The owners of Trump SoHo are offering disgruntled condo buyers in the building up to half their deposits back if they agree not to become part of a lawsuit alleging fraud, say people familiar with the matter, according to an article today by Craig Karmin in The Wall Street Journal.

The unusual offer applies only to buyers who have not closed their purchases in the 46-story hotel and condominium on Spring Street, the article said, adding that the suit, filed in August, alleged that representatives of Trump SoHo engaged in "fraudulent misrepresentations and deceptive sales practices" by inflating the number of purchases to attract more buyers.

A spokeswoman for Trump SoHo said that the developers "do not comment on litigation."

Donald Trump, whose company has a licensing and management agreement with the building, was also named in the suit and he declined comment on the suit.

However, the article continued, "Mr. Trump said the prospect of converting unsold units at the troubled project to a pure hotel was appealing. 'Because the hotel is doing so well, I'm personally going to recommend it.'"

Seventeen buyers of eight units in the condo project joined in the suit, the article said, adding that the building has 391 condos.

It's unclear, the article said, how many buyers have been offered part of their deposits back in return for not joining the lawsuit.

"Real-estate attorneys said the move by the Trump SoHo developers, a venture between the Sapir Organization and Bayrock Group, showed concern," the article said, "about the pending lawsuit. 'They must think the fraud lawsuit has legitimacy and that they will have to settle for more than 50%,' says Pierre E. Debbas, a New York attorney whose former client was given one of these offers. Alternatively, he suggested, the deposit refunds made sense if the developers are planning to convert the project to a pure hotel, in which case they would likely have to refund the entire deposits to condo buyers who haven't yet closed. An official at the law firm Adam Leitman Bailey, which represents the buyers, declined to comment on the prospect of refunds."

In recent months, the article continued, "the developers restructured their financing with iStar Financial and recruited a California lender to provide loans to interested buyers because conventional financing for condo hotels has all but dried up. The owners also offered discounts of up to 25% of the agreed-upon purchase price to buyers in contract who were reluctant to close. The lawsuit, filed in U.S. District Court in the southern district of New York, alleges that defendants stated to media and in sales pitches that as many as 60% of the units had been sold. But when the offering plan was made effective earlier this year, only 62 buyers of the units were indicated as in contract to the New York Attorney General's office."