experts are less upbeat. At a property conference sponsored by Portfolio magazine last week, Stephen Ross, chairman and chief executive officer of the Related Companies property group, said New York could not rely on foreign buyers and that the slump was unlikely to end any time soon. “We are in the third and fourth innings. Real estate lags the economy. We haven’t really felt it in real estate yet,” he said.
Dolly Lenz, America’s top property broker and vice-president of Prudential Douglas Elliman in New York, told the same conference that she saw little evidence of an influx of foreign buyers supporting the market.
But as the next generation of Trumps attempt to spread their reach across the Atlantic, Donald Jr, Eric and Ivanka are hoping they have something more than their rivals to see them through the storm: their name.
[less]
