The former president sold his Washington, D.C. hotel in 2022 for $127 million. To make the deal happen, he had to loan the buyer a huge amount of money that he may never get back.
Zach Everson, Forbes Staff
Updated: Sept. 10, 2024 at 4:30 p.m. This article has been updated to include additional details about Trump’s loan to CGI and the lawsuit against the company.
In a stroke of genius or incredible luck, Donald Trump sold his money-losing Washington, DC hotel in 2022, ultimately netting a whopping $127 million. But what few people know is that Trump had to provide a loan to get the deal done, so when the lease’s new owner ran into financial difficulties, Trump suffered a blow, too.
Trump’s connection to the Old Washington Post Office dates back to 2012, when he won a competitive bid to transform Washington’s historic, dilapidated Old Post Office into a 263-room luxury hotel. The building, just a few blocks from the White House on Pennsylvania Avenue, will remain owned by the U.S. government. But Trump has pledged to spend $200 million to renovate the 1899 Romanesque building and pay at least $250,000 in rent per month for another 60 years.
In winning the contract, Trump beat out a consortium that included Hilton Worldwide, which planned to develop the building as a Waldorf Astoria hotel. The group protested Trump’s win to the General Services Administration, which oversaw the bidding process. Along with submitting dozens of pages of newspaper clippings highlighting Trump’s history of defaulting on loans, failing to complete projects and filing hotel bankruptcies, Hilton and its partners argued that Trump’s bid was entirely unfinanced. “Trump’s proposed minimum base lease would require Trump to earn hotel room revenues that, based on the redevelopment concept, this site simply cannot provide,” the protest said. “Instead, the General Services Administration improperly scored Trump’s proposal and hastily selected the highest ground rents without a sound economic and business foundation.” The General Services Administration dismissed the protest on procedural grounds, with a contracting officer writing that Trump’s revenue estimates were “by no means unreasonable,” The Washington Post reported at the time.
In October 2016, two weeks before Trump won the presidential election, the stately Trump International Hotel in Washington, DC, celebrated its grand opening. The hotel quickly became the center of power in the Trump swamp. In the year after Trump’s election, Republican political committees made at least 171 payments to the hotel, funneling $482,000 into the party leader’s pockets. By the end of the Trump administration, at least 29 of Trump’s 38 cabinet members, senior government officials from 33 countries, and 36 senators (35 Republicans plus Joe Manchin) were seen staying at the hotel.
But all that customer acquisition didn’t bring in enough revenue to make up for Trump’s bad business plan, which the Hilton Consortium warned about years ago. In 2017, the hotel brought in $52 million in revenue, $35 million less than the Trump Organization predicted. Things didn’t get better. Revenue was roughly flat the previous two years, at $53 million in 2018 and $52 million in 2019, about half what the Trump Organization predicted, according to an analysis of Trump’s financial disclosures. Then the coronavirus pandemic hit, and revenues fell by more than 60%, to about $20 million.
Trump first put the money-losing hotel up for sale in 2019 for $500 million, according to CNBC. But after no bids came close to that price, with several even going below $250 million, the sale was put on hold the following year.
In 2021, after leaving office, Trump tried again, this time finding a buyer willing to pay more than $370 million. Brian Friedman, a Washington real estate developer who had previously offered $175 million for the hotel, was shocked to hear the news. “Oh my goodness,” he said. “I can’t believe it, but it’s amazing. Maybe there’s some stupid group in South America or Florida, or seller financing or something, or a side letter that we’ll never know about because the property is in the red.”
Friedman was right on both counts: The buyer, CGI Merchant Group, was based in Miami, and a financial disclosure statement filed by Trump in October 2023 showed that he had loaned the company $28 million.
But CGI funded most of the $375 million it ultimately paid with a $285 million loan from BDT & MSD Partners, a merchant bank with ties to Michael Dell and co-owned by investment banking billionaire Byron Trott. CGI also assumed Trump’s original lease with the GSA. The new leaseholder partnered with Hilton Worldwide, which had lost out to Trump in the original bid, to operate the hotel as a Waldorf Astoria.
Meanwhile, according to evidence in the New York Attorney General’s civil fraud case, Trump walked away with a $127 million payment from the struggling hotel. But there was one problem: CGI didn’t have the funds to pay the transfer and mortgage taxes. Trump agreed to loan the company $28 million to cover those costs, according to court records. CGI promised to repay $13 million plus interest in November 2022. The deadline for repaying the remaining balance depends on other factors.
Despite the new ownership, not much changed immediately after the Trump Hotel closed and relaunched as the Waldorf Astoria a month later in June 2022. Aside from differences in branding (goodbye, Ivanka Trump Spa) and menu, the hotel looked, felt and smelled much the same as before. Even the staff was familiar: About 95% were holdovers from the Trump era, according to Seni Geray, the Waldorf Astoria general manager who came back from early retirement to run the hotel.
But one notable change has been the influx of new clientele who had never set foot in a Trump hotel: Nancy Pelosi’s campaign, the Congressional Black Caucus political action committee, Kamala Harris’ fundraising committee, Planned Parenthood and Politico have all held events at the newly christened Waldorf.
Apparently, these modifications were not enough to make up for the poor financial condition of the lease that CGI inherited from the Trump Organization. Trump claims that the first part of CGI’s loan to Trump was due in November 2022, six months after the Waldorf Astoria reopened, but CGI was unable to make the payment. The parties renegotiated the loan, and CGI was given a little more time. According to the lawsuit filed in June, the loan had to be amended two more times because CGI had missed additional payments, at which point CJI had only paid Trump $100,000. As Pincasco reported at the time, Trump is seeking $31.5 million.
According to sources familiar with the proceedings, CGI first defaulted on a principal loan payment in July 2023. In May 2024, lead lender BDT&MSD initiated foreclosure proceedings. The lenders gave CGI an additional 45 days to raise funds. Failing that, BDT&MSD offered to postpone foreclosure for another 45 days if CGI could pay a small portion of the accrued interest by providing cash or a letter of credit that would enable it to do so.
Nothing came of it, so on August 5, the hotel was put up for auction. When the bid went through, BDT & MSD owned it for $100 million. There were no other bidders, according to Paul Cooper of Alex Cooper Auctions, who oversaw the foreclosure auction. Cooper called CGI’s original purchase “beyond ridiculous,” adding, “No sane person would make such an investment.”
As for the $28 million in debt CGI owed Trump, it was written off. Trump had no mortgage and the debt was subordinated to BDT and MSD. “It’s gone,” Cooper said of the IOU.
The next hearing in Trump’s civil lawsuit against CGI is scheduled for later this month. Representatives for CGI and the Trump Organization did not respond to inquiries.
Despite now owning a failed lease that no one bid on, BDT & MSD remains optimistic. “We remain committed to our partnership with Hilton and are confident in the future of the asset,” said Sarah Evans, a partner and spokeswoman for the firm. Meanwhile, a Hilton spokeswoman said “the hotel continues to perform well,” but declined to say whether the firm stood by its previous statement that the lease “presents an unrealistic economic model and represents another failed attempt at the Old Post Office.”
Dan Alexander contributed reporting.
From Forbes