From the Archives: Trump Baja project is turning into a legal battle of Trump proportions

Waves crash against a rocky shore while a couple stroll hand in hand on the beach. Poolside, a bartender is mixing up a batch of margaritas.

Then comes Donald Trump, smooth and confident, singing the praises of the new Trump Ocean Resort Baja Mexico north of Rosarito Beach, an area he touts as “the next Cabo.”

“I’m very proud of the fact that when I build, I have investors that follow me all over,” he says in the eight-minute marketing video produced for potential buyers. “They invest in me. They invest in what I build, and that’s why I’m so excited about Trump Ocean Resort.

“This is going to be something very, very special.”

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So special that 80% of the first phase sold within hours in a 2006 presale. Many of the buyers were Southern California residents looking for affordable oceanfront vacation property.

But three years later, the only progress is a gigantic hole in the ground and a heap of dirt.

Instead of a 525-unit luxury vacation home complex with pools and tennis courts, this project is shaping up to be a legal battle of Trump proportions.

Dozens of angry buyers have sued Trump for failing to complete the project. He, in turn, sued the Los Angeles-based builders, saying he had only lent his name to the project, and it was the developers who allowed the project to fail.

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To the buyers, the heart of the dispute is this: If Trump is identified as a project’s builder, is he liable if the actual builder fails?

Yes, says Hamed Hoshyarsar, a Northridge accountant who bought one of the units.

“That’s the reason why we went with this project: Trump’s name was on it,” said Hoshyarsar, 30. “If we would have known he just licensed his name and he wasn’t the developer, then we wouldn’t have bought it.”

Now he changes the channel when Trump appears on television.

“I can’t believe a person with the reputation of Donald Trump and all that he represents on ‘The Apprentice,’ that he let this happen to us,” Hoshyarsar said. “It’s unbelievable.”

Trump said in an interview that sales contracts made it clear that he was not the developer. He said he licensed his name because the developer had a “good reputation” and had been a reliable partner in a similar project on Waikiki Beach.

“The documents state very clearly that we were not the developer,” Trump said. “We’re looking into the whole situation, because it doesn’t make me happier than it makes them. I don’t like to see people lose money.”

Before the reality-TV hit “The Apprentice,” the premium vodka and the signature clothing line at Macy’s, Trump in fact did make a name for himself building luxury office towers, hotels and casinos. Over time, the Trump name became a symbol of glamour and success.

In his newly released book “Think Like a Champion,” Trump wrote about the power of his name.

“My buildings sell out before they are built,” Trump wrote. “People recognize the brand name and know what they will be getting: the best for their money.”

Developers pay handsomely to stamp that Trump cachet on their projects. Such deals have proved profitable for both Trump and builders who paid to use his name.

The Baja project was developed by Irongate Wilshire and PB Impulsores, which both operate from offices in Westwood. Irongate principals Jason Grosfeld and Adam Fisher did not respond to requests for comment.

Irongate and PB Impulsores have not filed a response to the buyer lawsuits. In an e-mail to buyers in February, which a plaintiff provided to The Times, the developers blamed the project’s failure on the “global meltdown of the credit markets,” making it impossible to obtain financing.

But the buyers say Trump’s liability is clear. “Nobody ever said anything about this being a licensing deal,” said Daniel J. King, a lawyer for the buyers. “None of them would have bought if they knew the real arrangement.”

In February, the developers notified buyers that they had spent their deposits -- $32 million -- and were abandoning the project because they could not obtain financing to finish it.

Sixty-nine people who paid for units at Trump Ocean Resort Baja Mexico filed suit in March in Los Angeles County Superior Court against Trump and the developers, accusing them of falsely portraying Trump as the builder. Although the project was to be in Mexico, the suit seeks to apply U.S. law because the properties were marketed and sold here.

Trump, the 62-year-old symbol of capitalistic success, sued developer PB Impulsores in U.S. District Court in New York, accusing it of failing to make good on its promise to build the project and demanding an accounting of how the buyer deposits were spent.

Bart I. Ring, another lawyer for the buyers, said he considered Trump’s suit a “publicity stunt” that would not relieve him of culpability in the Baja project.

“If Trump is truly interested in the best interests of the buyers, he could reach in his pockets and make the buyers whole,” Ring said.

Meanwhile, 10 miles south of the border, Trump’s smiling face and famously big hair can still be viewed on a billboard at the resort site, alongside the slogan “Owning here is just the beginning.”

On a recent weekday, the paved road that leads to the 17-acre property was blocked by a single strand of steel chain. A security guard cautioned in Spanish that no one was allowed on the property.

If things had gone as billed, the first of three towers -- a monolith of marble and glass rising above the coast and providing picturesque views of the Pacific Ocean and the Coronado Islands -- would have been completed by now.

In January, Trump backed out of the project after it became clear that the developers were not going to complete it.

“This was not a deal where I could control things,” Trump told The Times. “I am personally looking into it.”

As for buyers who appear to have lost their investments, Trump said: “They’ll have to speak to the developer.”

George Lefcoe, a USC law professor who specializes in real estate financing and land use, said the buyers might have a difficult time pursuing damages against Trump.

“He doesn’t promise unconditionally that if anything goes wrong, he’ll give you the money back,” Lefcoe said. “What this controversy shows is you need to be sure your money is held by a third party, not controlled by the seller.”

Some people familiar with Baja real estate said they thought the project was doomed from the outset.

Trump or not, northern Baja was not the place for a five-star resort, said Brian Flock, a Baja California real estate agent. It’s a place where people wear flip-flops day and night, buy Coronas by the bucket and barter for serapes, ceramics and other souvenirs.

“Frankly, we’re not in the tropics. We’re not an international resort destination. They don’t land in the airport and walk along a polished marble floor and shops like Gucci and Louis Vuitton,” Flock said. “The project didn’t fit the profile at all of Baja California north. . . . I never sold a single unit there. I never promoted it at all.”

Still, buyers swamped a December 2006 sales event at a posh San Diego hotel and purchased about 80% of the units in the first tower.

Trump Baja buyer Lupe Mendoza, a single mother with two teenage boys, said she started to become concerned by late 2007 when there had been little progress at the construction site.

“I would always get these responses, ‘Yes, it’s happening, but it’s underground. You can’t see anything,’ ” Mendoza said. “To me, the word is ‘unbelievable.’ I was led to believe I was investing with a multimillionaire. I believed my investments were as safe as safe could be. I believed the man was a man of his word.”

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