The election isn’t the only drama happening in Washington, DC. The battle over the former Trump Hotel has ended in a foreclosure auction, sending the rights for the hotel back to the lender, BDT & MSD Partners, the merchant bank owned by Warren Buffett’s banker Byron Trott and billionaire Michael Dell. The leasehold interest in the hotel was sold for $100 million.
BDT & MSD Partners took control after CGI Merchant Group, an investment firm that purchased the leasehold interest for $375 million from the Trump Organization in 2022, defaulted on a $285 million loan. The hotel sale set a record in Washington, D.C., at that time and allowed Trump to pay off a $170 million loan with Deutsche Bank. At the time, the former President's son, Eric Trump, said, "We took a dilapidated and underutilized government building and transformed it into one of the most iconic hotels in the world."
During the Trump administration, the hotel served as a gathering spot for the Republican elite and fans of the President. After the hotel was sold, CGI Merchant Group partnered with Hilton, and the property was rebranded as a Waldorf Astoria. Republicans mostly moved on, and Democrats began using it as a gathering spot. The hotel has several restaurants, including The Bazaar by José Andrés. After some of Trump’s comments, Andrés had pulled out of a deal to operate a restaurant in the Trump Hotel. A lawsuit between the Trump Organization and Andrés was resolved in 2017. Despite the foreclosure auction, the Waldorf Astoria continues to operate the hotel where it is business as usual.
CGI Merchant Group is an investment firm based in Miami, FL. It invests in multifamily, hospitality, office, mixed-use, and other commercial real estate sectors. Some of its investments include The Gabriel Miami Hotel and 3480 Main, a mixed-use building in Coconut Grove, FL. The Gabriel and its sister hotel in South Beach faced foreclosure earlier this year. Baseball legend Alex Rodriguez invested in CGI's hotel investment fund in 2020.
The path to default was lengthy, with the initial default occurring in 2023. A BDT & MSD Partners spokesperson told CoStar News that the bank had given CGI ample time to correct the situation. For its part, CGI Merchant Group said that it had secured financing and informed BDT & MSD Partners about it before the auction. Nevertheless, the auction took place, and BDT & MSD Partners was the sole bidder. In a statement to CoStar, CGI Merchant Group said that it never walks away from a property and is not done fighting for the Waldorf Astoria.
BDT & MSD Partners has invested in other hotel projects, such as the Auberge Resorts Collection, a portfolio of luxury hotels and residential properties, and there is the possibility that it may retain the property or work with CGI Merchant Group to resolve the issue. With the Presidential inauguration coming next January, hotels around the Washington DC area are already being booked up. That will be good news for the Waldorf Astoria and its owners.
This story, though high-profile, is likely an isolated incident and doesn't have ramifications for the hotel industry at large. In fact, luxury hotels are having a strong year, with revenue per available room expected to increase in 2004 by 3.8%, according to CBRE data. While hotel transactions have been slow over the past few years, that may be set to change. Sachin Avadhani, EY Americas Hospitality Sector Leader, believes that deal activity will increase in the second half of the year, especially for luxury hotels in top urban markets.
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