Trump International Hotel in Washington, DC
Adam Jeffery | Cnbc
The Trump Organization’s efforts to sell the Trump International Hotel to Washington DC have been put on indefinite strike, according to industry officials, doubting the future of one of the president’s biggest financial bets.
The Trump Organization hired Jones Lang LaSalle to buy the hotel for potential buyers in hopes of a price of around $ 500 million. Those familiar with the deal negotiations said that none of the bids came close to the asking price, and many were for less than $ 250 million. Jones Lang LaSalle confirmed to CNBC that efforts to sell the hotel were on “indefinite hold”.
The hotel, which became President Donald Trump’s spectacular social center of Washington and a splendid jewel of Trump’s business empire, now faces the coronovirus epidemic and future pressures following the presidential election.
According to industry officials, faced with a $ 100 million loan from Deutsche Bank and consistently incurring losses, the Trump Organization could lapse over years to subsidize the business, or default on loans or property. Can return.
“At this point, they can either simply turn over the keys, or keep it and are part of whatever media company the president has decided to create,” said Brian Freedman of Fridman Capital. In the DC area. “I don’t think they are going to get the price they expected.”
The Trump Organization did not respond to requests for comment.
Get a location for GOP
The Trump International Hotel in DC held its grand opening in October, 2016, just before the election, and became a favorite location for companies, politicians and lobbyists eager to build ties with the new White House. According to the revelations filed in the Office of the Ministry of Government Ethics, the property received $ 40.5 million in revenue in 2019, the latest available period.
According to electoral filings, campaign committees have spent about $ 3 million in hotels with the president or the GOP since Trump became president. With business strengthening, the Trump Organization began shopping around the hotel for potential buyers last October.
Following extensive lockdowns and travel restrictions in March, sales efforts were halted. Even Washington hotels, such as St. Regis and The Hay-Adams, continue to struggle to fill the room amid the long-standing pillars of business, a decline in travel and tourism.
But when the economy recovers, hotel investors and owners say the Trump hotel is a burden on two terms that are unlikely to make any sales. The Trump Organization does not own the property known as the Old Post Office Pavilion, but it is leased from the General Services Administration.
Under the lease terms, the Trump Organization has to pay $ 3 million annually over 60 years, with annual rents rising with inflation. The company invested $ 200 million for the renovation of the property, with Deutsche Bank investing about $ 100 million.
Trump approved to pay for the property
Hotel owners say the $ 3 million-year lease – far above competitive bids when Trump won the rights in 2011 – makes it difficult for any future owner to make a profit. Trump accepted to pay for the property in 2012, telling the Washington Post: “I mean, we’re paying too much for the Old Post Office. But we’ll make it so amazing that at some point in the future That would be pretty cool.” . “
Hotel officials and consultants say that given the lease terms, any bid to buy the hotel today should be $ 150 million to $ 175 million – less than Trump Org’s $ 200 million investment. This leaves the Trump Organization with the option to sell the asset at a loss, default on Deutsche Bank loans and turn over the keys, or try to keep the asset and eventually make a profit.
Bidders say that the Trump Organization also needed a buyer to place the Trump name on the hotel, which helps the Trump brand but could be problematic for any buyer.
For now, the Trump Organization continues to make its lease payments. A GSA spokesman said that “tenants remain in full compliance with the lease.”