Donald Trump’s firm is close to reaching an agreement to sell the lease on its Washington, DC hotel for more than $370 million.
The purchase is being pursued by Miami-based investment company CGI Merchant Group, which is in talks with hotel operators such as Hilton about taking over operation of the facility.
CGI is one of around a dozen parties interested, including pension funds, foreign government funds, and high-net-worth individuals. Any entity wishing to take over the lease must be approved by the General Services Administration, which owns the land.
The Old Post Office building, acquired from the GSA in 2012, was a hard-won pet project of Ivanka Trump, who was able to beat out competitors like Marriott and Hilton with what some say was an overgenerous bid of $3 million per year for the ground lease and a promise to invest $200 million in the building’s renovation — a promise that forced Trump to borrow $170 million from Deutsche Bank, which comes due in 2024.
The lease is for 60 years with three 10-year options, giving the Trumps ownership of the property until 2003.
Ivanka informed GSA authorities at the time of the transaction that she expected her newborn daughter, Arabella Rose, to one day manage the property and handle re-leasing talks.
But plans for legacy may alter when your father becomes the leader of the free world, exposing his DC property to a series of emoluments cases by refusing to sell, as well as generating a divided clientele in a strongly Blue city.
Despite Eric Trump’s assertions that the family listed the hotel because “people [were] complaining to [them] earning so much money,” the mammoth property has been a money hole, producing just around $40 million in revenue (not profit) each year even before the epidemic.
The revelation comes only four days after a Senate investigation showed that the hotel lost more than $70 million during Trump’s presidency, while receiving millions in foreign government payments.
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According to the Trump Organization, the accusations are “irresponsible and unequivocally false.”
When you consider that the Trump organization has approximately $300 million in largely personally guaranteed debts coming due in the next several years, the family’s initial exorbitant asking price of $500 million seems more reasonable.
Understandable does not imply feasible, especially given that in the first attempt to sell the property, investors shared that Trump was unlikely to relinquish management rights (or allow the removal of the Trump name from the side of the building) for offers less than $500 million — a valuation that would exceed that of New York’s Waldorf Astoria by 90%.
The firm claims to have rejected offers in excess of $350 million, but CNBC says that none of the bids were even close to the asking amount, with several falling below $250 million.
“It’s an historic building, it gives you rooms that have ceiling heights like no other hotel in Washington DC,” says Brian Friedman, a DC developer who put a bid on the property in 2019. “Normally when I buy assets, I have to bring in decorators and designers and do all sorts of crazy stuff. I [wouldn’t] have [had] to do that here. You take out some of the Trump gold and stuff like that; you don’t have to spend a lot of money….[It’s] got a really big spa, multiple restaurants, and multiple ballrooms. [It’s] got all these different drivers that, if there’s demand, you can make money.”
What remains to be seen is if demand will quickly follow after the Trump logo is removed.
Since Trump took office, and particularly in the tumultuous final year of his presidency, the hotel has been a fortress of the Trumpian elite — a place where leftie protesters have gathered to project light displays and scream “Fuck Trump!” and where those on the far right have gathered for overpriced cocktails in what they call their “safe space” in liberal Washington.
Will Biden employees want to hold their nuptials in the ostensibly beautiful ballroom in two years? Will the MAGA supporters take an Alamo-style stand to defend their conservative haven? Time will tell.