Donald Trump’s polarizing personality and presidential candidacy complicated the recent sale of the Trump Organization’s most lucrative overseas property, the Ocean Club in Panama City, Panama, according to real estate professionals familiar with the deal. The majority interest in the 369-unit luxury resort was sold in August by developer Newland International Properties to Ithaca Capital Investments in a $24.5 million deal that had to be approved by the Trump Organization, currently led by Trump’s oldest sons, Donald Jr. and Eric. (None of those proceeds went to the Trump Organization, which collects licensing fees and hotel management fees on the property, say brokers.)
The complex was put on the market in January 2016, in the midst of the grueling Republican primary, but it took a year and a half for the deal to close due partly to the uncertainty around Trump’s election prospects and his controversial personality, among other factors, says Paul Weimer, a senior vice president at CBRE Hotels in Miami, who helped broker the deal.
“You didn’t know from day to day, is he going to be president?” he recalls. “Does that help the hotel? Does it hurt the hotel? Some thought that many guests would be turned off. But others felt that if he’s president, we should have more business.”
There was interest from bidders in Europe and South America but less so from some areas of the world, like potential Mexican buyers and sovereign wealth funds in the Arab world, says Weimer. “Some couldn’t care less, some were offended by him, and some like the idea.” (There were no Russian bidders, he insists.)
In addition, the deal was complicated since it’s a mixed-use development with multiple owners and the city’s hotel market has weakened in recent years, says Weimer. He says that Eric Trump was the point person on the deal for the Trump Organization, which approved the deal and performed due diligence on the buyer to answer questions like: “Do they have the experience? Is the money from legitimate sources and not from money laundering?”
The Ocean Club, a 70-story tower in the shape of a sailboat that dominates the skyline of Panama City, was opened in July 2011 at a lavish ceremony attended by Trump, his sons, and then-Panamanian president Ricardo Martinelli. It quickly became the Trump Organization’s biggest individual source of branding fees, reportedly earning Trump at least $50 million. In addition to the licensing deal, the Trump Hotel Collection runs the resort’s hotel. (Weimer was skeptical of those numbers, saying that they seemed too high. “They get a percent of the total revenue,” he noted, adding that “they get maybe about a million [a year].”)
Since the Ocean Club’s opening, the world has turned upside down—Trump was elected U.S. president and handed over the reins of his empire to his sons, Eric and Don Jr.; Martinelli left the country facing multiple corruption charges and now sits in jail in Florida and is trying to fight off an extradition request from the current president of Panama; and the Ocean Club’s developer filed for bankruptcy in 2013 amid lackluster sales.
By 2015, the condo owners voted to fire the Trump management team, citing “more than $2 million in unauthorized debts, paying its executives undisclosed bonuses, and withholding basic financial information from owners,” reported the Associated Press. Trump, in turn, went to arbitration court to demand up to $75 million from condo owners, asserting that his management team had been wrongfully fired. (The Washington Post reported in January that the dispute had ended in a confidential settlement.) Trump’s team is still managing the hotel portion of the Ocean Club under a 40-year contract.
The hotel made headlines this week when it was revealed that the U.S. State Department’s embassy used a government charge card to pay $632 for a room at the Ocean Club in March. That raises questions about possible violations of the “domestic emoluments clause” of the Constitution, which prevents the president from receiving any compensation from federal, state, or local governments beyond the salary he earns as chief executive.
Possible violations of the emoluments clause related to the Ocean Club were also raised in a recent affidavit in a lawsuit filed in federal court against the president by Citizens for Responsibility and Ethics in Washington and other groups. Sarah P. Chayes, a fellow at the Carnegie Endowment for International Peace, wrote in the affidavit that the complex (and thereby Trump and his family) have benefited financially from favors from the Panamanian government:
“Current favors include (at least) government repair of private drainage and sewage systems around the building, use of the hotel for government functions, regular renewals of health permitting for the hotel restaurant, and property tax relief afforded to owners of individual hotel rooms under tourism promotion legislation.”
She also asserts that Trump’s role in the Ocean Club damages the integrity of any decision made by the U.S. government regarding Martinelli’s extradition. And Chayes writes that due to the infamy of Panama’s luxury high-rise market as a haven for money launderers, “suspicion will persist that Defendant is collecting fees from people who purchased their investment properties in Trump Ocean Club Hotel with tainted cash. With the United States in the vanguard of the global fight against money laundering and financial crime, its power of example will be crippled by this embarrassing ambiguity.”
The Trump administration has asked the court to dismiss the suit for three reasons—because the plaintiffs lack standing to sue, a president is prevented by the Constitution from being compensated only for an “official” act, and requiring a president to sell his assets is unconstitutional.
The Ocean Club’s new owner, Ithaca Capital Investments, was formed just last year in Panama, incorporated in Delaware, and has offices in Miami. The investment firm is led by Orestes Fintiklis, a Cypriot investor who previously was the acquisitions director at Dolphin Capital, a private equity firm that specialized in luxury real-estate properties around the world. In early 2014, Dolphin Capital was revealed to be one of the primary debtors of the Bank of Cyprus, which almost failed amid the island’s financial collapse. Later that year, the bank’s rescue was led by billionaire investor Wilbur Ross, who became its vice chairman before leaving to serve as Trump’s Commerce Secretary. That same year, the bank’s former chairman, Theodoros Aristodemou, who reportedly owned a stake in Dolphin Capital, was arrested on conspiracy and fraud charges. A year later, Aristodemou was acquitted of the allegations by a court in Cyprus.
Fintiklis’s new venture already has some high-profile connections in Panama—the law firm that helped incorporate Ithaca Capital last year is Aleman, Cordero, Galindo & Lee, whose partner Jaime Aleman was Panama’s ambassador to the U.S. from 2009 to 2011 and whose brother is current Panamanian president Juan Varela’s powerful chief of staff. Fintiklis told Fast Company that the firm has an international mix of investors but declined to discuss details further. When asked to confirm some details about his firm and his own background, Fintiklis said in an email that my description wasn’t accurate, but refused to explain what was inaccurate about it. A spokesperson for the Trump Organization did not respond to an email seeking answers to several questions about the deal.
A “Flurry Of Sales” By Global Condo Buyers
Trump’s election was good for business at the Ocean Club, says local property broker Jeff Barton, the managing director of Punta Pacifica Realty, which has sold many of the complex’s units to international buyers. “There were people who thought that if Trump won, it would be a good reason to invest,” says Barton, adding that the last residential condo in the development was sold a few weeks after the election. “I wouldn’t say prices went up, but there was a flurry of sales.”
Related: Trump’s Panama Problem
Soon after the Ocean Club opened in 2011, there were reports that 60 Russians and Russian-born Americans had bought into the complex. Barton claims that he hasn’t seen any Russian buyers in the last five years.
“I’ve seen more Chinese and more Europeans in the last few years,” he says, adding that “the flurry of Russian buyers was pre-construction.” Asked if he would necessarily know the true buyers of the condos, many of which have been purchased by shell companies, Barton says, “I would know in the sense that we are normally face-to-face with the actual buyers, see their passports, and talk to them. I think I would know [if there were Russian buyers]. That doesn’t mean one or two didn’t slip by.”
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