The Trump International Hotel & Tower in Chicago has seen delays in its completion like several other Trump projects, and now primary financier Donald Trump is suing lenders to extend the development’s construction loan and avoid foreclosure. For more information, read the following article from PropertyWire.
Property entrepreneur Donald Trump has filed a law suit against the lenders on his unfinished Chicago skyscraper, highlighting the fact that the credit crunch is affecting even high profile developers.
Trump is suing to extend a $640 million senior construction loan on the 92-story Trump International Hotel & Tower from a group of more than a dozen lenders led by Deutsche Bank AG.
It is a high profile development with 339 hotel rooms and 486 condominiums, which will become the second-tallest building in the U.S. when completed next year.
The situation typifies the kind of problems large scale developers are encountering in the global financial crisis. The hotel, on the lower floors, opened earlier this year. But sales of both the hotel rooms and the condominiums have come in below original estimates and the project’s current projected revenue remains short by nearly $100 million needed to pay off the senior lenders.
The lawsuit, filed in New York State Supreme Court in Queens, is a further indication of the dysfunction in the real-estate lending markets as borrowers and lenders struggle to resolve troubled projects.
Problems arose when the lender group, which is made up of more than a dozen institutions, was unable to agree on the requested loan extension. The suit alleges that Deutsche Bank compromised the senior construction loan by selling pieces off to ‘so many institutions, banks, junk bond firms, and virtually anybody that seemed to come along,’ that the lending group is unable to come to a consensus on how to deal with the matter.
The suit demands, among other things, that an extension provision in the original loan agreement should be triggered because of the ‘unprecedented financial crisis in the credit markets now prevailing, in part due to acts Deutsche Bank itself participated in.’
The suit won’t affect construction of the project, according to people familiar who say there is enough money to complete the $90 million work that is left.
Trump has put $77 million of his own equity into the tower, which he would stand to lose in a potential foreclosure. Other than a $40 million guarantee to complete the project, Trump has no recourse obligations to the project. A Trump spokesman declined to comment.
This article has been reposted from PropertyWire. View the article on PropertyWire’s international real estate news website here.