The Trump Organization's efforts to sell the Trump International Hotel Washington, DC, have been put on indefinite hold, casting doubts on the future of one of the president's biggest financial bets, according to industry executives.
The Trump Organization hired Jones Lang LaSalle to shop the hotel to potential buyers last fall hoping for a price of about $500 million. People familiar with the deal talks said none of the bids came close to the asking price, and several were for less than $250 million. Jones Lang LaSalle confirmed to CNBC that efforts to sell the hotel are on "indefinite hold."
The hotel, which became the glittering social hub of President Donald Trump's Washington and a crown jewel of Trump's business empire, now faces the added pressures of the coronavirus pandemic and the president's post-election future.
Faced with a $100 million loan from Deutsche Bank on the property and continued losses, the Trump Organization may end up either having to subsidize the business for years to come, or default on the loan and hand back the property, according to industry executives.
"At this point, they could either just turn over the keys, or keep it and make it part of whatever media company the President decides to create," said Brian Friedman of Friedman Capital, which bid on the hotel and owns several hotels and properties in the DC area. "I just don't think they're going to get the price they expected."
The Trump Organization didn't respond to requests for comment.
Gathering spot for GOP
The Trump International Hotel in DC celebrated its grand opening in October, 2016, right before the election, and quickly became the favorite gathering spot for companies, politicians and lobbyists eager to build relations with the new White House. The property took in $40.5 million in revenues in 2019, the latest period available, according to disclosures filed to the the Office of Government Ethics.
According to election filings, campaign committees tied to the president or the the GOP spent about $3 million at the hotel since Trump became president. With business strong, the Trump Organization started shopping around the hotel to potential buyers last October.
After the widespread lockdowns and travel restrictions in March, the sales efforts were halted. Even longtime longtime pillars of the Washington hotel business, like the St. Regis and The Hay-Adams, continue to struggle to fill rooms and amidst the drop in travel and tourism.
But even when the economy recovers, hotel investors and owners say the Trump hotel is burdened by two conditions that make any sale unlikely. The Trump Organization doesn't own the property, known as the Old Post Office Pavilion, but leases it from the General Services Administration.
Under the the lease terms, The Trump Organization is required to pay $3 million a year over 60 years, with the annual rent escalating with inflation. The company also invested $200 million to renovate the property, with about $100 million of that loaned by Deutsche Bank, according to filings.
Trump admits to overpaying for the property
Hotel owners say the $3 million-a-year lease — far above competing bids when Trump won the rights in 2011 — makes it difficult for any future owner to make a profit. Trump admitted to overpaying for the property, telling the Washington Post in 2012: "I mean, we are paying too much for the Old Post Office. But we will make that so amazing that at some point in the future it'll be very nice."
Hotel executives and advisors say that given the lease terms, any bid to purchase the hotel today would have to be around $150 million to $175 million -- less than the Trump Org.'s $200 million investment. That leaves the Trump Organization with the options to sell the property at a loss, default on the Deutsche Bank loan and turn over the keys, or try to keep the property and eventually turn a profit.
Bidders say the Trump Organization also required any buyer to keep 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 spokesperson said that "the tenant has remained in full compliance with the lease."
"hotel" - Google News
November 20, 2020 at 03:21AM
https://ift.tt/35JCYGE
Trump International Hotel Washington DC sale put on indefinite hold - CNBC
"hotel" - Google News
https://ift.tt/3aTFdGH
https://ift.tt/2xwvOre
Bagikan Berita Ini
0 Response to "Trump International Hotel Washington DC sale put on indefinite hold - CNBC"
Post a Comment