TORONTO — Ontario regulators say after reviewing the sale of hotel units to investors in Toronto's Trump International Hotel and Tower, it has decided not to pursue action against the developer.
The Ontario Securities Commission said Tuesday it made the decision after considering a number of factors, including meeting with prospective purchasers. The regulator did not give any further details on the decision.
On Friday, developer Talon International Inc. said it would extend the closing date to Dec. 13 for the sale of hotel condominium units at the downtown Toronto hotel and residence in order to deal with inquiries by the Ontario Securities Commission.
Talon also faces a lawsuit from a group of investors, who sought a formal investigation by the OSC.
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Talon developed and owns the property and licenses the Trump brand name. A company affiliated with U.S. celebrity businessman Donald Trump manages the hotel for Talon.
The investors said every Canadian bank has refused to offer financing to them, despite assurances from Talon that hotel units could be easily financed as residential condo units.
The investors said they've learned that Canadian banks are treating the hotel project as a commercial enterprise and are refusing financing as a condo purchase.
They also say their investments are running up losses of more than $175 a day per unit because of the current shortfall between maintenance fees and hotel unit revenues.
Investors say they're now faced with either having to come up with substantial amounts of cash to close or resort to secondary financial institutions which will only provide partial financing for the project as a commercial investment at high interest rates.
The investors have launched a multimillion-dollar lawsuit against Talon and their directors, as well as a number of Trump organizations and their directors, including Donald Trump Sr.
The plaintiffs' claims allege that investors were persuaded into investing in the Trump Hotel on the basis of alleged negligent or reckless misrepresentations, and that promises and projections offered were allegedly inaccurate and in contravention of securities regulations.
None of the allegations have been proven in court.
In 2004, when the hotel project was first being planned, the investors say Talon sought permission from the OSC to be exempt from regulatory requirements for commercial investments, and provided a number of promises and conditions to obtain those exemptions.
In granting an exemption, the OSC made it a strict condition that Talon and Trump Hotel not market the hotel units as a cash-flow investment.