Trump International Hotel in Washington DC
Adam Jeffrey | CNBC
According to industry executives, the Trump Organization’s efforts to sell Trump International Hotel Washington, DC have been put on hold indefinitely, questioning the future of one of the president’s biggest financial bets.
The Trump Organization hired Jones Lang LaSalle to buy a hotel for potential buyers, hoping for a price of about $ 500 million last fall. Those familiar with the deal negotiations said none of the bids approached the asking price, and some were less than $ 250 million. Jones Lang LaSalle has confirmed to CNBC that efforts to sell the hotel have been “held indefinitely.”
The hotel, which has become President Donald Trump’s glittering social hub in Washington and the pinnacle of Trump’s business empire, is now facing a coronavirus pandemic and further pressure in the future after the presidential election.
Faced with a $ 100 million loan from Deutsche Bank and ongoing losses, industry executives say the Trump Organization will have to subsidize its business for the next few years or neglect to repay real estate. It may not be.
“At this point, they could flip the key over or hold it and be part of a media company that the president decided to create,” he bid on the hotel and with some hotels. Brian Friedman of Friedman Capital, who owns the property, said. In the DC area. “I don’t think they can get the price they expected.”
The Trump organization did not respond to requests for comment.
Republican gathering place
The Trump International Hotel in Washington, DC celebrated its grand opening in October 2016, shortly before the election, and quickly became a favorite gathering place for businesses, politicians, and lobbyists who wanted to establish a relationship with the new White House. The property generated $ 40.5 million in revenue in 2019, according to a disclosure filed with the Office of Government Ethics. This is the latest period available.
According to the election report, the president or Republican-related campaign committee has spent about $ 3 million at the hotel since Trump took office. The Trump Organization is doing well and started shopping around the hotel in October last year for potential buyers.
After extensive blockades and travel restrictions in March, sales activities were discontinued. Even the long-standing pillars of Washington’s hotel business, such as The St. Regis and Hay-Adams, continue to struggle to fill rooms amid a decline in travel and tourism.
However, even if the economy recovers, hotel investors and owners say the Trump Hotel is plagued by two conditions and is unlikely to be sold. The Trump Organization does not own this property, known as the Old Post Office Pavilion, but leases it from the General Procurement Office.
Under leasing terms, Trump organizations have to pay $ 3 million a year for 60 years, and annual rents rise with inflation. According to Filing, the company also invested $ 200 million in real estate refurbishment, of which about $ 100 million was loaned by Deutsche Bank.
Trump allows property overpayment
Hotel owners say the $ 3 million annual lease (much more than the competitive bids Trump acquired in 2011) will make it harder for future owners to make a profit. I will. Mr. Trump told The Washington Post in 2012 that he admitted to overpaying real estate. “That is, we are paying a lot to the old post office.”
Hotel executives and advisors say the bid to buy a hotel today should be about $ 150- $ 175 million, less than the Trump organization’s $ 200 million investment, given the terms of the lease. Is called. As a result, the Trump Organization has the option of selling the asset at a loss, handing over the key with a Deutsche Bank loan as the default, or keeping the asset and ultimately making a profit.
Bidder says the Trump organization also required all buyers to keep the Trump name in the hotel. This helps the Trump brand, but it can be a problem for all buyers.
For now, the Trump organization continues to pay leasing fees. A GSA spokesman said, “Tenants continue to fully comply with the lease.”
Trump International Hotel Washington DC sale pending indefinitely
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