Trump Lost $1.2 Million at Hotel He Should Sell, Democrats Say

Trump Lost $1.2 Million at Hotel He Should Sell, Democrats Say

(Bloomberg)—President Donald Trump’s Washington hotel lost almost $1.2 million during its first two months of operation, before he was elected president, according to a letter released Monday by four congressional Democrats who say the president is violating the hotel’s lease with the federal government.

Trump’s company had projected $397,000 in net income for September and October, according to the Jan. 23 letter. The lawmakers cited information from the General Services Administration, which oversees government real estate, in a letter to the agency that sought more information. Before the Nov. 8 election, business analysts suggested that the hotel had suffered as Trump lagged Democrat Hillary Clinton in polling.

Alan Garten, executive vice president and general counsel at The Trump Organization, didn’t respond to a request for comment. Neither did Jennifer Rodstrom, a spokeswoman for Trump Hotels, and White House Press Secretary Sean Spicer.

Trump’s company operates the Trump International Hotel Washington, D.C. in a former post office leased from the GSA. The letter doesn’t include financial data for the months since Trump’s surprise election win, although traffic at the hotel, where cocktails start at $24, has been high.

Possible Profit

"The possibility that President Trump will profit from large increases in hotel revenues because he was elected president highlights the grave concerns we have raised for months about his conflicts of interest," the Democrats wrote. The letter, which was addressed to acting GSA administrator Timothy Horne, was signed by Elijah Cummings of Maryland, Peter DeFazio of Oregon, Gerald Connolly of Virginia, and André Carson of Indiana. Cummings is the top Democrat on the House Oversight Committee.

The lawmakers also said business at the hotel, where foreign diplomats have scheduled events, might violate a clause of the U.S. Constitution that bars U.S. officials from accepting payments from foreign governments. A watchdog group with ties to Democratic fundraisers sued Trump over such alleged violations on Monday, although the suit could face procedural hurdles.

Trump’s lawyers have said the clause does not apply to fair-market transactions like those at the hotel. They also say Trump’s hotels will give any profit derived from foreign governments to the U.S. Treasury, but they haven’t provided any details about how that process might work.

Company’s Predictions

Trump Old Post Office LLC, through which President Trump owns a majority stake in the hotel, predicted it would take in more than $6 million in September and October, before the election, according to the letter. Instead, its revenue totaled roughly $4.1 million, not enough to cover expenses.

The Trump Organization has said it spent about $212 million -- about 80 percent of it borrowed from Deutsche Bank AG -- to redevelop the 1899 Romanesque Revival-style Old Post Office, located a short walk down Pennsylvania Avenue from the White House. Trump’s cost was 51 percent higher than that of a group including Hilton Worldwide Holdings Inc., which called Trump’s revenue projections “unrealistic” in a 2012 protest of the award. The cost may now make it difficult for Trump to recoup his investment if he tried to sell the hotel.

Trump pays $3 million a year in base rent for a 60-year ground lease with the GSA, with two renewal options for 20 years each. During his campaign, Trump made the 263-room hotel, which opened for business in September, a symbol of his plan for the government, saying it came in “under budget and ahead of schedule.”

Lease’s Language

In their letter, the Democratic lawmakers also questioned whether the agency will enforce a provision of the lease that bars elected officials from taking part in the agreement.

The lease forbids an “elected official of the Government of the United States” from taking part in the lease or receiving “any benefit that may arise therefrom.” The group that sued over Trump’s foreign ties, Citizens for Responsibility and Ethics in Washington, also lodged a complaint with the GSA on Jan. 20, just minutes after Trump was sworn in. The group said that by taking the oath of office, Trump effectively made himself both lessor and lessee, a breach that should prompt GSA to terminate the lease.

Trump’s lawyers have said the lease’s language doesn’t apply to him because he was not an elected official when the lease was signed in 2013.

But the Democrats’ letter cites an unnamed deputy commissioner at the GSA who told congressional staff members that the contract contains a “categorical ban” that “applies to all elected officials, regardless of when they are elected.”

The agency has yet to announce a final determination on whether the lease’s language prohibits the president’s ownership. If the agency determines that Trump is in breach of the contract, he has 30 days to remedy the situation, or the matter would go to the U.S. Civilian Board of Contract Appeals, according to the letter.

The Democrats said in their letter that they were requesting additional information about any determination, as well as additional financial data.

Trump’s ability to name a new GSA administrator raises the possibility that he could control the agency’s determination. The most recent GSA administrator, Denise Turner Roth, who was appointed by President Obama, stepped down the same day Trump took office. Trump now gets to pick the next administrator, with congressional approval.

Seven-Member Rule

In gathering the documents and seeking more information, Democrats used a rule that allows seven members of a panel to request such information from the GSA and other executive agencies. Minority parties generally don’t have the power to subpoena witnesses because the majority will block their efforts. The seven-member rule, which was passed in the 1920s, could provide congressional Democrats with one of their few tools to use against the administration.

Trump announced Jan. 11 that he will maintain ownership in more than 500 companies with $3.6 billion in assets while leaving day-to-day operations to two of his sons and a trustee. Although ethicists criticized the arrangement as falling short of the blind trusts set up by recent former presidents, Trump said he was doing more than he had to and noted that an ethics law that applies to most executive branch officials exempts the president.

--With assistance from Billy House. To contact the reporters on this story: Ben Brody in Washington at [email protected] ;Caleb Melby in New York at [email protected] To contact the editors responsible for this story: Joshua Gallu at [email protected] John Voskuhl


© 2017 Bloomberg L.P


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