In the News from Panama

Investor Group Buys More Than 200 Trump Hotel Units

The original developer of the Trump Ocean Club, Newland International Properties, has sold more than 200 hotels units to an international investment group, essentially ending its role in promoting Panama City’s best-known project.

The unnamed group paid $23.7 million for 202 hotels units and 13 amenity spaces, including the Trump restaurants, according to a document filed with the Panama Stock Exchange. The bulk of the proceeds from the sale will be used to pay bondholders who loaned Newland $220 million to help build the tower.

Although few details were available, the investors clearly saw an opportune time to buy into Panama City’s best-known luxury resort. After a surge in construction, Panama City’s hotel market has been suffering from growing pains in recent months, with a large amount of supply resulting in low rates and high vacancies.

The sale of the units is not only a display of confidence in the market, it should establish a new player in Panama City with the resources and motivation to market the Trump around the world.

The deal also represents the likely conclusion of the long-running saga between Newland and the bondholders, which has been hanging over the tower for years. Newland struck the deal for the bonds in 2007, right before the global market collapsed. In 2011, Newland was forced to use the U.S. Bankruptcy Court to restructure and extend payments on the debt.

Last December, Punta Pacifica Realty led the sale of the last of the developer-controlled apartments in the tower, which brought Newland’s role in the residential side of the tower to an end. With the developer units sold, investor attention turned to the existing units and we immediately saw an uptick in prices.

The sale of the hotel units should have a similar effect. The deal marks the end of Newland’s primary role marketing the tower, which was always constrained by the financial issues with the bondholders. Newland will retain control of two commercial units but the arrangement for the hotel units “represents the substantial sale of all remaining assets of the company,” according to Newland’s statement.

The sale—which was approved by the bondholders–should not have any impact on the day-to-day operations of the Trump Hotel. But it will bring stability to the entire building and provide a better environment for all the owners.

One immediate beneficiary is the Trump Homeowners Association, which will receive a $2.1 million capital infusion from the sale. As we reported last month, homeowner fees in the Trump were slashed by almost 13 percent this year, after owners took over control of the association. And the money from the sale will boost the homeowners’ association’s bank reserves to more than $5 million, which is far more than cushion found in most Panama City association fees.

At PPR, we’ve already received several inquiries from investors since word began circulating about the sale of the hotel units. Many investors have been sitting on the sidelines, waiting for a resolution to Newland’s issue. We’ve also seen a few current owners move to take their apartments off the market, now that they feel better about the financial health of the tower.

The announcement from Newland (in Spanish) can be found here.