Update: This story was updated on Aug. 7, 2024 with amplified statements from CGI Merchant Group and BDT & MSD Partners.
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As the commercial real estate market nears its bottom, another notable property has succumbed to foreclosure: the Washington, D.C., hotel formerly owned by Donald Trump’s family firm.
Miami-based investment firm CGI Merchant Group purchased the luxury hotel in 2022 for $375 million. By 2023, the firm defaulted on its debt, according to BDT & MSD Partners, the bank that first made CGI a $285 million loan with which the firm purchased the property. BDT & MSD then extended the foreclosure by auction date for 45 days, but CGI was unable to cure the default, according to BDT & MSD.
On Monday, the bank took over the hotel in a foreclosure auction, The Wall Street Journal reported. The property has been operating as the Waldorf Astoria Washington D.C. since 2022.
“We have actively engaged with CGI in a constructive manner, allowing ample time for them to explore financing and alternative options,” a spokesperson for BDT & MSD told The WSJ.
The company elaborated in a statement emailed to Inman, “We have now taken control of the Waldorf Astoria Washington D.C. via foreclosure and remain dedicated to our partnership with Hilton and confident in the future of the asset.”
CGI, which has partnered with former Major League Baseball player Alex Rodriguez on hotel investments, said it is hoping to recoup the property’s long-term lease and contested the suggestion that it was unable to cure the default in advance of the auction.
“Despite the extremely challenging interest rate environment and the hotel’s slower than anticipated ramp up period, we leveraged our strong industry relationships to secure the necessary financing to cure the loan default related to the property prior to Monday’s auction,” a spokesperson for CGI told Inman in an email. “The lender, BDT & MSD Partners, and other parties were made aware of this prior to Monday’s auction, yet the process proceeded at their behest. Although this represents a disappointing development, we never walk away from a property — and we are not done fighting for the Waldorf Astoria
“CGI is fully committed to protecting the interests of its partners and investors, and we will utilize all resources at our disposal to prevail in this flawed auction process,” the statement continued. “Even though the auction has occurred, we remain in intense discussions with BDT & MSD Partners and still have a finalized solution on the table to cure the loan default and recapitalize the asset.”
BDT & MSD said it would be retaining rights to the property. Hilton owns the Waldorf brand and will continue to operate the hotel.
The hotel is housed in the Old Post Office building on Pennsylvania Avenue, not far from the White House. The Trumps never owned the hotel, but leased it from the federal government. The family outbid a number of other big-name hoteliers, including Marriott International and Hilton, to secure a long-term lease.
While Trump was president, the hotel became a popular meeting place among Republicans, including lobbyists and lawmakers.
Business has reportedly been good at the hotel this year, but CGI has still been hit hard by higher interest rates, like many commercial properties across the country.
Portfolios of foreclosed and seized commercial properties hit $20.5 billion during the second quarter of 2024, according to MSCI Capital Trends. The latest foreclosure figures suggest that the commercial market may be near its bottom, according to economists.
Despite the Waldorf Astoria’s foreclosure auction, Hilton said that the hotel will continue to operate.
“Hilton has a long-term agreement to manage the hotel, and that agreement will continue,” a Hilton spokesperson told The WSJ. “It remains business as usual at the Waldorf Astoria Washington D.C.”
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