The deal gives the 391-unit development more breathing room as it tries to ride out a turbulent real-estate market that's been particularly hard on condo hotels. It shows that iStar, which already has lent more than $250 million to Trump SoHo, has faith in the project. But it's not clear whether it will be enough to restore the project to health.
The Trump SoHo developer, a venture of the Sapir Organization and Bayrock Group, also revealed new details of its plan with a California financial company to offer financing to potential buyers who can't get enough credit to purchase a unit.
Analysts say both measures are intended to inject some momentum into the condo sales process, which has been sluggish and has raised some concern about the long-term viability of the Trump SoHo as a condo-hotel project. About a quarter of the 391 condo units are in contract, but only about two dozen of them have closed.
"The increase in the loan amount demonstrates the ongoing confidence and support of our lender, iStar," a Trump SoHo spokeswoman said in a statement. iStar officials didn't respond to requests for comment.
A Trump SoHo spokeswoman declined to say how the $20 million will be used. Often in restructurings of this type, lenders increase the amounts of loans simply to give developers funds to keep current on interest payments. The restructuring "allows some room for management and the developer to enact their plan," says Bradley Burwell, a hotel analyst with commercial broker CB Richard Ellis.
Mr. Burwell also said the new loan was another sign that lenders have been reluctant to foreclose when there may be limited opportunities to sell and they are uncomfortable taking hits to their balance sheets.
The Trump SoHo faces unusual challenges because, under the zoning rules that allowed it to move forward, condo owners are permitted to stay in their units no more than 120 days a year. On other days, they're part of the hotel operation. This arrangement has made it particularly difficult for buyers to obtain financing.
In an effort to get over that hurdle, Trump SoHo said CalCon Mutual Mortgage, a San Diego-based lender, would provide financing for condo sales and "is accepting applications from qualified existing buyers," according to a statement from Rodrigo Nino, president of Prodigy International, the Trump SoHo's sales and marketing company. The Trump Organization has a licensing and management agreement with Trump SoHo.
CalCon is offering loans to potential buyers as well as owners in contract who can't get the financing to close, said Josh Erskine, CalCon's president. He said U.S. buyers need to put down deposits of 40% of the purchase price, and foreign buyers are required to put down 50%. Most sales so far have been to foreign buyers, people familiar with the matter said.
The Wall Street Journal previously reported that the Trump SoHo was taking another uncommon step to close on deals: it is offering discounts of up to 25% off the agreed-upon purchase price as an extra inducement to convince buyers who might be getting cold feet to close on a deal.
"We look forward to contract holders honoring their commitments," Mr. Nino also said in his statement.
Donald Trump hasn't invested money in the project but his company, the Trump Organization has a licensing and management agreement that allows the development to use the Trump name. The deal gives Mr. Trump and his children—Eric, Ivanka and Donald Jr.—an equity stake in the project.
Original article Wall Street Journal
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