Thread: Trump Ocean Club Panama - Investor Jitters?

Originally Posted by Expat123

Well, you're assuming Viewpoint is correct on the 2BR units being part of the purchase.

Originally Posted by The American Investor

Do you know this information not to be correct? And again, Viewpoint said with authority that 2 AND 3 bedroom units were sold for less than $230,000.

Just because others were excluded from this deal doesn't mean that arguing about it will change anything.

I'm sure many would like to purchase at that price.
I don't think other units will be available at that price again.

As Viewpoint stated, it may have been viewed/executed as Bridge financing. I also don't agree that it sets a 'market' price. Who knows if the developer will excercise his option to repurchase?

Are you stating the bulk purchase was illegal somehow? Is it in violation of any contract?

Here's a link to more Newland/TOC data:
http://www.panabolsa.com/sys/index.p...qp0qpinfo_corp

I haven't read thru these yet. Looks like mostly in Spanish.
I haven't seen this info elsewhere before.

Originally Posted by Viewpoint

I assure you that I am making a lot more than 9.50% as I didn't pay par (100) when the bonds were issued but I bought them in the low 40s yielding over 30% YTM. While many of you were buying the apartments are high prices I bought the bonds as distress prices. These bonds don't trade in Panama (to the best of my knowledge) even through they are listed on the local exchange.

If The American Investor doesn't pay for his apartment we will repossess the building.

I knew they were in the 40's-60's for awhile.
Congrats on the purchase!

What are they trading at right now?

P.S. I think the bondholders have rights to reposess/purchase units, but not the whole building eh?

Originally Posted by The American Investor

I can understand their rights to procure unsecured financing but if this was secured bridge financing it would have required bondholder consent. Is anyone aware of bondholders having consented to 6million of secured bridge financing?

You keep thinking you are in the USA. There's nothing "secured" about this type of arrangement as the property is still just one single FINCA (undivided). Until the P.H. reglamento comes out of the Public Registry Trump Ocean Club is just one single property (FINCA). These agreements (and yours) are just promises to sell and totally unsecured. The only secured party are the bondholders who hold a "first" mortgage on the FINCA (property). Everyone else is in an unsecured position. Your deposit is unsecured (as you know or should know) subject to the bondholders being paid in full and the property being transferred into your name.

In the USA I can call a title company or escrow agent and transfer a property (on a cash deal) in two days but here in Panama it's like playing Russian Roulette with 5 bullets in the 6 shot chamber (sooner or later you will kill yourself).

Don't worry about TOCLUB as it will get built and delivered but look at the other remaining (100) non-transparent projects under construction in Panama for risk. Look at the problems they have had during good times but just wait till the shit hits the fan. With Trump it's just a function of price as it will sell out in a few months if priced correctly. At $3000 to $3500 for the residential and it's sold quickly but as it nears completition and people can see the finished product (rather than visualize) the demand and prices will go higher even in this soft real estate market.

Originally Posted by Expat123

I knew they were in the 40's-60's for awhile.
Congrats on the purchase!

What are they trading at right now?

P.S. I think the bondholders have rights to reposess/purchase units, but not the whole building eh?

The bonds are currently 90-92. The bondholders have the same structure that a bank lender would have on any project in Panama holding the title of the property and only releasing their interest as the loan gets paid in full. Sometimes you wait 6 months for the developer to finish paying the loan off and then (only then) you receive the necessary paperwork to prepare and record your deed. The whole building is a single property (one FINCA) until it's divided into separate FINCA's (properties) which generally takes place after the completition of construction. Your Compra Venta is just a promise and nothing more.

TOC will get completed by somebody eventually if not K Developers and those at the bottom of the chain will have paid for it. So far, the people likely to make money out of it are the early buyers, Trump, some realtors and some bond holders.

[QUOTE=The American Investor;52888][QUOTE=Expat123;52881]Well, you're assuming Viewpoint is correct on the 2BR units being part of the purchase.

Do you know this information not to be correct? And again, Viewpoint said with authority that 2 AND 3 bedroom units were sold for less than $230,000.

You keep bending the truth as the AVERAGE price was $230,000 but not each price as the prices were different depending on the size of the unit and it's placement in the building but again this was not a sale but a financing arrangement.

Originally Posted by Contrail

TOC will get completed by somebody eventually if not K Developers and those at the bottom of the chain will have paid for it. So far, the people likely to make money out of it are the early buyers, Trump, some realtors and some bond holders.

Let's ALL pray that the building gets finished on schedule (the new schedule) and on budget (the new budget). This building will be a real landmark for Panama City and a great asset to the community.

Not a bad asset for you Viewpoint by the sound of it. Let's face it though, the budget will no doubt go up again, the finishing will take longer than projected and the unwary will have dropped a bundle by buying in at the wrong time.

Originally Posted by Contrail

Not a bad asset for you Viewpoint by the sound of it. Let's face it though, the budget will no doubt go up again, the finishing will take longer than projected and the unwary will have dropped a bundle by buying in at the wrong time.

You are probably correct on all counts. I think that any increase in the budget and delay in completition will be manageable but the late buyers in 2008-2009 at higher prices may have bought at the wrong time like so many of us did with real estate everywhere. I think the developer pushed prices higher than they should have been during this period which killed or stalled sales. If the prices would have been keep at reasonable levels the project would be 100% sold out 1 1/2 years ago. Trump risked nothing but his already tarnished reputation and he will do well in the transaction. The wild card will be the hotel units because there's still no management agreement on the table for Purchaser's and their lenders to review.

Originally Posted by Viewpoint

You are smoking something !! There will be no massive defaults except in your dreams. You forget that a number of these apartments were purchased with cash or by people with wealth that just want to have one of the apartments in their collection. Not everyone needs a mortgage and for those that do the mortgages are available. HSBC and ScotiaBank have taken off their caps and they are approving mortgages but you need to send your information to them through a mortgage broker as they are not going to chase you down up there in the USA. If just 60% of the purchasers closed Newland could pay off the bonds with no problem. I am not worried except for you closing or defaulting as you don't sound serious about completing your purchase.

I have never purchased any real estate using a mortgage as I have always paid cash because I wanted to own the real estate rather than have the bank own it. I gave you the contact info for Panama Property Connection and ask for Duncan as he can help you secure financing if you need a mortgage.

If the bonds trade lower we will buy them all.

Love your assumptions Viewpoint...you speak like the a true trader, light on facts and heavy on hyperbole (let me know if you need a definition for this word as well). Just to summarize my points so they are clear to you without putting further demands on your limited reading comprehension:

1. I never said I needed a mortgage (which is besides the point in any case) but did say that unless financing is generally available to the investors there will be a rash of defaults which will cause a price decline affecting all investors.

2. I am equally bullish on the project but that does not mean I'm willing to take bull about the bulk sales or be blind as to the risks of the project.

3. I am the most serious investor as my questions show. Will I close if units in the building are selling for under $230,000...no, as that would defy common sense. So what does this mean, Viewpoint? Yes, now you got it, we must all work to ensure that the market value of these apartments remains high. How will we do this, Viewpoint? Yes, you're catching on, by making sure side-deal bulk sales and other off-market deals impacting the market value of these units don't happen and ensuring that general financing is available to all.

As for your point that you've always purchased your real estate without financing, congratulations, you've done what every US major corporation and majority of US homeowners have not done...obviously someone who either doesn't believe in or understand the power of leverage. In any case, your personal financial management is not the topic of this site.

As for buying more of the TOC bonds as they dip lower, again good luck to you on that one as well. I'm not interested in discussing your trading strategy either (however flawed)...I am solely interested in the success of the project, period.

Originally Posted by Viewpoint

You keep thinking you are in the USA. There's nothing "secured" about this type of arrangement as the property is still just one single FINCA (undivided). Until the P.H. reglamento comes out of the Public Registry Trump Ocean Club is just one single property (FINCA). These agreements (and yours) are just promises to sell and totally unsecured. The only secured party are the bondholders who hold a "first" mortgage on the FINCA (property). Everyone else is in an unsecured position. Your deposit is unsecured (as you know or should know) subject to the bondholders being paid in full and the property being transferred into your name.

In the USA I can call a title company or escrow agent and transfer a property (on a cash deal) in two days but here in Panama it's like playing Russian Roulette with 5 bullets in the 6 shot chamber (sooner or later you will kill yourself).

Don't worry about TOCLUB as it will get built and delivered but look at the other remaining (100) non-transparent projects under construction in Panama for risk. Look at the problems they have had during good times but just wait till the shit hits the fan. With Trump it's just a function of price as it will sell out in a few months if priced correctly. At $3000 to $3500 for the residential and it's sold quickly but as it nears completition and people can see the finished product (rather than visualize) the demand and prices will go higher even in this soft real estate market.

Agree, Viewpoint, that the Trump project is the best of the lot...at least it will get built and as you say the question is all about price.

[QUOTE=Viewpoint;52926][QUOTE=The American Investor;52888]

Originally Posted by Expat123

Well, you're assuming Viewpoint is correct on the 2BR units being part of the purchase.

You keep bending the truth as the AVERAGE price was $230,000 but not each price as the prices were different depending on the size of the unit and it's placement in the building but again this was not a sale but a financing arrangement.

Yes AVERAGE price of less than $230,000. Can you tell us the price of each unit sold in this bulk sale?

It seems pretty clear that the majority of the construction costs are already covered. As Viewpoint said, the developer will be fine even if only 60 percent close. So, the way I see it, even if most default the developer can just hold onto the condos with the construction paid for and rent or sell later. What this means is that I don't see any reason why the developer would dump a lot of supply on the market at a low price. So you may see some desperate sellers near the closing but I think volume will be light as it will only be leveraged speculators trying to get out, not the developer.

American Investor - you sound like a speculator rather than an investor. Your logic is to default if the price is below what you've put in at that time. But an investor would not just look at one desperate seller but the potential of the condo in the next 5 years. While your logic may be correct at the time, you are assuming that the price will stay that low and you won't be able to get income from the investment. The price would probably rebound quickly after the closing and then you would wish you held on. Defaulting is the realization of a current paper loss and I think the developer would prefer people default on their 30 percent deposits so they can keep the condos.

It seems this pattern is recurring for other projects as well. Those who are leveraged speculators lose whatever they put in, and the developer just benefits as they end up reselling it or renting it. I suppose whether that can continue depends on the financial stability of developer's and at least some rental demand.

Anyone care to speculate what the price per sq/meter will be in neighboring punta pacifica condos once Trump is completed?

[QUOTE=skynet21;52934]...

American Investor - you sound like a speculator rather than an investor. Your logic is to default if the price is below what you've put in at that time. But an investor would not just look at one desperate seller but the potential of the condo in the next 5 years. While your logic may be correct at the time, you are assuming that the price will stay that low and you won't be able to get income from the investment. The price would probably rebound quickly after the closing and then you would wish you held on. Defaulting is the realization of a current paper loss and I think the developer would prefer people default on their 30 percent deposits so they can keep the condos.
[QUOTE]

I am an investor but not a foolish one. Why, for example, would anyone close on a $500,000 apartment which is currently priced at $150,000. Assuming a 30% deposit forfeiture, it would still come out cheaper purchasing the same apartment at $150,000 (total cost of $300,000) than going forward with committed purchase ($500,000). Is there any reason Skynet that you would proceed given the facts of this hypothetical?

You are of course correct that there is a walk-away price. I think there are few things to consider though.
1) How liquid is the market price. If one person sells his Trump condo for 100k that doesn't mean you'll be able to buy another one at that price. My guess is most of the condos are still selling for 300k even in that case.
2) The walk away price also becomes the FLOOR price. Using an earlier example I saw on this thread, if your walk away price is 240k even you won't sell it for less. You'd rather walk away than sell it at a loss. The developer will just hold onto it for years if necessary until he sells it for 300k+, so there probably won't be any sales below that point. And maybe we're near that point now.
3) I've never done this, but I'd be curious to see how the developer reacts when you call him up and tell him you are defaulting, but oh, by the way you want to buy the unit next to the one you gave up. I'm guessing he may not let you do it, and if he does there may be repercussions but I don't know. Maybe you can enlighten me on this one?
4) If you still believe you can either live there or get rental income, and you think it will be a nice place, what are the chances that prices stay this low in 2 or 5 years time.
5) Even if prices stay low - and assuming you can either live there or get rental income - who cares what the price is? You're getting what you wanted out of it.
6) This isn't a stock and it isn't the US. There isn't really a single price, its too illiquid. At the same time, its not enron and won't go to 0. There's a lot of really rich people out there like Mr. Viewpoint who buy cash only and will never sell. The only people leveraged are speculating Americans. Developers, drug lords, bankers, and who ever else will absolutely not be selling at low prices.

Maybe I'm wrong, but I think all these issues need to be considered in addition to the simple math.

Originally Posted by Viewpoint

The bonds are currently 90-92.

Cgrats. I thought I saw them quoted at 90-92 elsewhere.
Where/how can you check the current price?

Originally Posted by skynet21

You are of course correct that there is a walk-away price. I think there are few things to consider though.
1) How liquid is the market price. If one person sells his Trump condo for 100k that doesn't mean you'll be able to buy another one at that price. My guess is most of the condos are still selling for 300k even in that case.
2) The walk away price also becomes the FLOOR price. Using an earlier example I saw on this thread, if your walk away price is 240k even you won't sell it for less. You'd rather walk away than sell it at a loss. The developer will just hold onto it for years if necessary until he sells it for 300k+, so there probably won't be any sales below that point. And maybe we're near that point now.
3) I've never done this, but I'd be curious to see how the developer reacts when you call him up and tell him you are defaulting, but oh, by the way you want to buy the unit next to the one you gave up. I'm guessing he may not let you do it, and if he does there may be repercussions but I don't know. Maybe you can enlighten me on this one?
4) If you still believe you can either live there or get rental income, and you think it will be a nice place, what are the chances that prices stay this low in 2 or 5 years time.
5) Even if prices stay low - and assuming you can either live there or get rental income - who cares what the price is? You're getting what you wanted out of it.
6) This isn't a stock and it isn't the US. There isn't really a single price, its too illiquid. At the same time, its not enron and won't go to 0. There's a lot of really rich people out there like Mr. Viewpoint who buy cash only and will never sell. The only people leveraged are speculating Americans. Developers, drug lords, bankers, and who ever else will absolutely not be selling at low prices.

Maybe I'm wrong, but I think all these issues need to be considered in addition to the simple math.

Responding to your points in order -

1. If everyone is selling units at 350k and only one person sell at 100k you are correct but why would that person have ever sold it at 100k in the first place if there is truly a market at 350k? Either market value is really at 100K and others will then start selling at this price or it is an inside deal done for other reasons (the question we all still have about the TOC bulk sales.
2. If the walk away price is triggered for most investors then the developer will end up with units but even this may be too expensive for the developer to maintain depending on the level of rental income. In such case Viewpoint and the bondholders become saddled with problem which probably gets settled through sale of the building.
3. Market is greater than the developer and there are other means of buying units from developer than through same party
4. I don't engage in this type of speculation with my money
5. Not sure I understand logic. So, best to continue to pay 5 times more than a comparable home you can purchase because you are getting what you originally wanted?
6. There may be a lot of rich people who may be willing to fund their entire purchase in cash but neither you nor I know whether this represents the majority or minority of purchasers of TOC units. And even if they have the means please don't assume they are so pre-disposed as they may wish to exercise leverage. As for Viewpoint's professed wealth, as I said before good luck to him but not subject of this site. Also I can see where your sympathies lie as the "speculating Americans" are not held in the same good stead you've placed the drug lords who hold on to their investments.

The safety and security of holding bonds is not what it appears. Bonds have always been the place to be for security but this is changing. First with Obama leaving the GM bond holders dry and now the holders of Muni bonds in Harrisburg PA are taking a bath. Harrisburg defaulted on it's bonds this week. There are other Munis around the country in the same boat. The bond market is changing and governments and courts now have precedent not to pay bond holders first. Thanks allot Obama!

Originally Posted by fleeted

The safety and security of holding bonds is not what it appears. Bonds have always been the place to be for security but this is changing. First with Obama leaving the GM bond holders dry and now the holders of Muni bonds in Harrisburg PA are taking a bath. Harrisburg defaulted on it's bonds this week. There are other Munis around the country in the same boat. The bond market is changing and governments and courts now have precedent not to pay bond holders first. Thanks allot Obama!

Your correct regarding the risks increasing. Warren Buffet recently withdrew his Municipal Bond Insurance unit from the market of insuring municipal bonds when he correctly recoginized the fact that municipalities would default on insured bonds before they default on uninsured bonds because by defaulting on the insured issues the bondholders continue to receive payments on their bonds from the insurers so they don't complain. Harrisburg was no exception as most (not all) of their defaulted debt was insured. For that reason we are not seeing any sellers (of size) in the Harrisburg bonds so far.

Buying bonds and fixed income research go hand in hand. GM bondholders took a bath at the benefit of the labor unions thanks to the US Government but GMAC bondholders faired out OK. GM and Chrysler went down for the count but Ford survived and FMCC thrived without missing a beat. Your statement about the treatment of bondholders by the US Government and the Obama Administration is right on target as with GM they simply were re-distributing the weath to the labor unions while ignoring the bondholder rights and security. Unfortunately, this trend and socialistic attitude is getting worse day by day.

Is anyone aware of any steps taken or planned by the Panamanian Government to ensure the success of TOC? Ordinarily I would not expect the government to be directly involved in assisting a private enterprise but the fact is that they have a stake in the success of this building and that can't be ignored. For if problems arise, it will be contagion risk for the entire Panamanian real estate market. Viewpoint, can you comment on whether they were involved in the bulk sale purchase? If not, do you know who was?

Does anyone have any information on where the Beach Club will be built and whether the land is of comparable value to the original site in Coronado?

That doesn't surprise me one bit. Even the Trumpster's not immune from the dismal economic conditions.

Originally Posted by The American Investor

Does anyone have any information on where the Beach Club will be built and whether the land is of comparable value to the original site in Coronado?

I believe it is planned for Saboga now.
Anyone want to guess which parcel TOC will take?

http://islasaboga.com/

http://islasaboga.com/downloads/Saboga.pdf

Originally Posted by Expat123

I believe it is planned for Saboga now.
Playa Blanca, Location 'L' (?)

Saboga: Island Paradise Resort

http://islasaboga.com/downloads/Saboga.pdf

Do you kow what happened to the original property in Coronado? I hope the property has equivalent value.

A.I.

The Panamanian government doesn't get involved in any private real estate deals. Bigger projects than Trump have already gone up in flames (Ice Tower, Faros) and they haven't done anything. Hundreds if not thousands of foreigners have been scammed over the last 5 years by all kinds of real estate shenanigans and the Gov. has not gotten involved. This is NOT the USA. This is a country that's doing it's best to leave the 3rd world behind and become a 1st world country. Part of the 3rd world element is the "wild west dynamics" that are still present. Going to court can take a decade and if you don't know the right people, you're almost guaranteed to lose. Having a "fair, just, quick, honest legal system" in Panama is not going to happen overnight.

Matt

Originally Posted by The American Investor

Do you kow what happened to the original property in Coronado? I hope the property has equivalent value.

Do you mean the other island Contadora?
Saboga looks like an improvement if the other developments planned go forward.
More eco friendly, natural. Higher end, private.

I'm not familiar with the Coronado plans.

Here is a three bedroom unit offered on craigslist at $700,000. I assume it is 185 M2 if so, it makes it $3784 M2. The Q2 report shows the current average list price at $846,656 or $4574 M2.

Trump Ocean Club 3 Bedroom Condo direct Ocean Views

As is sometimes or perhaps usually the case, the realtor makes unsubstantiated claims like these:

'The entire City of Panama regularly boasts occupancy rates of 90%.
'With the name "Trump" on it, this property is sure to sky-rocket in value once the building is complete'
'This is your chance to get your own spectacular unit at a fraction of the cost!'

And here is one on encuentra 24 complete with a generated image of the dock:


Apartamentos en Panamá Punta Pacífica | venta | Trump Ocean Club - Studio Hotel Deluxe (50% Price Reduction) : 1 habitaciones, 47 m2, USD 290000.00

Asking price is $290,000 and supposedly:

"An excellent investment opportunity! Hotel occupncy is anticipated to be circa 80 - 85%."
"Trump Ocean Club Hotel Studio Condo on the 24th Floor with sea views. Price reduced by 50% for urgent sale."
Construction will be completed by the end of 2010.

Originally Posted by Contrail

And here is one on encuentra 24 complete with a generated image of the dock:


Apartamentos en Panamá Punta Pacífica | venta | Trump Ocean Club - Studio Hotel Deluxe (50% Price Reduction) : 1 habitaciones, 47 m2, USD 290000.00

Asking price is $290,000 and supposedly:

"An excellent investment opportunity! Hotel occupncy is anticipated to be circa 80 - 85%."
"Trump Ocean Club Hotel Studio Condo on the 24th Floor with sea views. Price reduced by 50% for urgent sale."
Construction will be completed by the end of 2010.

Probably worth $225,000-$240,000 at best and there still is NO Trump Hotel Management Agreement so there's NO financing available until the lenders review and approve the management agreement. For some reason TRUMP is witholding the agreement from the Purchasers of the Hotel units until closing and delivery gets closer. Why ? There certainly must be a reason TRUMP is delaying this information !! Good News travels soon and bad news is always delayed !! Newland has been pushing TRUMP to release the management agreement for the last several months with no success so far.