Trump’s Sale of D.C. Hotel Proved Prescient as New Owner Defaults on Loan

As Donald Trump’s real-estate empire comes under pressure from a $355 million civil-fraud verdict, one of its most recent sales looks particularly well timed.

The Trump International Hotel in Washington, D.C., was a favorite Republican meeting spot during the Trump presidency, attracting lobbyists, lawmakers and others with business before the administration. After the Trumps faced criticism that they were flouting government-ethics laws by profiting from the property, they put up for sale the long-term lease rights for the hotel in the former Old Post Office.

In 2022, the Trumps sold those rights to Miami-based investor CGI Merchant Group for $375 million—a price that was tens of millions of dollars more than the other offers, according to people familiar with the matter. CGI rebranded the hotel as a Waldorf Astoria.

This month, the new owner defaulted on a $285 million loan related to the property, according to people familiar with the matter. The missed payments on that loan reflect higher interest rates and the above-market price the firm paid the Trumps, industry executives say.

In an interview, CGI Chief Executive Raoul Thomas said he is lining up $100 million of new financing for the property.

Mavik Capital Management, a real-estate debt and investment fund, is in talks to provide $75 million to cure the default and restructure the troubled balance sheet, while also providing money for a private club and another restaurant at the hotel, according to a person familiar with the matter.

But reaching a final deal might not be easy. Hilton, which manages the Washington, D.C., property, has been talking to other firms about new capital and would have to approve any new partner, say people close to the matter.

Many of the Trumps’ real-estate holdings, golf resorts and licensing deals have been under pressure during this period of commercial-property-market turmoil. But the sale of the hotel rights when rates were starting to climb and at a rich price is shaping up as one of the family’s shrewder—or more fortuitous—recent transactions at a time when its finances are in the spotlight.

A Manhattan judge ordered Trump and his business to pay $355 million, and he could be on the hook for nearly $100 million more in interest. Those penalties compound the financial burden on Trump, who separately faces a recent $83.3 million judgment stemming from a defamation lawsuit filed by writer E. Jean Carroll.

How much the Trumps profited from the sale of the hotel’s long-term lease couldn’t be determined, but it is likely at least tens of millions of dollars, say people familiar with the matter. The true worth of the hotel has been a subject of debate in the hospitality industry and in some Washington political circles.

The Trumps never actually owned the Washington property, a short walk down Pennsylvania Avenue from the White House, but leased it from the federal government. With extensions, the lease runs close to 100 years.

In 2012, the Trumps beat out some of the most-experienced names in the lodging business for the rights to the lease. The family’s pledge to spend about $200 million renovating and converting the 19th century post office into a modern luxury hotel was the highest offer, say people familiar with the matter.

While the Trump brand was a magnet for the GOP and many White House visitors, the affiliation discouraged other business, hotel analysts say, including from various trade organizations and other groups that didn’t want the association with the president.

Eric Trump, executive vice president of the family company, told The Wall Street Journal in 2019 that scrutiny of the hotel’s profits was one reason the family firm put the lease rights up for sale. “People are objecting to us making so much money on the hotel, and therefore we may be willing to sell,” he said at the time.

The Waldorf Astoria is the marquee property for CGI. It has joined with former baseball superstar Alex Rodriguez on its hotel investments, which have been mostly in Florida.

“This acquisition marks a major milestone for CGI,” Thomas said in 2022. “We are thrilled to partner with our friends at Hilton to bring the Waldorf Astoria brand to an iconic landmark in the nation’s capital.”

MSD Partners, a group whose investors include Dell Computer founder Michael S. Dell, is the main lender to CGI and has the defaulted loan. MSD must also approve any new creditors or other partners.

Write to Craig Karmin at [email protected]