Tuesday / December 18.
HomeFT SelectCanada High: New Trump hotel, fresh fears of conflicts

Canada High: New Trump hotel, fresh fears of conflicts

Joo Kim Tiah, the son of one of Malaysia’s wealthiest tycoons, sat on stage in the summer of 2013 as his new business partner announced their plans for a C$360m luxury condominium-hotel project on Vancouver’s most prestigious downtown thoroughfare.

With characteristic salesmanship, Donald Trump bragged that the 63-storey glass tower on West Georgia Street would be “one of the great buildings, not only in Canada and the US but anywhere in the world”.

Mr Tiah, chief executive of Holborn Group, his family’s Canada-based property development company, was similarly effusive, saying the Trump International Hotel & Tower Vancouver would one day “become a new symbol” for the city.

For many residents of Vancouver, a proudly multicultural city with a thriving film industry and environmentally friendly vibe, Mr Tiah’s prediction has already come true. Since his business partner’s election as US president in November, the shimmering tower has become an unwelcome symbol of the man whose name shines in large block letters on the front façade.

“The building comes to represent the worst in humankind with that name on it: bullying, sexism and intolerance,” said Kerry Jang, a city councillor. He and other politicians in the city, including the mayor, have called for the Trump name to be removed from the building.

Mr Tiah, the 37-year-old son of Malaysian property developer Tony Tiah Thee Kian, insists he will not remove the name. “I am locked in with the contract,” he said in an interview with the Financial Times. The Trump family is “aware I’m under pressure but what am I going to do? From a business standpoint they haven’t done anything wrong.”

Presidential interests scrutinised

The Vancouver development — the first Trump hotel property to open since his inauguration on January 20 — highlights the potential for conflict for a sitting president who has refused to sever ties with his still-expanding business empire. Like some of Mr Trump’s other properties, the Vancouver development raises the risk of violating the emoluments clause in the US constitution prohibiting elected officials from receiving benefits from foreign governments. The hotel also invites scrutiny of his business partners such as the elder Mr Tiah, who was convicted of providing a false report to the Kuala Lumpur stock exchange.

Joo Kim Tiah posted on Instagram an image of himself with Ivanka Trump from a Bloomberg Television report on the Trumps and the White House

Still, Mr Tiah says the condos — which cost as much as $14m — have sold out, despite some buyers getting cold feet. A grand opening for the development is scheduled for the last week of February.

The Vancouver hotel project is structured like many of Mr Trump’s offshore deals. Holborn owns the building while the Trump Organisation receives a fee for managing the property and licensing its name as well as additional “incentive fees” if certain financial targets are reached. Mr Trump’s 2016 financial disclosure says that he received nearly $36,000 in management fees from “THC Vancouver Management Corp”. Fees for other Trump-branded properties run into the millions.

The Vancouver Sun recently reported that wealthy locals as well as foreign buyers have purchased units. One investor is a company called KMF Property, whose address the Sun linked to a home “owned by Sou Lam Fong, the founder of CHTC Fong’s Industries, a Hong Kong-based manufacturing company”. CHTC Fong’s majority shareholder is the Chinese government.

Norman Eisen, a former White House ethics adviser, says the connection with Beijing could represent a violation “since in essence a cut of any foreign emoluments are being passed through to him [Mr Trump] personally. That is the consequence of the president’s insistence on hanging on to ownership of his businesses”.

Mr Eisen said foreign officials staying at properties branded under the Trump name could increase their value, particularly if the officials are high ranking. He added that more transparency is needed about the president’s corporate deals.

Joo Kim Tiah posted his invitation to the inauguration on Instagram

The bipartisan Citizens for Responsibility and Ethics in Washington, of which Mr Eisen is chairman, on January 23 filed a lawsuit alleging Mr Trump is in violation of the emoluments clause. It cited Mr Trump’s new Washington hotel in the Old Post Office building.

Mr Trump has continued to mix politics with his family business, further blurring the lines of the relationship and raising concern among Democrats and some Republicans too in Washington. As president, Mr Trump is not legally bound to conflicts of interest laws. Last week, he criticised Nordstrom, the publicly traded department store chain, for treating his daughter “unfairly” after it said it would no longer sell Ivanka Trump merchandise, citing poor sales. He also hosted Shinzo Abe, Japan’s prime minister, at his company-owned Mar-a-Lago estate in Florida.

‘We’re second-generation guys’

Mr Tiah said he courted several hotel managers, but the Trumps, whom he met in about 2012, appealed to him because he knew the family would be running the business for years. He also liked their “flexibility” and experience as developers.

There was another factor: he formed a bond with Donald Trump Jr, the president’s oldest son, who is running the day-to-day operations of the Trump Organization with his brother Eric.

“I’m a second-generation guy. Don Jr is a second-generation guy. We both have very dominant successful fathers,” Mr Tiah said. “I pick up my phone and call Don Jr [and he] picks up his phone — in five or 10 minutes we’ll get it done. No bureaucracy.”

Holborn, the Tiah family’s property development group, first came to Vancouver early in the last decade following a wave of investment from Asia that was inspired by Li Ka-shing, the Hong Kong billionaire who made a fortune from his 1988 purchase of a waterfront site that hosted Vancouver’s World Fair in 1986.

“What that did was to focus attention in Hong Kong on the Vancouver land market. As a Chinese-Canadian real estate agent told me, where the big fish swim the small fish follow,” said Kris Olds, a professor of geography at the University of Wisconsin-Madison.

The money behind Holborn comes from Tony Tiah Thee Kian, chairman of TA Enterprise, which controls several other businesses from real estate to a securities brokerage. The elder Mr Tiah was a prime mover in Malaysia’s boom years of the 1990s.

The new Trump hotel in Vancouver during construction © Maciej Lulko/Flickr/CC

In the late 1990s Mr Tiah was caught up in a crackdown on corporate crime and charged with breaching securities law. In 2002, he was fined 3m ringgit and pleaded guilty to providing a false statement to the Kuala Lumpur stock exchange regarding dealings with another brokerage, Omega Holdings, according to Malaysia’s Securities Commission.

At the time, the commission trumpeted the conviction as a significant move in tackling crimes involving “high profile corporate figures”. Mr Tiah was charged alongside John Soh Chee Wen, another Malaysian dealmaker, who pleaded guilty to two charges of abetting Mr Tiah in submitting false information to the stock exchange. Mr Soh was fined Rm3m for each charge.

Some believed the crackdown may have had a political motive. Mr Tiah was associated with Anwar Ibrahim, Malaysia’s deputy prime minister from 1993-98, who was sacked and imprisoned following a power struggle with Mahathir Mohamad, then prime minister. “He was the up and coming Chinese tycoon who was closer to Anwar than Mahathir,” said another Malaysian opposition politician.

A former senior staffer for the elder Mr Tiah said: “At the time, Anwar was coming up, and everybody wanted to get close to him.” The former staffer described the businessman as a “fighter” who was a keen tennis player before age slowed him down; he is now 70. He returned to TA’s board in 2009, and describes himself as a born-again Christian.

“He is now on the marketing side,” the former staffer said. “His wife is more running the company day-to-day.”

TA Global, the family’s Malaysian real estate business in which the younger Mr Tiah is also chief executive, now makes most of its profits from its Canadian operations. Sales from the Trump Vancouver development represented the lion’s share of profits in 2015. TA Global said it earned Rm46.4m — about $10m — in profit from the Trump development in 2015, amounting to nearly 58 per cent of the group’s profit.

Malaysia’s prime minister, Najib Razak, and his family have been caught up in a scandal linked to 1MDB, the state investment fund. The US Department of Justice has been investigating claims that more than $1bn was stolen from the fund but has not accused Mr Najib of any wrongdoing.

Still, Malaysia’s leader was relieved by Mr Trump’s election victory. Before Mr Trump became the Republican presidential candidate, the two men played golf together at his New Jersey course; Mr Najib keeps a framed picture from the day in his office. The two leaders spoke in November after Mr Trump’s election win.

The changing city

The gleaming Trump hotel replaced a boxy concrete structure that sat vacant for years. Holborn bought the site in 2003 and struck a deal with the Ritz-Carlton that fell apart after the financial crisis. It was then that Mr Tiah, who attended Oral Roberts University, a Christian college in Oklahoma, and business school at Australia’s Macquarie University, was brought in to replace his brother-in-law at the top of Holborn.

After his initial meetings with the Trumps about five years ago, Mr Tiah went to New Yorkto make his presentation to the siblings. The experience, he said, reminded him of an episode of The Apprentice, the future president’s reality television show.

Eric Trump, Ivanka Trump, Donald Trump and Donald Trump Jr. The president’s two sons now run his businesses © Reuters

“One of the senior vice-presidents pulled me aside and said: ‘Joo Kim it’s really important in your presentation that you connect with Ivanka [Mr Trump’s daughter]’. In other words: no one else is in the room. He said, ‘you have to understand that,” Mr Tiah said at the October 2015 launch of a “Trump Luxe” VIP service for condo residents.

Mr Trump was not intimately involved in the project but he did sign off on the deal, Mr Tiah said, and they spent some time together. “My experience with him is that he’s awesome. He’s so charismatic, so warm, so friendly. He’s the straight goods. He’s really real,” Mr Tiah said of Mr Trump.

At the 2015 event Mr Tiah said: “The biggest thing I’ve learned from the Trump Organization and the Trump family is the power of putting a face behind your brand. They connect with the values of the person, what he believes, what he stands for and what he strives to be.”

Mr Tiah represents part of a wave of foreign investment in Vancouver that residents say is changing the dynamics of their city. The number of non-resident unoccupied units reached 25,502 in Vancouver in 2016, up from 12,335 in 1996, according to a new study by Andy Yan, director of the city programme at the local Simon Fraser University.

The juxtaposition of the new wave of Lamborghini-driving youth with the progressive culture of the city shows the “absurdity” of the amount of foreign capital that has flooded the city, he said.

Among those who thought the Trump project did not fit with Vancouver’s image was Brent Toderian, former chief planner for the city.

“My initial criticism was on [Trump] being a bad developer and a bad reality TV star. Both of them I considered to be incompatible with the value system and brand of Vancouverism,” he said.

His feelings only deepened when Mr Trump said in December 2015 during the US presidential campaign that he would impose a ban on Muslims from entering the US. Mr Toderian has joined the calls for the Trump name to be removed from the building.

Mr Tiah told the FT: “As a politician [Trump] shouldn’t say certain things. He is not a politician, he is just a guy telling it how it is.”

From the outset Mr Tiah wanted the hotel to stand out. In letters to the city council last spring to seek approval for a Las Vegas-style nightclub with poolside drinks and music, Mr Tiah billed the hotel as a destination for Vancouver’s nouveau riche, many of whom are from mainland China.

The nightclub was at first opposed by the Coal Harbour Residents’ Association, which butts against the hotel, protesting it would be too noisy and attract drunken revellers. The nightclub was initially voted down but the city council later approved its liquor licence after the hotel agreed to offer food and reduce the club’s size. The liquor licence will be reviewed every year.

After a six-month delay, the hotel had a soft opening last month. On a recent afternoon, construction workers were adjusting light fixtures near the marble bar, where customers can order a 40oz Tomahawk steak for C$150 ($115) or a bison burger for C$25.

A small group of men and women sat on powder blue couches in the lobby bar as hip music filled the air. On the table were a mix of small plates and cocktails, including the C$25 “Scentless Apprentice”, a vodka-based drink containing the essence of Chanel No 5. It is served on a vanity tray alongside a perfume bottle and mister.

Mr Tiah said he has not invited any politicians for the opening party, though two Trumps are on the guest list: Donald Jr and Eric.

“I don’t want it to be misinterpreted,” he said. “It’s a business event.”

Via FT