After encouraging a MAGA horde to march on the U.S. Capitol, could Donald Trump now be the target of an insurrection at his own Chicago hotel?
If the downtown hotel hasn't suffered enough from the coronavirus, it's now facing some damage of the self-inflicted variety. The Trump brand, already polarizing during the Trump presidency, has become downright toxic as his tenure in Washington comes to an end—a corporate pariah due to the president's role in fomenting the Jan. 6 attack.
The downtown hotel market will recover eventually after the pandemic ends, but Trump's hotel could face a bleak future as long as that big TRUMP sign hangs over the Chicago River. That's a problem for the investors who own 160 or so of the 339 hotel rooms in the Trump International Hotel & Tower, a 92-story skyscraper at 401 N. Wabash Ave.
The investment has turned out badly for many of them: The hotel's profits were plunging even before the pandemic, according to Trump tax appeal filings, and some investors who bought the rooms when the hotel opened in 2008 are racking up huge losses in the resale market.
The fallout from the riots, including the impeachment of the president, will only compound the hotel's problems, which could put pressure on Trump to put it up for sale. After all, the Trump Organization, the president's family business, put its Washington hotel on the market last year. It makes sense to consider the same thing here, say brokers and hotel experts.
"This might be the straw that broke the camel's back and pushed his brand to a certain low that you can't recover from," says Phil Skowron, a broker at @properties who has sold many residential condos and hotel units in the building. "And it might just force his hand to sell."
The New York-based Trump Organization, currently run by Trump's sons Don Jr. and Eric, did not respond to requests for comment.
Complicating matters is the hotel's unusual ownership structure. Trump developed it as a condo-hotel, selling off hotel rooms or suites individually to small investors. Many urban hotel developers in the early 2000s borrowed the condo-hotel concept from resorts, but the trend quickly fizzled around the crash of 2008.
Unable to sell all of his Chicago hotel units in a depressed market, Trump retained ownership of about 175. He sold the last of the 486 residential condos on the upper floors in 2014, the same year he put up the massive TRUMP sign on the tower's south facade.
The Trump Organization runs the hotel on behalf of a condo board elected by hotel unit owners. It manages the residential part of the building for a different condo board.
One big question is how much power the two boards have to enact big changes, whether that would mean renaming the building or selling the hotel. Brokers who have sold units in the tower say they have very little because Trump holds most of the cards.
Trump owns a majority of the hotel units, meaning he controls the hotel condo board. The board's president, a businessman from Green Bay, Wis., named Edward Martin, is a major Trump political supporter, donating $80,000 to the Trump Victory fundraising committee in 2020, according to Federal Election Commission records.
Martin did not return phone calls, nor did Neal Shact, president of the residential board. The Trump name has also depressed values of residential condos in the building, offsetting a location, views and amenities that should command a premium, according to brokers.
"Every time there's a big headline, the phones stop ringing," Skowron says.
But the hotel owners are suffering more. Occupancies and room rates have fallen so much since the pandemic began that many are suffering big operating losses. The hotel's troubles predate COVID-19: Its revenue fell to $51.7 million in 2017, down 29 percent from 2015, and its net operating income fell to $5.6 million, a 68 percent drop, according to documents the Trump Organization's legal team filed with the Cook County assessor's office, part of a 2018 appeal for a reduction in the hotel's assessment.
Prices for Trump hotel units, already low before the pandemic, have fallen even more in the past year. Five hotel condos in the building have sold for $120,000 to $133,000 in the last six months, resulting in big losses for the investors that sold them, according to the multiple listing service. Two sellers paid more than $700,000 for their units in 2008, according to county property records. One paid $285,000 in May 2017.
"They've been difficult to sell in the last four years, and they've gotten more difficult to sell," says Tricia Fox, an @properties broker who recently sold a 22nd-floor unit for $129,000, down from an original asking price of $189,000. "The only ones that are selling right now are selling at a significant discount."
The Chicago high-rise has been a source of multiple headaches for the Trump Organization. In 2008, Trump battled in court with the project's lead lender, Deutsche Bank, over a past-due $640 million construction loan. Trump and the bank made up, but New York's attorney general is investigating whether Trump reported as taxable income about $100 million of forgiven debt from another lender on the project.
Trump also has struggled to fill the commercial space at the bottom of the building, which has sat mostly vacant since he completed construction. Federal financial disclosure filings show Trump also is still carrying $25 million to $50 million in debt on the property owed to Deutsche Bank, which recently joined the growing list of companies that have decided to stop doing business with him.
Trump's recent troubles could embolden hotel and residential owners in the high-rise to agitate for change, hoping to persuade him to sell his interest in the building. Or Trump and his family could come to that conclusion on their own, as they did in Washington.
One option would be to retain his stake but rename the building and bring in a new operator to run the hotel. Trump could wait for the market to recover and for the hotel to establish a profitable track record under a new brand. Then he could sell, allowing himself to maximize the value of his investment.
But public perception would be a big factor in any big decision to sell or not. He'd need to come off as a winner, one reason hotelier Robert Habeeb thinks there's a "slim chance" he would sell.
"His hubris alone would prevent him from selling any marquee assets that would be interpreted as a defeat for him," says Habeeb, founder and CEO of Chicago-based Maverick Hotels & Restaurants.
Danny Ecker contributed.
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January 16, 2021 at 04:13AM
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Trump's Chicago hotel faces challenges in post-presidential era - Crain's Chicago Business
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