Trump Dispute Spotlights Asian Real-Estate Mogul
The two-pronged building in the foreground
is part of the property being disputed by Mr.
Trump and his Hong Kong partners.
By CHRISTINE HAUGHNEY and JAMES T. AREDDY and JONATHAN CHENG
The $1 billion lawsuit filed on July 18 by Donald Trump against a group of his Hong Kong investment partners didn't stop one of them, Vincent H.S. Lo, from unveiling a television show yesterday called "The Winner" -- loosely modeled on Mr. Trump's "The Apprentice."
The two real-estate moguls are a lot alike. While Mr. Trump perfects the art of the deal in New York, Mr. Lo wheels and deals in the one city that may be hotter: Shanghai.
Just as Mr. Trump has emblazoned his surname on marble and glass across the U.S., Mr. Lo, arguably China's most celebrated property developer, is stamping his brand across the mainland. State-owned Shanghai Media Group's Dragon TV and China Business News Channels plan to begin broadcasting Mr. Lo's TV show in September.
Mr. Trump says he is flattered by Mr. Lo's TV plans. "It just shows you how much Vincent respects me," he says. "We've always had a good relationship."
Mr. Trump filed suit against Mr. Lo and other Hong Kong investors who are partners with Mr. Trump in a 77-acre New York property on Manhattan's West Side. The group has contracted to sell the property for $1.76 billion to private-equity firm Carlyle Group and Extell Management Co., in what could be the biggest residential sale in New York's history.
But Mr. Trump says the sum is too low, and he claims in his suit that the partners are either "reckless, uninformed or grossly negligent."
"Someone may say you made a lot of money," Mr. Trump said in an interview. "But that's not how the game is played. You sell it for the proper amount of money. You don't give away an asset."
None of the partners, who include Hong Kong billionaire and New World Development Co. Chairman Henry Cheng, has commented specifically on the lawsuit, filed in federal district court in New York. Several of them are traditionally low-profile Asian tycoons who rarely speak to the news media.
But in an interview on the third floor of his Shanghai mansion, dubbed the Clubhouse, Mr. Lo calmly asserts that the suit lacks merit, as he sinks silver-tipped chopsticks into a five-course Cantonese lunch.
"The shareholders have already done everything possible to get the best sales price for the lot," Mr. Lo says of the real-estate partnership. He goes on to rattle off his current roster of projects, including some of the most-expensive developments in Shanghai, in addition to his new TV show.
He hopes to repeat his success with the $170 million Xintiandi project in Shanghai, a historically themed development that includes restaurants, bars and some of the priciest offices and apartments in China, as well as one of China's first Starbucks. The development, which has influenced projects throughout China, is owned by Mr. Lo's Shui On Land Ltd., which he says he plans to take public as soon as early next year. Last fall, his company had five ongoing development projects in different cities valued at a total of $8 billion.
The partners in the Manhattan property came together in 1994, when Mr. Trump was experiencing financial difficulties. The terms of the original deal prescribed that Messrs. Lo and Cheng and several other Hong Kong investors would purchase the plot from Mr. Trump for $82 million and assume $250 million in debt. Despite having pulled his own money out of the deal, Mr. Trump received a 30% interest in the newly formed partnership, lending his name and expertise to the development.
Since then, Mr. Trump has golfed with the two Chinese billionaires at his course outside New York City and even lent Mr. Cheng his plane to visit his children at private school in Connecticut, people familiar with the matter say. On this year's Forbes magazine list of the world's billionaires, Mr. Trump is No. 228, with $2.6 billion, falling between Mr. Cheng at No. 132, with $4.2 billion, and Mr. Lo at No. 507, with $1.3 billion.
In the current dispute, Mr. Trump, 59 years old, says there have been several offers to buy the property, including bids from developer Richard LeFrak, a close friend, and Barry Sternlicht, chairman emeritus of Starwood Hotels & Resorts Worldwide Inc.
One offer came from Thomas J. Barrack Jr., a friend of Mr. Trump's, who bid $2.9 billion for the property in May. Mr. Barrack, chairman and chief executive of Colony Capital LLC, a Los Angeles-based private-equity group, confirmed the bid yesterday through an assistant. Mr. Trump says that Mr. Cheng turned down every offer.
"He said, 'We are satisfied with the price,' " says Mr. Trump. "I said, 'How can you be satisfied?' " Mr. Trump still bristles when recalling the moment in April when the Hong Kong developers told him they were selling the West Side property. "To this day," Mr. Trump says, "it's the craziest deal I've ever seen."
Mr. Lo, 57, agrees that several offers were made for the site, but he says none received in writing was higher than the $1.76 billion selling price.
A spokesman for Mr. LeFrak says the developer wouldn't confirm or deny any discussions to buy the Manhattan site. Mr. Sternlicht wouldn't comment on any bids he might have made.
Scott Latham, a real-estate sales broker with Cushman & Wakefield Inc., says he had shopped the property to potential buyers for a year and couldn't find a buyer willing to pay more than $1.3 billion. "From my perspective, a sale at $1.76 [billion] was a phenomenal execution for the ownership consortium," he says. Mr. Latham says that he didn't arrange the deal with the Carlyle Group and Extell Management.
George Artz, a spokesman for Mr. Trump's Asian investment partners, said the group received "five written bids and Gary Barnett's was the highest," referring to the president of Extell Management.
One of the first Hong Kong businessmen to invest aggressively in China, Mr. Lo maintains close ties with mainland officials, earning the nickname "the king of guanxi," or connections.
Now he is poised to spread his fame with "The Winner." Like "The Apprentice," in which Mr. Trump tests the business mettle of contestants and revels in firing those who don't measure up, "The Winner" tests the entrepreneurial spirit of contestants in real-life situations. Each of 14 contestants will be given 100,000 yuan, or about $12,000, to launch a business and then will be followed over the course of the season. The one with the best project gets the grand prize of a million yuan.
But there are some telling differences. The winner on "The Apprentice" gets a job with Mr. Trump's company; The victor on "The Winner" will set up his or her own business. Mr. Trump famously appears on each episode of "The Apprentice," while in "The Winner," a panel of experts will evaluate contestants' business proposals weekly, only occasionally consulting Mr. Lo -- who says he has no intention of firing anyone.
"It's not a show for one individual's fame, but rather for the public interest," says Yun Binshu, a spokeswoman for Dragon TV.
Like Mr. Lo, Mr. Cheng is the son of a wealthy Hong Kong property tycoon. Mr. Cheng's multibillion-dollar conglomerate controls several prominent properties in Hong Kong but has suffered from overexpansion, incurring losses and, like many of the region's companies, piling up debt because of the 1997-98 Asian financial crisis. Since then, the company has erased some of its debts and won back the confidence of many investors.
Copyright © 2005 Dow Jones & Company, Inc.