The Wall Street Journal reports Donald Trump’s company is close to making a deal to sell the lease on its DC hotel for over $370 million. Miami-based investment firm CGI Merchant Group is pursuing the deal, and is in discussions with hotel operators like Hilton about taking over management of the property. CGI is one of about a dozen interested parties, among them pension funds, foreign government funds and high net-worth individuals. The General Services Administration, which owns the property, will have to approve any party that wants to take over the lease.
Acquired from GSA in 2012, the Old Post Office building was a hard-won pet project of Ivanka Trump’s, who was able to beat out competitors like Marriott and Hilton with what some say was an overgenerous bid of $3 million a year for the ground lease and and a promise to invest $200 million in the building’s renovation — a promise that forced Trump to borrow $170 million from Deutsche Bank that comes due in 2024. The 60-year lease has three 10-year options, giving the Trumps control of the property until 2103. At the time of the sale, Ivanka told GSA officials she believed her newborn daughter, Arabella Rose, would one day manage the property and handle re-leasing negotiations.
But plans for legacy can change when your father takes the seat as the leader of the free world, not only subjecting his DC property to a slew of emoluments suits by refusing to divest, but creating a polarized clientele in a deeply Blue city. Despite Eric Trump’s claims that the family put the hotel on the market because “people [were] objecting to [them] making so much money,” the behemoth property has been a money pit, generating just roughly $40 million a year in revenue (not profit) per year even before the pandemic.
The Journal scoop comes just four days after a Senate report revealed that the hotel had lost over $70 million during Trump’s presidency, despite taking in millions in payments from foreign governments. (The Trump Organization said the allegations were “irresponsible and unequivocally false.”) Add in the fact that the Trump company has roughly $300 million in mostly personally guaranteed loans coming due in the next few years, and the family’s original astronomical asking price of $500 million becomes a bit more understandable.
Understandable does not equate to feasible, though, especially given that in the first attempt to offload the property investors shared Trump was unlikely to relinquish management rights (or allow the removal of the Trump name from the side of the building) for offers south of $500 mill — a valuation that would exceed that of New York’s Waldorf Astoria by 90 percent. The company claims they rejected bids north of $350 million, but CNBC reports none of the bids were close to the asking price, with many south of $250 mill.
Which makes this new offer from CGI something of a surprise, as according to a spokesperson from the Trump Organization, it would be the highest price paid for a hotel in DC. Almost a doubling of the Trump Organization’s initial investment into the property, the bid likely represents the value of fully separating the building from Trumpian influence, as well as the work the Trumps put into making the former food court/office complex a luxury hotel.
“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’s unclear is whether demand will soon follow once the Trump insignia comes tumbling down. Since Trump assumed office, and especially 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 describe as their “safe space” in liberal Washington. Will Biden staffers want to have their weddings in the admittedly stunning ballroom two years from now? Will the MAGA faithful make an Alamo-esque stand to protect their conservative haven? Only time will tell.