Miami-based investment firm CGI Merchant Group purchased the luxury hotel in 2022 for $375 million and secured a $285 million loan from BDT & MSD Partners. By 2023, the company had defaulted on its debt.
Update: This article was updated on August 7, 2024, to include detailed statements from CGI Merchant Group and BDT & MSD Partners.
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As the commercial real estate market nears rock bottom, another prominent property is in foreclosure: a Washington, D.C., hotel formerly owned by Donald Trump’s family business.
Miami-based investment firm CGI Merchant Group acquired the luxury hotel in 2022 for $375 million. By 2023, the company had defaulted on its debt, according to BDT & MSD Partners. BDT and MSD subsequently extended the foreclosure auction date by 45 days, but CGI was unable to resolve the default, according to BDT and MSD.
The bank took over the hotel through a foreclosure auction on Monday. wall street journal reported. The hotel will operate as the Waldorf Astoria Washington, D.C. starting in 2022.
A spokesperson for BDT and MSD said: “We are actively engaging with CGI in a constructive manner and providing them with ample time to explore financing and alternatives.” wall street journal.
“We now have control of the Waldorf Astoria Washington, D.C., through foreclosure and remain committed to our partnership with Hilton,” the company elaborated in an emailed statement to Inman. , and have full confidence in the future of the asset.
CGI, which worked with former Major League Baseball player Alex Rodriguez on the hotel investment, said it wanted to repossess the property’s long-term lease and was concerned it could not be resolved before the auction. The claim of breach of contract was questioned.
A spokesperson for CGI told Inman: “Despite a challenging interest rate environment and slower than expected hotel growth, we leveraged our strong industry relationships to secure the necessary financing ahead of Monday’s auction. “The lenders, BDT and MSD Partners and other parties were aware of this before Monday’s auction, but the process was conducted at their behest. Disappointing development, but we never give up on a property — and we’re not done with the Waldorf Astoria yet
“CGI is fully committed to protecting the interests of its partners and investors, and we will use every resource at our disposal to prevail against this flawed auction process,” the statement continued. “While the auction has taken place, we are still working with BDT and MSD Partners are in intense discussions and there remains a final solution to resolve the loan defaults and recapitalize the assets.”
BDT & MSD said it will retain rights to the property. Hilton owns the Waldorf Astoria brand and will continue to operate the hotel.
The hotel is located in the old post office building on Pennsylvania Avenue, not far from the White House. The Trump family never owned the hotel but leased it from the federal government. The family outbid several other high-profile hoteliers, including Marriott International and Hilton, to secure a long-term lease.
During Trump’s presidency, the hotel became a popular gathering place for Republicans, including lobbyists and lawmakers.
Business at the hotel has reportedly been good this year, but like many commercial properties across the country, CGI is still being hit hard by rising interest rates.
Commercial real estate portfolio foreclosures and seizures reached $20.5 billion in the second quarter of 2024, according to MSCI Capital Trends. Economists say the latest foreclosure data suggests the commercial market may be nearing the bottom.
Despite the Waldorf Astoria’s foreclosure sale, Hilton said the hotel will continue to operate.
“Hilton has a long-term agreement to manage the hotel, which will remain in effect,” a Hilton spokesperson said. wall street journal. “The Waldorf Astoria Washington, DC is open for business as usual”
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