Last fall, the Trump organization dropped an October surprise: It was thinking of selling its luxury DC hotel, a towering, granite symbol of Trump’s takeover of official Washington—and of his unprecedented, for-profit presidency. The timing was notable. It was nearly three years to the day that the Trumps used golden scissors to snip the ribbon on the just-renovated property, housed in a historic, Romanesque Revival–style federal building that had served as DC’s main post office until World War 1. By contract with its landlord, the General Services Administration, this anniversary was the first chance the Trumps had to offload their lease. The proposed price tag: $500 million, one of the highest amounts per room that any hotel has ever commanded.
But why put the hotel on the block now? “People are objecting to us making so much money on the hotel, and therefore we may be willing to sell,” the president’s son Eric told the Wall Street Journal, which broke the story. The hotel had become known as one of Trump’s most brazen conflicts of interest. Yet Eric’s rationale didn’t add up. By his logic, the Trump Organization hoped to halt ethical questions over the hotel by creating a gigantic new conflict of interest, since the motives of any potential buyer would be in question.
A glossy sales brochure that CNN obtained put forth another reason: The hotel wasn’t earning its full potential. As if anticipating questions about why the hotel wasn’t raking in more, the sales pitch claimed the Trumps had lost out on $9 million in revenue in 2019 by not seeking business from foreign governments. (Trump pledged to donate profits from foreign government business to the Treasury when, in 2017, he refused to fully relinquish control of his business empire.) “Tremendous upside potential exists for a new owner to fully capitalize on government related business,” the brochure stated. It wasn’t just here that revenues were lackluster. They were coming up short at a number of Trump businesses—even before the pandemic hit.
November’s election is a definitive moment, not just for Trump’s White House residency but also for his Old Post Office tenancy. If he loses, his prized hotel could easily revert to what it was before his 2016 win—discounted and empty. The sycophants, the Levs and Igors, the One America News Network propagandists, the Nigerian politicians, the America First Action fundraisers, the bankers jetting in from Oklahoma, and the White House staffers and administration alums will be gone. As will the Trump-appointed lackeys at the GSA currently overseeing his lease and approval of its possible sale.
Oh, and Joe Biden will be Trump’s new landlord.
At the hotel’s grand opening on October 26, 2016, less than two weeks before Election Day, Trump boasted that his project was “under budget and ahead of schedule.” Neither claim was quite true, according to a person familiar with the project, but the more dubious assertions were buried in the business plan, which industry experts considered about as realistic as expecting Mexico to underwrite a border wall. Trump’s Old Post Office bid was part of a nine-year stretch, between 2006 and 2014, in which his company spent bigly, often with cash, to acquire 18 properties. When the GSA solicited bids for the property in 2011, Trump offered the agency a higher rent payment than any of his rivals, according to one of those competitors. And his company pledged $200 million to renovate the Old Post Office, $170 million of which was lent by the good folks at Deutsche Bank. That loan and five others—totaling about $479 million—come due over the next four years, creating a possible financial squeeze for the Trump Organization and a whole new ethical morass. Trump committed to pay the GSA $250,000 a month over a 60-year lease, with possible rent increases pegged to the Consumer Price Index. And if undisclosed revenue thresholds were met, the GSA would receive additional payments from Trump, starting at 3 percent of the profits for the first 10 years of the lease and increasing by 0.5 percentage points for five decades thereafter.
The GSA has said the projected room rate for all bidders on the project averaged $626 a night. But to recoup its massive investment, the Trump Organization needed to charge at least $750 a night on average, industry experts calculated, according to the Washington Post. (Ivanka Trump—who, like brothers Don Jr. and Eric, holds a 7.4 percent stake in the project—has disputed that estimate, but she would not share her projections. The Trump Organization did not respond on the record to questions from Mother Jones.)
In its 2012 appeal of the GSA’s decision to go with Trump’s bid, BP-Metropolitan Investors, a rival consortium that included Hilton Worldwide, took both the agency and the Trump Org to task, saying the project couldn’t succeed because the lease payments were too high:
[The] minimum base lease proposed by Trump would require Trump to obtain hotel room revenues which are simply not obtainable in this location based on the concepts for the redevelopment…GSA, instead, improperly scored the Trump proposal and hastily elected to choose the highest ground rent absent a sound economic and business foundation.
The following year, the GSA and Trump, a six-time veteran of hotel bankruptcy proceedings, signed the lease to redevelop the Old Post Office into a luxury hotel.
When the hotel opened three years later, BP-Metropolitan Investors’ prediction that it would be a money pit seemed spot-on. The hotel’s rates during its opening weeks were about $625 a night—$280 more than what other downtown DC luxury hotels were charging, per STR, a data hospitality benchmarking firm. And with that premium, guests were being asked to associate with the brand of a racist, sexist, almost-certain loser. “Trump hotel not worth the trouble for wedding planners, travel agents” a CNN headline declared. Analyses by NBC News and New York magazine found plummeting prices and available rooms on dates when other DC luxury hotels, including the historic Hay-Adams, were sold out or charging higher rates. By the week before the election, room rates at Trump’s new hotel had dropped to $400, Emily Jane Fox reported in Vanity Fair. In her feature on the newly opened hotel, she used the word “empty” six times.
Then its owner became president.
This lesson probably isn’t taught in business school, but it turns out that being elected leader of the free world can buttress even the iffiest business plans. At least for a while.
After Trump’s election, the hotel jacked up its already lofty drink prices (the cheapest cocktail hit $24) and room rates surged back to among the highest in the city. (Mar-a-Lago also capitalized on Trump’s victory, doubling its initiation fee to $200,000.) In a pre-inauguration press conference, Trump made it clear that his word was the only guarantee that he’d wall himself off from his business interests. Further, a revision to his trust documents allowed him to withdraw money at any time from his companies.
The hotel and Trump political entities quickly tag-teamed to establish the business as the social hub of the new president’s realm. Trump’s inaugural committee dished out more than $1 million to the hotel for four days of event-space rentals, an expenditure so grand that after it came to light, the DC attorney general sued the group, alleging it “improperly wasted” nonprofit funds by “grossly overpaying” the hotel. (The case is ongoing.) Undeterred by the troubling optics, top officials, including Cabinet members Steve Mnuchin and Linda McMahon, moved in, briefly making the hotel their weekday residences. Meanwhile, prior to Inauguration Day, the hotel hosted a reception for about 100 foreign diplomats, the Washington Post reported, luring business from overseas governments. The event came before Trump said he would forgo profits from foreign government officials, but the hotel employed a “director of transient and diplomatic sales” until 2018. (The Trump Organization has annually paid over its foreign-government profits to the Treasury, but those figures are unaudited and based on overseas officials self-reporting their visits.)
The Trump Organization had initially projected that its new hotel would lose $2.1 million in the first four months of 2017, per confidential documents the GSA accidentally posted online.
Instead, the company turned a $1.97 million profit.
By Trump’s inauguration, the hotel was firmly entrenched as both a Republican hangout and a way to curry favor with the new president and funnel money into his pocket. Allow Rudy Giuliani’s now-indicted associate and eventual hotel fixture Lev Parnas to explain: “It was like a breeding ground at the Trump Hotel,” he told Rachel Maddow earlier this year. “Every event would be there, so everybody would hang out there afterwards. All the meetings would be there. So it’s basically you would see the same people every day, all the same congressmen that supported the president would be there.”
The hotel became as central to the plotlines of the Trump presidency as the red room was in Twin Peaks. Convening with Parnas and fellow Soviet-born American businessman Igor Fruman, Trump’s attorney Rudy Giuliani discussed his effort to create Ukrainian dirt on Joe Biden, a scheme that was connected to Trump’s impeachment. White nationalists Richard Spencer and Evan McLaren were seen at the lobby’s Benjamin Bar around the time they were plotting the Unite the Right rally in Charlottesville—about which Trump infamously declared there were “very fine people on both sides.” In 2017, the hotel hosted a conference aiming to improve US-Turkish business relations, organized by a group whose chair’s company once paid retired Lt. General Michael Flynn more than a half-million for pro-Turkey lobbying that Flynn failed to disclose.
If Trump loses the election, his prized hotel could easily revert to what it was before his 2016 win—discounted and empty.
And it became a regular Instagram backdrop for Beltway Republicans. Most mornings, photos from the hotel would pop up on the social media accounts of junior Hill staffers, lobbyists, and Trump stans “just hangin’ out” with the likes of Giuliani, Kellyanne Conway, and Anthony Scaramucci (for an 11-day stretch anyway). Finding a daily stream of conflicts of interest, I soon made covering the business my full-time beat, launching the 1100 Pennsylvania newsletter in 2018. By scouring social media and camping out in the airy lobby, I’ve published 340 issues documenting Trump’s transactional presidency.
Representatives of at least 31 foreign governments have popped up at the hotel, as have numerous foreign candidates for office and political operatives. To prove he was permitted to enter the United States after being implicated in the 2009 bribery conviction of then-Rep. William Jefferson (D-La.), Atiku Abubakar, the main opposition candidate in Nigeria’s 2019 presidential election, stayed at the hotel where he livestreamed a town hall. “You said I cannot step my foot on American soil. Here I am, not only in America, but in the hotel belonging to the president, Donald Trump,” Abubakar reportedly said later. Nigerian Vice President Yemi Osinbajo later gave Voice of America an interview from a comfy couch in one of the hotel’s signature suites. The business has also hosted parties for various embassies, including those of Bahrain, Kuwait, and the Philippines.
“If he loses, that hotel goes in the tank. They’ll be broke and we’ll be repossessing it.”
Along with foreign dignitaries and true DC power brokers, the hotel has enjoyed a steady flow of business from lesser swamp things, such as the Fourth of July 2019 gathering of QAnon disciples that included an appearance from the disheveled, fedora-wearing fellow who some Q acolytes believe is JFK Jr. (who staged his death in 1999 to avoid the deep state, natch). In 2018, a self-proclaimed prophet fighting off Trump’s political foes by speaking in tongues convened a three-day conference at the hotel to “focus on real-time prophetic revelation with governmental authority,” whatever that means.
Trump’s revenue (he doesn’t report profit) from the hotel in the first three years of his term topped $121 million. White House staffer (and hotel spa namesake) Ivanka Trump’s take has been more than $11.7 million.
That influx of cash came while many other Trump properties appeared to struggle. Hotels in Toronto and Panama and six buildings in New York that had marketing deals with the Trump Org cut ties; at Trump’s resort in Doral, Florida, income plunged by 69 percent over two years while profits dropped even more dramatically at Trump’s Chicago hotel and tower. His golf clubs in Scotland, meanwhile, have hemorrhaged millions (as another story from this issue details).
The Trump Organization is a private and notoriously secretive company. But as part of its lease with the GSA, the company is required to provide the government with the hotel’s monthly financial statements. At first, the agency shared redacted versions of those documents on its website. But that transparency stopped the month after the tenant became the president (and effectively the landlord). And despite being asked numerous times since, the GSA’s Trump-appointed leadership has refused to provide lawmakers with the hotel’s unredacted financial information unless they pledge not to make it public—even defying a congressional subpoena. The GSA’s public buildings commissioner, Daniel Mathews, however, provided a clue to the hotel’s finances when he testified that the Trump Organization did not pay the agency any funds beyond its base rent in 2018. That meant business wasn’t booming—its gross revenues were below the threshold that would have given taxpayers a cut of the profits. Supposedly. As Mathews also explained, neither the agency nor an independent party audits the hotel’s financial statements. Instead, the US government just takes the Trump Organization at its word, which has not worked out well for many other Trump business partners.
But, anecdotally anyway, it appears that—notwithstanding a surge in the wedding business from Trump administration staffers—the DC hotel is struggling like its counterparts elsewhere. After the initial rush, the only embassy known to have returned to party at the Trump Hotel was Kuwait’s, and even that three-time customer decided not to make it a four-peat in 2020. After hosting two consecutive conferences at the Trump hotel in DC, the Turkish American business confab decamped to the Ritz-Carlton. The Independent Petroleum Association of America, the Institute of International Bankers, and the climate-change-denying Heartland Institute were one-and-done customers. (This summer, Trump twice delayed filing his 2019 personal financial disclosure, temporarily preventing the public from getting a clearer picture of his company’s financial health.)
If you get them in private, some members of Trumpworld’s lesser castes complain about the hotel’s pricy drinks and slow service. They still frequent the business, but it’s more of an obligation than a choice. Some now pregame at a nearby dive bar, called Harry’s, to avoid dropping big bucks at the Benjamin Bar.
And that brings us to October 25, 2019—the day before the third anniversary of the hotel’s grand opening—when the Trump Organization’s contract with the GSA allowed the company to sell the lease and the news broke that the Trumps were planning on doing just that. Despite the eye-popping, half-billion-dollar price tag, there was some initial interest. Entrepreneur Sheila Johnson, the co-founder of BET and the owner of a handful of resorts, confirmed she had her eye on the property. DC developer Brian Friedman thought about making a serious play but decided against it after getting a closer look at the hotel’s financials. “I was really considering bidding heavily, but then another opportunity came up,” he said. “The asset is not performing to where I need to bid. I’m not sure the economics make sense…As I look under the hood, it’s not good news.”
Then COVID-19 hit and the sale of the lease was put on hold. While DC deemed hotels essential businesses exempt from closing, Trump’s was obliged to shutter its bars, steakhouse, conference facilities, and spa, reopening them in stages. As with the rest of the hospitality industry, the pandemic pummeled the Trump Organization, which laid off or furloughed 2,800 employees, including 237 staffers at the DC hotel. The pandemic also created more conflicts. At one point, Trump’s company reached out to the GSA to inquire about getting a break on the hotel’s rent, the New York Times reported. (In May, the GSA said it had not granted any relief because it had not received a formal request from the Trump Organization; the agency declined to respond to questions.) Notable sightings during the lockdown dwindled to Rep. Clay Higgins (R-La.), in town to protest COVID-19-related closures; supporters of Tiger King’s Joe Exotic, who were seeking a presidential pardon for the imprisoned iconoclast; and a sex worker who Instagrammed a video of herself popping a bottle of champagne on a bed in one of the hotel’s guest rooms. Caption: “Life is so good.”
While much is unique about the president operating a guest lodge down the block from the White House, the arc of Trump’s stewardship of the Old Post Office is largely a replay of his washout with New York’s Plaza Hotel: a highly leveraged acquisition, with a shaky business foundation, that ended up on the market a few years after it opened to great fanfare.
In 1988, after outmaneuvering competitors and assuming millions in debt, Trump secured possession of the iconic landmark positioned on one of America’s most prominent corners. Business bustled early on, with Trump’s connections, real and aspiring, helping fuel a busy events business and lofty room rates.
But the financials underlying Trump’s hefty vanity purchase didn’t work. By 1992 the Plaza Hotel was available for a steal.
As for what happened next—and what it may tell us about the future of Trump’s DC hotel—the Plaza filed for bankruptcy. Valued at just 64 percent of what Trump had paid for it, the celebrated hotel ended up in the hands of creditors. They in turn sold it to two business partners: a billionaire entrepreneur from Singapore and a billionaire prince from Saudi Arabia. “[Trump’s] the only owner to ever bankrupt the hotel in its 112-year history,” said journalist Julie Satow, author of The Plaza: The Secret Life of America’s Most Famous Hotel. “And that includes someone who ran the hotel when he was in a prison cell in New Delhi.”
Yes, that backstory, as well as Trump’s five other hotel bankruptcies, had been well reported by the time the Obama-era GSA awarded him possession of the government-owned landmark. And if the agency hadn’t been aware of that history, BP-Metropolitan Investors pointed it out in its appeal of the decision:
Either GSA failed to properly assess the hundreds of publicly accessible records regarding Trump entity bankruptcy and loan defaults related to real estate development projects that Trump had a duty to disclose; or alternatively Trump’s proposal failed to fully disclose these bankruptcies and loan defaults, and hence did not comply with the RFP.
For good measure, the consortium provided the GSA “media and public records regarding Trump bankruptcy, loan defaults, project terminations, and litigation.” The dossier ran 76 pages.
Reelection puts every president’s legacy on the line. But for Trump the financial stakes are almost as great.
“If he loses, that hotel goes in the tank,” Rep. Peter DeFazio (D-Ore.) said in January. DeFazio chairs the House Committee on Transportation and Infrastructure, which has oversight of the lease. “They’ll be broke and we’ll be repossessing it,” he said. While the true believers may still congregate at the temple of their “god-emperor,” foreign leaders, lobbyists, GOP lawmakers, industry groups, trade war casualties, the newly unemployed, and onetime Trump supporters who lost loved ones to COVID-19 don’t seem likely to return.
Further, a Biden-helmed GSA’s loyalty would likely be to taxpayers rather than the Trump family. And the agency will have approval over successor tenants, so the vetting process could be far stricter than one undertaken by Trump officials. A de-Trumped GSA might also provide the oversight that Trump’s appointees have failed to do—even retroactively.
“I just hope if there is a Biden administration, it doesn’t adopt the ‘Let’s look forward, not back’ mistake that the Obama administration made with regard to torture,” says Kathleen Clark, a law professor at Washington University’s law school, who specializes in government ethics. One possibility Clark envisions: an independent audit of the hotel’s books from the past four years to see if it did in fact meet the revenue thresholds that would have triggered the profit-sharing clause in its contract.
In August, Trump told the New York Post he’d had second thoughts about putting the hotel on the market. (So much for his pre-inauguration pledge that he would divorce himself from the operations of his business!) “I like it. It does well,” he told the paper. The agent marketing the property declined to comment on Trump’s claim that his company was no longer seeking to sell the property.
If Trump is reelected and does decide to hang onto the hotel, there’s no reason to think the next four years would be much different than the first four. In fact, he wouldn’t even need to pay lip service to ethics obligations. And if his company resumes its search for a buyer for the lease, any bid “other than a bargain-basement or fire-sale-level offer…at this point, must be viewed skeptically and assumed to be driven by something other than bargain forces,” says Steven Schooner, a professor of government procurement law at George Washington University Law School. “Or in other words, a bribe, gift, or something other than what it appears.”
For now, Donald Trump and his family are continuing to cash in. After months of depressed business due to the pandemic, the hotel was buzzing with activity once more during the Republican National Convention this week. “This is sort of like a convention extension,” Rudy Giuliani told the Wall Street Journal. Trump himself was expected to attend a fundraiser at the hotel on Thursday hours before his convention speech. Trump’s allies appear to be banking (or at least hedging) that he will hold onto power: The Trump International Hotel Washington, DC, has no rooms available on Election Day 2020. It’s also booked for next year’s inauguration.
Originally published: 2020-08-27 11:23:13