Real estate when new requires a bit of buzz generation, something for the marketing people to gnaw on when preparing their well-honed works of fiction. Donald Trump, being the savvy real estate mogul that he is, knew that his sales pitch for the shiny new condominiums on Chicago's riverfront would sell better if he could say that people were buying before he even sunk a caisson into the ground.
Friends and family sales, they call it, and it's done quite often. Insiders are offered a deal on living units that are not in existence, requiring someone to take a chance and pay for a place that they have not actually seen, in a building that could turn out to be a disaster. Since all risk is offset by some perceived benefit, the condo buyer gets a deal on the price and the developer gets to trumpet all the pre-construction sales.
As it turns out, the location of Chicago's growing Trump Tower is one hot site, and location is everything in property. Close to Michigan Avenue and the high-end shops of Oak Street, the place will offer spectacular views of the river and the shining white Wrigley Building. Whether pre-sales had anything to do with it, who can say, but the going price for a condo in the tower has risen dramatically.
The insiders who took a chance can now almost triple their initial investment, having paid around $500 per square foot. These days, buyers are willing to spend upwards of $1300 per square foot, and so those who took a chance on a new development stand to make some substantial gains.
Not so fast, not when Donald Trump is behind the deal. Out of nowhere, the insiders have been notified that the deal is now null and void. Thanks for the help, but things are going well and we don't need your pre-sale statistics, and don't let the door hit your arse on the way out.
How, you might ask, can the developer cancel out a previous agreement? It's unheard of, and Richard Peiser of the Harvard Graduate School of Design has said that he has never heard of such a thing, and he's heard it all in his professorial capacity.
It's in the contract, according to Trump's attorney. Right there in Paragraph 12 (b), where it says the deal is a no deal due to matters beyond the seller's reasonable control. Well, there you have it. Clearly, the jump in selling price was beyond the Donald's control. How was he to know that it would nearly treble? He has a chance to rake in even more money on the project, and the insiders have been told that if they still want the units they thought that they had bought, they have to pay the going price. Or, they'll get their initial investment refunded to them. With interest, certainly, even though the interest earned will be nowhere near the potential profits to be had by flipping the units.
Poor Donald says he needs more money to meet skyrocketing construction costs, and there's 21% of the units still unsold. And the friends and family that he sold to? Ah, sure and they made their money when he paid them for work that they did on the project. Why should they make even more by risking their money on his namesake tower and then reaping the benefit when it succeeded?
For what shall it profit a man, if he shall gain the whole world and lose his soul?
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