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Trump Wins at Chicago Trial, Victory for Proper Disclosures

After a trial with all the hallmarks of Donald Trump’s dramatic reality TV show, “The Apprentice”, Trump declared victory in a lawsuit brought by a disgruntled buyer at the Trump International Hotel & Tower Chicago yesterday.

The plaintiff, an 87-year-old grandmother named Jacqueline Goldberg, accused The Donald of fraud and was suing for $6 million in damages, in addition to the return of over $500,000 in deposits on two defaulted units purchased back in 2006. Goldberg’s attorney, Shelly Kulwin, accused Trump of breaching her purchase agreement when revenue earmarked from ballroom space was instead allocated to the hotel’s owner in exchange for $500,000 per year.

But after only five hours of deliberations, the jury sided with the defendant in the case. Disclosures in the purchase agreement and offering documents clearly retained the right to restructure such elements of the hotel for the developer.

The rather clear-cut case started to turned personal a few times, with Kulwin defending every Chicago resident’s right to mock New York, while Trump also accused Goldberg of “playing the age card.” Upon hearing the verdict, Kulwin dramatically buried his head in his arms on the courtroom table. This melodramatic episode may be continued, however. Goldberg is considering an appeal, while Trump told Chicago’s WGN9 news, “We are giving serious consideration to bringing a major lawsuit against her.”

Meanwhile, Goldberg felt vindicated, stating, “I think I have exposed him for what he is, and that people won’t get trapped by him again.” She also offered the advice to those dealing with Trump to “read the contract, really carefully.” Indeed, with disclosure documents typically several hundred pages in length, buyers are often seduced by the sexy marketing campaigns of such condo-hotel properties and do not carefully consider all the risks when investing in hotel real estate.

While Donald Trump may be considered a lightning rod for litigation, his condo-hotels are like many others in the world that have spurred lawsuits from disgruntled buyers whose expectations were misplaced. However, the business model is maturing after 10 years of development and there are increasing operating examples to educate potential buyers about this structure, most popular in places like Florida, Latin America, Las Vegas and New York. Recent changes in how the Securities & Exchange Commission in the US treats these (near always) investments should allow greater transparency in the marketing of hotel-condo units to so-called “sophisticated investors,” which should lead to better consumer protection and managed expectations.

Nonetheless, sales are still underway at the 92-story Trump International Hotel & Tower Chicago, which claims the rank of 12th tallest building in the world, designed by the well-respected architecture firm of Skidmore, Owings & Merrill. Available homes range from studio to two-bedroom hotel suites, topped by studio to three-bedroom residential condominiums of 580 to over 3000 square feet each. Larger penthouses – up to 14,000 square feet – are also available as raw “white box” space to be designed and customized by the buyer.