How Trump cleared a $100 million profit on his money-losing Washington hotel

Hint: It doesn't have much to do with the nominal buyer, a minority-owned finance company committed to funding social causes whose chairman gives heavily to Democrats.

The former Trump International Hotel on Washington’s Pennsylvania Ave., May 13, 2022.

Do you like mysteries?

In 2012, Donald Trump paid way too much to lease the Old Post Office from the federal government and turn it into a hotel. He committed to spending a minimum of $200 million to refurbish it, and to pay $3 million per year in rent. To get back his investment, the Washington Post’s Steve Pearlstein wrote, Trump would have to charge an average room rate of $750, which was $250 more than Washington’s most expensive hotel, the Four Seasons. Clearly this fool was headed back to bankruptcy court.

In 2016 the Trump International Hotel opened on Pennsylvania Ave. The following month Trump was elected president. That gave the hotel an advantage as a shakedown depot that Pearlstein hadn’t anticipated, and Trump took maximum advantage, defying the terms of the lease, which forbade the property’s use to enrich government officials, and defying the emoluments clause of the Constitution by accepting $3.8 million from foreign governments, of which the Trump Organization gave back to the Treasury less than $500,000. The Secret Service shoveled more than $200,000 to the hotel. The Republican National Committee shoveled $3,000 per month. A lobbyist for the Saudi government rented 500 rooms, which had to be rented serially because the hotel only had 263. And so on.

In spite of this unanticipated utility, Trump lost an estimated $70 million in operating expenses. That part isn’t the mystery. Corporations avoided the hotel for fear of upsetting stockholders. Democrats avoided the hotel. The more scrupulous foreign governments avoided the hotel. And room rates, which peaked on January 6, 2021, at $8,000, dropped to $446 one year later, well below Pearlstein’s break-even calculation ten years earlier.

The mystery is that Trump last week sold this money-losing property for a reported $375 million, enabling Trump to clear a $100 million profit. It is, the Washington Post reports, “by every measure” the most that anyone has ever paid to purchase a hotel in Washington, fully 10 percent more than the previous record-holder, Georgetown’s Rosewood Hotel. That sale took place five years ago, well before Covid delivered a gut-punch to the hospitality sector.

Well, you’re thinking, the buyer must be some MAGA lunatic. Wrong! Trump sold the hotel to a minority-owned finance company that will manage the property as a “Conscious Certified Hotel” using a “proprietary social impact tracker aligned with key United Nations Sustainable Development goals about education, employment and prosperity” to donate 1 percent of all room-night revenue to local nonprofits. The chairman, a Jamaican immigrant, has given $100,000 to political causes in the last decade and a half—all to Democrats.

How did a bunch of Democrat-aligned minority capitalists with vaguely Buddhist notions about the profit motive end up overpaying for a property that was already overpriced when its nakedly corrupt owner bought it? The answer began to trickle out this past weekend. It involves something called the Axos Bank, which in February agreed to refinance Trump Tower to the tune of $100 million mere days after Trump’s longtime accountant, Mazars USA, said it could no longer stand by a decade’s worth of financial statements that it prepared for the Trump Organization. Axos started doing a lot of business with the Kushner family in 2017 after the SEC cleared it of charges brought by a company auditor. There’s a lot more to the story. To read it, check out my latest New Republic piece.