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Though the property has been open for business since 2012, the majority of the hotel rooms and condominiums in Toronto’s Trump International Hotel and Tower, seen last December, remain unsold.

Ian Willms/The Globe and Mail

Donald Trump may have a lock on the Republican nomination for president, but his hold on an eponymous Toronto hotel is slipping away, as one-time partner Alex Shnaider and his bank attempt to sell Trump International Hotel & Tower Toronto or put the troubled property into creditor protection and sever their management contract with Mr. Trump's company.

Through his real estate company, Talon International Development Inc., Mr. Shnaider is quietly shopping the 65-storey Trump Toronto, which consists of condos and privately owned hotel units, after Talon defaulted last year on a construction loan for approximately $260-million. The hotel has received poor reviews for service and has been through extensive expensive makeovers. Symon Zucker, a lawyer for Mr. Shnaider, confirmed the company and its bank are working on a sale, recently signed a letter of intent with a buyer and are working to close the deal.

While Mr. Zucker declined to name the potential buyer, sources say U.S. real estate funds, rival hotel companies and distressed-debt investors are circling the downtown property. None of these bidders are expected to want to keep the Trump name on the Toronto skyline.

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"The expectation is that any new owner is going to want a new manager. There are too many negatives associated with Trump's management," said a real estate professional working for one bidder. An executive at a rival hotel company that has considered bidding said: "That hotel needs a stronger reservation network, such as Starwood or Marriott, because Trump's network is weak."

Trump Toronto Hotel Management Corp. was created in 2004, and the Canadian property is one of 15 high-end locations under the Trump banner. Under the local partnership, Trump Management takes care of reservations, marketing and housekeeping. During construction, Mr. Trump and his family frequently appeared in Toronto to promote the project. However, Mr. Trump does not have equity in the Canadian property. Trump Management took Talon to court earlier this year in a bid to block an attempt to end its hotel contract, and said in a filing that Mr. Shnaider wanted to "replace Trump as manager for selfish reasons."

Mr. Zucker said Mr. Shnaider's attempt to remove the Trump name from the hotel is a separate issue from the sale. Talon and senior Trump Management representatives from New York met last month for a mediation session with former Ontario judge George Adams, a meeting Mr. Zucker described as "productive." Mr. Zucker said discussions on the management contract are ongoing. But with a sale on the horizon, Mr. Zucker said it would be up to the hotel's next owner to decide what to do with the Trump partnership. He said: "If there is a new purchaser, that will be in play, whether he wants Trump to continue or doesn't. It'll be out of our hands."

Real-estate experts say a new name would help turn the fortunes of the hotel, where rooms start at $400 on summer weekends and the "Trump Wellness Suite," which includes a gym and fitness wear, costs $2,900 a night. "Trump is not a brand with tremendous value, particularly for Canadians. In commercial real-estate circles, the man and the brand get little respect," said John Andrew, head of the Queen's Real Estate Roundtable at Queen's University. He noted that Mr. Trump's presidential campaign is succeeding despite numerous past real-estate failures, and said: "In terms of political implications, I don't think the people voting for Trump care if he loses a contract on a Toronto hotel."

E-mails to Trump Management requesting comment were not returned.

Talon built Trump Toronto with a loan from Raiffeisen Bank International AG, known as RBI, which is based in Vienna. The bank has strong historic ties to Mr. Shnaider in Europe, where the Russian-born executive made a fortune buying state-owned steel refineries in Ukraine before trying his hand at hotel development. Sources say this is the only loan RBI has ever made on a North American real-estate project.

In 2007, RBI lent Talon $310-million to fund construction; the overall cost of the project was $500-million. The hotel opened in 2012 to weak reviews, and within 18 months of debuts from three Toronto rivals in the luxury sector: a new Four Seasons property, a Ritz-Carlton, and the Shangri-La Toronto. The RBI loan went into default in the summer of 2015, with approximately $260-million outstanding, sources say, and RBI has been working with Talon since to sell the Trump Hotel. Sources say RBI is willing to sell the loan to a potential buyer for $180-million to $200-million.

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"Shnaider's equity is long gone. The question now is what the bank can get back on its loan," said one real-estate executive working with a potential bidder. Mr. Zucker said the notion that Mr. Shnaider's equity had been wiped out was "at this point in time, not entirely true," but he declined to go into specifics.

Talon has hired real-estate brokerage firm CBRE Ltd. to sell Trump Toronto, according to sources in the real-estate industry. CBRE declined comment. Starwood Hotels & Resorts Worldwide Inc. and investors in distressed real estate, such as TPG Capital and Blackstone Group LP, are said to have kicked tires. While several potential investors made informal bids on the property, sources say the prices offered did not meet RBI's expectations. Two major issues for potential buyers are the property's poor relationship with its condo owners and the Trump Management contract, according to executives in the real-estate industry.

Along with the sale process, sources say RBI hired professional services firm Ernst & Young to work on a possible restructuring of the hotel's finances that would involve filing for creditor protection. RBI and E&Y declined comment. Mr. Zucker said Mr. Shnaider continues to have an "excellent relationship" with the bank, and denied an insolvency filing was imminent: "At this point, it's not on the table. It wouldn't profit the bank to do that. It's not in the bank's interest. Nobody wants a receivership."

The Trump Hotel's financial problems reflect a raft of operational woes. Backed by marketing muscle from Mr. Trump, 261 rooms in the hotel were originally pitched as glamorous, income-spinning opportunities. The property is also home to 118 condominiums. The majority of both the hotel rooms and condos are unsold. Most of the hotel rooms that were sold went to mom-and-pop retail investors, who paid $700,000 and up, then placed the units into a rental pool for hotel guests. In ongoing lawsuits, investors claim they are losing money because the hotel's occupancy levels and room rates are below prelaunch projections, while maintenance fees and taxes are higher than expected.

Mitchell Wine, a lawyer for a group of aggrieved hotel-unit owners, said a sale would not affect his case against Talon, Mr. Shnaider and Mr. Trump, which is scheduled to go before the Ontario Court of Appeal in June. But an insolvency filing would stay his action, and put his clients in line with other creditors.

For all the controversy kicked up by Mr. Trump and his White House run, real estate executives said some condo owners would resist any attempt to take the celebrity's name off the hotel. One executive working with a bidder said: "There are a number of condo owners who bought based on Trump and continue to believe in the power of the Trump name, and would fight any attempt to transfer the property to another hotel manager."

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