What’s Next for the Trump International Hotel in D.C.?
President Trump ended his four-year term and subsequently left the White House on Wednesday January 20, 2021. What remains in Washington, besides his legacy, is one of his many real estate assets – the Trump International Hotel Washington DC. The 263-room hotel opened its doors to the public in October 2016 and, just three years after its grand opening, the long-term lease was listed for sale by the Trump Organization. Why?
There are several factors to consider when assessing this unique property’s struggle to stay afloat in the D.C. hotel market. In one of Delta Associates’ previous posts, we pointed out that Washington’s hotel market has been struggling since before the pandemic’s effect on the economy. We also mentioned that, as of July 2020, the Trump International Hotel had about 5% occupancy with 95% of its staff not working.
The Trump Organization cannot find a buyer that will match its steep asking price of $500 million – an average of approximately $2 million per room. CNBC reports that none of the received bids came close to the asking price, with several reported to be less than $250 million.
Trump admitted to overpaying for the leasing rights of the property, which is known as the Old Post Office Pavilion and owned by the General Services Administration. In a 2012 interview with The Washington Post, Trump said “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.”
According to CNBC, the Trump Organization’s initial $200 million investment is above the estimated $150 million to $175 million that would make any bid to own the hotel’s leasing rights feasible. Under 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 Washington Business Journal reported that the Trump International Hotel Washington DC was ranked No. 28 in U.S. News and World Report’s best hotels in the U.S. in 2021, which includes only luxury hotels. The ranking is down two spots from 2020.
Whomever inherits the property will be required to keep the Trump name on the hotel. While this is good for the Trump brand it could be problematic for any potential bidder. After becoming the first president in U.S. history to be impeached twice in addition to being a polarizing figure, there is certainly some controversy associated with the name.
The property’s enlisted broker, JLL, announced last November that the sale offering was placed on an indefinite hold. After the U.S. Capitol riot in early January 2021, it was reported by Washington Post reporter Jonathan O’Connell on Twitter that JLL “is not going to be involved in selling that hotel” due to the president’s involvement in a rally prior to the attack.
The future of the hotel remains uncertain for now. The Trump Organization continues to make payments as per the lease agreement and a spokesperson from the GSA says that “the tenant has remained in full compliance with the lease.”
Sources:
https://www.washingtonpost.com/business/2020/03/31/trump-dc-hotel-sale/
https://skift.com/2021/01/08/trump-organizations-brokers-ditch-d-c-hotel-sale/
https://twitter.com/jocwapo/status/1347570371961233411
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