The company’s sales representative, Jeffrey Davis of JLL, confirmed to The Washington Post that the proposed sale of Trump’s lease to the federally owned Old Post Office Pavilion has been set aside as the industry recovers.
“We have toured only the most discerning buyers and are proud to be representing such an iconic asset,” he said. “Trump International Hotel, Washington D.C. is one of the finest hotels anywhere in the world and we look forward to working with the Trump Organization on finding the right fit once the industry is back up and running.”
Trump’s company, now run by Donald Trump Jr. and Eric Trump, announced the planned sale in October and set a January deadline for initial bids. It is unclear how many companies are pursuing the lease, which Trump signed with the federal government before his election, although BET co-founder Sheila Johnson was among the bidders.
As of Monday, seven of the Trump Organization’s 10 top-grossing properties were closed. Those that remained open were at a fraction of their usual capacity: Trump’s hotels in Chicago, New York and Washington had all closed their bars and restaurants in response to local orders.
The company has now laid off more than 550 workers at its hotels, according to government filings and people familiar with the properties. Occupancy at the D.C. hotel recently was about 5 percent, according to the union that represents workers there, and managers of the hotel have been peppering social media with promises of a comeback and thank you messages to the few guests staying there.
The union said that 160 workers had been laid off there, though that did not account for the closure of the BLT Prime steakhouse, which is separately owned.
BLT’s owner, ESquared Hospitality, has not returned requests for comment. The Trump Organization also did not respond to a request for comment.
The $2.2 trillion economic stimulus bill signed by Trump last week contained a provision pressed by Democrats that prohibits Trump’s company from benefiting from a $450 billion pool of Treasury department loans and investments. That pot of money is intended to keep struggling businesses afloat during the pandemic, but the company is eligible to benefit from tax changes as well as support its tenant partners receive.
Trump’s company is hardly alone in suffering from virus-related lockdowns that are preventing nearly all travelers from booking rooms and have closed thousands of retailers. Top hotel chains such as Marriott and Hilton have sent tens of thousands of workers home without pay as part of furlough programs. In Washington a main Trump hotel competitor, the Four Seasons, informed the D.C. government March 20 that it was laying off 413 employees.
How long the pandemic will effectively shut down the economy and what effect it will have on the values of hotels, office buildings, shopping malls and other properties remains to be determined.
JLL, the firm that represents Trump’s company, projects a commercial real estate slowdown that lasts at least through the first half of 2020. Other experts say that it could last much longer, further sidelining top dollar sales like the Trump hotel lease.
“The comeback period for major purchases is going to extend well beyond this six-month period that we’re talking about,” said Spencer Levy, CBRE senior economic adviser, to NAIOP, a trade group for developers. “It might be a year before you get back to normal patterns.”
Of immediate concern is what commercial tenants, including companies renting office space and retailers renting storefronts, will do about paying the April rent. America has more than 1 million restaurants and other food service locations, supporting more than 15 million jobs, according to the National Restaurant Association.
Scores of restaurants have already laid off staff due to the forced closures, contributing to the staggering 3.3 million unemployment claims filed in a week earlier this month. Major retailers are also shedding workers en masse, as Macy’s announced Monday it will furlough most of its 125,000 workers due to the closure of 775 stores. Kohl’s and Gap announced furloughs of 80,000 each.
Dozens of companies lease office space from the Trump Organization at two New York City locations, Trump Tower on Fifth Avenue and 40 Wall Street. Trump’s company also has retail leases in New York and at some of his hotels and golf courses, such as the Japanese restaurant Sushi Nakazawa and Italian suit maker Brioni in the D.C. hotel.
Trump is also in the role of tenant at the D.C. hotel, which is in a federally owned building managed by the General Services Administration. His company pays the government a base of $3 million in annual rent plus a share of any profits above a certain threshold (an amount the government has not disclosed).
According to the lease, his company is subject to interest payments, additional fees and ultimately termination if it stops making lease payments. Some disputes require mandatory mediation between the company and the government. Contracting and government ethics have repeatedly questioned whether taxpayers are fairly represented in negotiations between Trump’s company and his government.
Administration officials say Trump has resigned from his business is not involved in its day-to-day operations.
There are a series of tax benefits in the stimulus package signed into law by Trump last week for commercial real estate owners, which could provide the industry with as much as $232 billion in savings. Trump’s company stands to benefit from those provisions, as they weren’t subject to the blocking provision inserted by Senate Democrats, prompting criticism from government ethics groups.
But it isn’t yet clear how or when the industry will bounce back. Colony Capital chairman Thomas J. Barrack Jr., who chaired Trump’s inaugural committee, has warned of a second financial crisis if the coronavirus shutdown leads to a potential blockage in commercial lending.
Due to the spread of coronavirus, Barrack wrote, “American businesses are unable to generate revenues from the ordinary course; consequently, America’s businesses are unable to make lease payments on the office, retail, and industrial buildings which they occupy.”
Trump has not addressed the strains faced by commercial landlords including his own company or retailers that have been forced to shut down and now have rent coming due. But he was asked at a White House press conference Sunday what people ― meaning individual renters ― should do about paying their April rent.
“I will tell you, I think landlords are going to take it easy,” he said. “We may put out a statement on that. I think a lot of people that are owed money are going to take it easy. They don’t, sort of, have a choice. But a lot of concessions are made.”