Making a Play: Q&A With Brian Friedman on His Bid for the Trump DC Hotel
Developer Brian Friedman made a splash in September when his Washington, D.C.-based firm, Friedman Capital, picked up the famed Watergate office building for $101.5 million.
Now, he’s eyeing a blockbuster purchase of a different stripe.
The exec, who helped develop the Line Hotel DC in the city’s Adams Morgan neighborhood, told Commercial Observer that he’s considering making a bid for the Trump International Hotel.
“It’s a fabulous property; it’s historic and iconic,” he said of the 263-room luxury hotel located at 1100 Pennsylvania Avenue NW.
Bids are due next week, on Jan. 23, via brokerage JLL (JLL) with the Trump Organization eyeing a reported $500 million price tag. The firm signed a 60-year lease in 2013 at the historic site, a former headquarters space for the U.S. Post Office, and pays the federal government about $3 million a year in rent, according to public records.
The Wall Street Journal reported that a mix of domestic and foreign private equity firms, family buyers and hotel operators are also potentially in the running, naming Bethesda’s Marriott and Tysons’ Hilton companies as strong possibilities.
CO spoke to Friedman about why he’s interested in the hotel, what he thinks about its jaw-dropping price tag, and what to do with all that “Trumpy” furniture.
Commercial Observer: You’ve said you’re interested in buying the Trump International Hotel. What are you thinking as we approach the bidding deadline?
Brian Friedman: It’s an auction and we’re going to bid. But, we’re not confident and optimistic that we’re going to get it because price is what you pay and value is what you get.
Are you definitely bidding?
I was really considering bidding heavily, but then another opportunity came up. The asset is not performing to where I need to bid; I’m not sure the economics make sense.
I came to this because I was bidding on the Mayflower Hotel — I bid $162 million because that’s what the loan was, and it got pushed up to $175 million. I chased it a little bit but then started looking at what else was out there, and that’s how I came to the Trump [hotel].
As I look under the hood, it’s not good news so it’s very complicated. I have some other opportunities that I am bidding on and that will be what drives whether I make a bid or not.
What sort of background research on the hotel have you done to prepare for the sale?
It’s science and heart. We look at the numbers and right now, the numbers aren’t great and they are going the wrong way. And then the heart of it is the special sauce — you can change the design and enhance the food and beverage and open the doors, and suddenly you have a better experience. But that’s changing the flag.
Talk about your level of interest. How determined are you to make a top bid?
It’s not a vanity thing for me; it’s not an ego thing for me. I’m a venture capitalist and real estate hotels is one of the things I trade in. I can’t make money overpaying for things; that’s not where I am bidding from. I am bidding to add value real quickly. I’m an opportunistic investor.
I do think this could be like the Rosewood Inn, which we bought in Santa Fe [earlier this year], where you make a couple of changes and a lot of money drops to the bottom line.
We hear there’s going to be a lot of buyer interest in the property. What do you think we can expect?
There will be a ton of interest and I think there will be a lot of interest from a whole bunch of people that no one is even talking about yet. Hotels are very ego-driven. They are a business within a business. There’s a “heads and beds” business, a food and beverage business and a real estate business. This one is very complicated because you need approval by the [General Services Administration]. That makes it that much more unique.
From what you’re hearing, do you think it’s a done deal that the Trump Organization will sell the property?
From what I am told, Trump is prolific for doing this or that, unless he gets his number. So, he’ll either get his number or he never sells. I don’t know, but that’s what I was told. We’ve heard they are looking for something stupid like $500 million.
Based on that, do you think it will sell?
I do. Why would you put yourself through all of this if you weren’t going to sell?
What makes this a property worth owning?
It’s the most special building in D.C. today and it’s an iconic hotel. The ceiling heights are incredibly high because of the period it was built. There is no other hotel room that can offer that in Washington, D.C., because of the height act. Most hotels are, like, nine feet at the most.
If you end up buying the hotel, what would your plans be?
There are some things you can do to it and make it really special, much more valuable than it is today, and make a lot of money, plus make it more welcoming to the world. If you go to the asset today, the front doors are closed for security purposes. It’s really hard to approach it.
We would intend to make the opening a big food court and do a luxury [restaurant] looking down on it because the building is just magnificent. I would bring Chef José Andrés in and multiple international chefs — a bunch of names — and I would do what they did at the Plaza with a food court that would be welcoming to all the tourists.
How long before a transition could occur where the numbers start going the right way?
You would need to shut down, reinvent, redo it, change the furniture, alter food and beverage and spice it up. So, probably a year to do everything.
How about the rooms themselves? Would you make any changes?
The hotel rooms are some of the most expensive and special hotel rooms in D.C., but now they are not getting the rate they deserve. Those are special and all you have to do with them is furnishing. In this industry, it’s about the FFE [furniture, fixtures and equipment]. The equipment is great and most of the fixtures are great. The ones that are too “Trumpy” you can sell and get some value out of.