Author Topic: Trump Hotel in Washington DC  (Read 424 times)

Spekulatius

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Trump Hotel in Washington DC
« on: November 19, 2020, 05:54:34 PM »
I found this article pretty interesting, assuming the numbers are correct:
https://www.cnbc.com/2020/11/19/trump-international-hotel-washington-dc-sale-put-on-indefinite-hold.html

Thepupil would love this:
This was valued at $500M by the Trump organization, but they didnít even get a bid for $250M
Hotel was apparently renovated / build for $200M in cost
$40M in Revenue annually (2019)
$3M (ground lease - 60 years with inflation escalator)
$100M in debt (held by Deutsche Bank)

Does any of this even make remotely economic sense? Building a Hotel for $200M that brings in a measily in $40M revenue while not even owning the dirt and having to pay  $3M ground lease (seems they the ground lease is less than 99 year even).

How on earth could this be worth $500M? As the article cited, it may not even be worth $100M (the loan amount) if they give it back to a lender.

Life is too short for cheap beer and wine.


adesigar

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Re: Trump Hotel in Washington DC
« Reply #1 on: November 19, 2020, 06:49:00 PM »
I found this article pretty interesting, assuming the numbers are correct:
https://www.cnbc.com/2020/11/19/trump-international-hotel-washington-dc-sale-put-on-indefinite-hold.html

Thepupil would love this:
This was valued at $500M by the Trump organization, but they didnít even get a bid for $250M
Hotel was apparently renovated / build for $200M in cost
$40M in Revenue annually (2019)
$3M (ground lease - 60 years with inflation escalator)
$100M in debt (held by Deutsche Bank)

Does any of this even make remotely economic sense? Building a Hotel for $200M that brings in a measily in $40M revenue while not even owning the dirt and having to pay  $3M ground lease (seems they the ground lease is less than 99 year even).

How on earth could this be worth $500M? As the article cited, it may not even be worth $100M (the loan amount) if they give it back to a lender.

Article says some bids were under 250 million. That means there were others at or over 250 million

Spekulatius

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Re: Trump Hotel in Washington DC
« Reply #2 on: November 19, 2020, 07:25:37 PM »
I found this article pretty interesting, assuming the numbers are correct:
https://www.cnbc.com/2020/11/19/trump-international-hotel-washington-dc-sale-put-on-indefinite-hold.html

Thepupil would love this:
This was valued at $500M by the Trump organization, but they didnít even get a bid for $250M
Hotel was apparently renovated / build for $200M in cost
$40M in Revenue annually (2019)
$3M (ground lease - 60 years with inflation escalator)
$100M in debt (held by Deutsche Bank)

Does any of this even make remotely economic sense? Building a Hotel for $200M that brings in a measily in $40M revenue while not even owning the dirt and having to pay  $3M ground lease (seems they the ground lease is less than 99 year even).

How on earth could this be worth $500M? As the article cited, it may not even be worth $100M (the loan amount) if they give it back to a lender.

Article says some bids were under 250 million. That means there were others at or over 250 million

There must have been an issue with these bids or the Trump a org would have taken it, I presume. how do you earn a reasonable return on a hotel that makes $40M in revenue, pays a $3M in ground lease, if you pay $250M for it?

Or perhaps there is some sort of plan B to make it way more profitable.
Life is too short for cheap beer and wine.

rb

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Re: Trump Hotel in Washington DC
« Reply #3 on: November 19, 2020, 07:39:27 PM »
I found this article pretty interesting, assuming the numbers are correct:
https://www.cnbc.com/2020/11/19/trump-international-hotel-washington-dc-sale-put-on-indefinite-hold.html

Thepupil would love this:
This was valued at $500M by the Trump organization, but they didnít even get a bid for $250M
Hotel was apparently renovated / build for $200M in cost
$40M in Revenue annually (2019)
$3M (ground lease - 60 years with inflation escalator)
$100M in debt (held by Deutsche Bank)

Does any of this even make remotely economic sense? Building a Hotel for $200M that brings in a measily in $40M revenue while not even owning the dirt and having to pay  $3M ground lease (seems they the ground lease is less than 99 year even).

How on earth could this be worth $500M? As the article cited, it may not even be worth $100M (the loan amount) if they give it back to a lender.
I would say that it made sense for Trump to do it. @40M in revenue for a 200M investment I'd probably do it. Plus he got 20% of investment in tax credits so it really was 160M with 100 financed by Deutche. Not bad.

Also that 40 million in revenue sounds a little fishy to me. This is something like a 260 key hotel right? As I recall pre-covid rooms were starting at 500+ per room. But many of the rooms are suites and not standard rooms. So let's say an average revenue per occupancy night at 700 per key. Well 40 million @ 260 keys is $420 per key at 100% occupancy. This implies a vacancy rate of 40% in 2019 which I find hard to believe. Also this little math just looks at the rooms. Doesn't include parking, retail, dining, and events. It just doesn't add up.

I would venture a guess that probably the restaurants, events, etc are probably owned/routed through another Trump company and not the hotel which obfuscates the numbers. We also don't know if they're included with the hotel for sale or not.

Now, even if I would do the initial deal, is this thing worth 500 mil? Hell no! Furthermore as part of the deal the Trump Organization wanted the buyer to keep the Trump branding which likely comes with some usurious IP and property management deal. Also after January 20, 2021 the revenue number (whatever it may be) is highly likely to experience a precipitous drop. You won't get an Arab (who spend prodigious money on hotels) get anywhere close to this place. They'll just go back to the Four Seasons.

Maybe they get to sell it for 200 mil with no branding. But really if they were smart they would have sold it in 2017.

Spekulatius

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Re: Trump Hotel in Washington DC
« Reply #4 on: November 20, 2020, 04:00:18 AM »
^ Thanks, that makes more sense. It is likely that just the bare numbers cited donít reveal the true economics.
Life is too short for cheap beer and wine.