Donald Trump Won Control Of A Prized D.C. Landmark — Here’s How
“The Trump people said all the right things,” said a former member of his team. “He never intended to stick with it. He thought, 'Well, let’s get to the next phase and then we’ll do what we want to do.'” A BuzzFeed News Investigation.
On a stretch of Pennsylvania Avenue separating the White House from the Capitol looms an architectural treasure and a prized jewel of the federal government’s real estate portfolio. The palatial, neo-Romanesque Old Post Office was built in 1899. Since then, its clock tower has been an iconic part of the Washington, D.C., skyline, visible from miles away.
These days the building is a vast construction site, ringed by scaffolding, where trucks come and go as plumbers, electricians, and carpenters redo the interior. But Donald Trump chose to hold an event there on March 21. Striding to a podium set in front of two American flags and decorated with a “Trump Hotels” sign, the candidate talked of GOP efforts to thwart his momentum. First, however, he called everyone’s attention to the Old Post Office itself, which will be the site of Trump’s newest hotel. “It's going to be amazing,” he said. “It’s a great thing for the country. It’s a great thing for Washington.”
Winning control of this magnificent, taxpayer-owned building — long coveted by developers and by one of Washington’s most notoriously corrupt lobbyists — was a remarkable coup for Trump. It is unusual for someone to personally profit from such a prominent contract with the government while at the same time seeking to win that government’s highest office. (A charity tied to Hillary Clinton received approximately $7 million in federal grants since 2010, according to federal spending data, but that money does not add to Clinton’s personal wealth.)
Steven L. Schooner, a professor of contracting law at The George Washington University Law School who has monitored the transaction, said Trump’s deal is “at a minimum a conflict of interest, that a presidential candidate or president could personally benefit or lose sums of money on this scale based on a contractual relation with the federal government.”
Schooner said the particular circumstances of Trump’s deal, which transfers control of the building for 60 years, are unique. “There is nothing normal about this,” he said.
The decision to award the contract to Trump was announced in 2012 with considerable fanfare, but the details of how he actually won the bid — beating out teams that included major hotel chains and then locking in near-total control of the landmark — have remained largely unknown. A spokesperson for the federal agency that handled the transaction, the General Services Administration, or GSA, called it “one of the most highly scrutinized deals” the agency has ever done, but it has kept many details hidden, heavily redacting the property’s lease and refusing to release Trump’s initial proposal. Officials declined BuzzFeed News’ requests for interviews about how the deal was struck and did not respond to questions in time for publication.
It is “a conflict of interest that a presidential candidate or president could personally benefit ... on this scale based on a contractual relation with the federal government.”
Six insiders who were involved in the project, working either for Trump or for the government, discussed the details with BuzzFeed News. They spoke on the condition that they remain unnamed, some for fear of lawsuits, some because they are not allowed to speak publicly.
Trump won the bid largely because of two grand promises, three of the sources said.
Trump promised to employ the architect who had, over decades, championed the building’s careful, historic restoration. And he promised the involvement of a multibillion-dollar real estate investment firm with a rock-solid financial reputation.
After Trump’s team got the nod from the GSA, however, it reversed itself on both these promises.
It announced that the architect would no longer be involved. And it informed the government that it would no longer be working with the real estate investment firm. To finance the construction, Trump borrowed $170 million from a bank, putting the federal lease on the property up as collateral.
According to a former member of his team, “The Trump people said all the right things” in the early stages. “He never intended to stick with it. He thought, ‘Well, let’s get to the next phase and then we’ll do what we want to do.’”
Several sources said the GSA decided to proceed with the deal, despite all the changes, in part because it feared the political fallout.
In response to questions about the bidding process, the Trump International Hotel in Washington, D.C., issued a statement to BuzzFeed News calling the chance to work on the building “an honor.” As for changes announced after bidding closed, the statement said: “As with any project of this size and timeline, there were some necessary agreed-to adjustments along the way, but come September — ahead of schedule — everyone will be able to see the results of all our hard work and this highly effective public-private collaboration.”
Trump promised to use a particular architect and to partner with a rock-solid investment firm. After winning the bid, he reversed himself on both.
Meanwhile, Trump’s firm has applied for a $32 million federal subsidy, in the form of a tax credit, which could help cover its investment in the taxpayer-owned building.
But insiders said that Trump’s company has pushed the government to accept design and decorative changes that run counter to the principles of historic preservation, which are the basis on which he applied for a tax subsidy. For example, Trump is covering century-old marble floors with carpeting and concealing historic wood and marble walls with drapery. And he has asked to festoon the grand lobby with gold leaf.
A Trump executive who spoke on behalf of the developer’s organization on the condition that he not be named said none of these issues are substantial, and that government agencies have all signed off on the plans.
For now, the most glaring visual element of all may be the large blue sign hanging on the construction fence. Right in the middle of a fierce presidential campaign, on taxpayer property, its huge white letters make a bold proclamation about the future: “Coming 2016 TRUMP.”
The Trump executive said the sign went up before Trump’s presidential campaign was launched, but conceded that it has since taken on another layer of meaning. “At the end of the day, people can interpret it any way they want,” he said.
The White Elephant in the Room
As beautiful as the Old Post Office is, it was for many decades a burden, its space underused and its upkeep expensive. In the 1960s, the GSA, which controls the building, pushed to raze it.
The building survived partly due to the crusading efforts of an architect named Arthur Cotton Moore, a member of the old D.C. establishment whose family went back in the city for generations. As the Washington Post put it in an editorial in 1977 celebrating the building, Moore “played a large role in persuading the government that the hulking Post Office is a community treasure.” He won a competition to renovate the building, its first reincarnation.
The building remained alluring to developers. In 2005, the GSA’s former chief of staff was arrested by the FBI in a major corruption probe. Prosecutors say he accepted an opulent golf trip to Scotland’s famous St. Andrews golf course from Jack Abramoff, a larger-than-life Republican lobbyist. Abramoff represented a Native American tribe that was interested in turning the Old Post Office into a luxury hotel. (Abramoff, who later pleaded guilty to corruption-related charges, was portrayed by Kevin Spacey in the 2010 film Casino Jack.)
In 2008, Congress passed a law to encourage the GSA to redevelop the building again, and in 2011, the agency solicited proposals from private companies. It was a huge opportunity for developers, who jostled to submit their bids, forming teams for hotel projects.
At his office in Washington, Moore, still working as an architect at 76 years old, was impassioned about a possible new phase for the landmark that had been his personal crusade.
Having previously met Ivanka Trump, Donald’s daughter, Moore decided to invite the Trumps to join his bid to take this legendary building to the next level, according to a person with knowledge of the matter.
Ivanka, 29 years old at the time, had the title of executive vice president of development and acquisitions at her father’s business empire. Sources said she immediately warmed to the idea of winning control of the landmark, located just blocks from the White House. It was she, these sources say, who first brought the deal to her father.
She quickly took charge of the Old Post Office project, representing the Trump Organization at key presentations and Capitol Hill meetings. Leading the high-profile hotel effort was an early, public vote of confidence from her father, foreshadowing the prominent role she now plays in his campaign.
When the GSA made its call for proposals, Donald Trump was discussing the possibility (later rejected) of a presidential run against Barack Obama. Trump incorporated a company in Delaware, called Trump Old Post Office LLC, and his team worked with Moore on their proposal, which was selected as one of 10 finalists.
Neither the GSA nor Trump has released that proposal in full, but some facts about it were made public, and sources have described it to BuzzFeed News.
Many projects bearing Donald Trump’s name are his in name only. It’s a key element of his business: Builders pay hefty sums to associate themselves with the Trump brand, but they do all the building and they assume all the risk. Examples range from the Trump International Golf Club in Puerto Rico to the Trump International Hotel and Tower Fort Lauderdale. But in the case of the Old Post Office hotel, which would feature a spa, fine dining spots, and high-end stores, the Trumps wanted to actually run the show.
Design was a big part of the GSA’s review process, accounting for 35% of a bidder’s score. Partnering with Moore, whose credibility was unimpeachable, and who had virtually invented the concept of renovating and rehabilitating the building, gave Trump a tremendous advantage.
To finance the construction, Trump borrowed $170 million from a bank, putting the federal lease on the property up as collateral.
Financing was the second big arena in which bidders had to prove themselves. They needed to show the GSA not just that they had the resources to pull off a project of this scale, but also that they would provide a healthy return to the government. But several of Trump’s companies had suffered highly publicized bankruptcies.
The Trump group teamed up with a partner that had very deep pockets: Colony Capital, one of the biggest real estate funds in the world, which, as of last year, had $28 billion in assets under management.
During his campaign appearance at the Old Post Office, Trump said, "They brought it down to 10 finalists, and we got it, I think because of the strength of our financial statement and because of the fact — they wanted to make sure it got built." And Colony Capital was a big part of that.
"They are a very credible group that we got involved,” said the Trump executive.
Trump committed to a minimum rent to the government of $3 million, three sources say. And on top of that, he repeatedly pledged that no matter what problems arose, his group could finance the deal and make the project a success, two former members of his team recalled.
In February 2012, the government announced that Trump had won the competition. Trump’s proposal “represented the strongest development team, best long term potential for the local community, and most consistent stream of revenue for the Federal Government,” the agency’s official announcement said.
Trump was customarily exuberant: “We will build the greatest hotel that Washington has ever seen,” he told the Washington Post. “There will never have been a comparable hotel to what we’re going to do with the Old Post Office.”
“Are they going to tart the thing up?”
Behind the scenes, some top officials had been skeptical of Trump’s track record and commitment to historic preservation.
"Are they going to tart the thing up? How do you maintain the dignity of the building?" one former GSA official recalled wondering.
The former official recalled a meeting between government officials, Ivanka Trump, and others shortly after Trump won the bidding. Officials said they were concerned about the company’s history of bankruptcies and contentious dealings, and she tried to reassure them. Her goal was to “make us feel like you don't have to feel worried that you've hired Trump,” according to the former official, who had direct knowledge of the meeting. To build confidence, he said, Ivanka agreed to all of the government’s requests, including those about historic detailing.
The GSA raised one concern in particular, about what’s known as “re-trading the deal.” That’s when a developer agrees to one set of terms, but tries to reopen negotiations after the project is too far along to halt. That was something the GSA let Ivanka Trump know it would not tolerate.
The Trump executive, speaking on behalf of the company, said that he attended all the meetings and does not recall any communication that sounded “that threatening.”
Ivanka’s Baby Daughter
After the government announced Trump had won the bid, a competing team, backed by Hilton Hotels, protested, citing the developer’s past corporate bankruptcies. The GSA, batting away the complaint, defended its selection in part by citing Trump’s architect. “Mr. Moore’s experience with the Old Post Office dates back to the early 1970s when he first proposed that the building become a hotel,” a GSA official wrote to the Hilton team.
Moore was by then 77 years old, so few questions were asked. But the health problem was never specified. The Trump executive now says that Moore “didn’t have the resources” to complete the project, but that he parted amicably.
"Are they going to tart the thing up? How do you maintain the dignity of the building?" one former government official recalled wondering.
One person recalled seeing him weeks later, working on another project and apparently in fine health. Moore did not return repeated calls for comment.
Moore’s replacement was Beyer Blinder Belle, a celebrated firm that had distinguished itself with major renovations, including Grand Central Station and the Cooper Hewitt museum, both in New York. The firm did not respond to multiple requests for comment.
Then the Trumps revealed another big change: Colony Capital, the huge equity firm backing their bid, was leaving the team.
The Trump executive said the Trumps were concerned that Colony Capital might seek to cash out within a few years. The Trumps wanted full ownership for the long haul. A second source confirmed this account, and added that the Trumps said they were so enthralled by the Old Post Office that they hoped Ivanka’s baby daughter would one day run it.
The Trump executive said Colony Capital’s departure was handled “very amicably.” And he emphasized that the GSA signed off on the deal. BuzzFeed News made numerous attempts to reach Colony for this story, but the company’s outside PR firm said no one was available to comment.
Two prominent features of Trump’s original winning proposal had been changed. The Trump executive downplayed their significance: “Some minor things did change over time," he said. But a former top GSA official who was involved said the public might wonder if Trump’s team pulled a bait and switch. “Those are completely fair questions,” he said. “Those are reasonable questions to ask.”
Another former agency official said that if the changes had happened on his watch, he would have said, "Whoa, let's talk about this.”
At this point in the process, experts said, the GSA could still have abandoned Trump and selected another developer. No lease had yet been signed — negotiations on the terms of the complex, 700-page lease took more than a year — and no money had changed hands.
But the agency had recently been weakened by a scandal involving lavish spending at its conferences. A single GSA event at a posh Nevada resort had cost taxpayers over $822,000, including $79,000 for light refreshments and breakfast, according to investigators, who called it “excessive” and “wasteful.”
Two GSA officials were forced out, including the head of the Public Buildings Service, which oversaw the Old Post Office building. The agency was eager to avoid further controversy, two former GSA officials said, and picking a fight with Donald Trump would certainly cause a storm.
Despite the pressure, a third former GSA official said the message from leadership was “to ‘do the right thing,’ not ‘get it done.’”
But the momentum, explained one insider with deep knowledge of the GSA’s decision-making, was to move the deal forward: “You don’t want to reverse yardage.”
The $170 Million Loan
In August 2013, 18 months after the GSA tapped Trump as its preferred developer, the parties finally agreed on a 60-year lease.
According to a redacted version released to the public, the lease required Trump to put down a security deposit of $4 million, not in cash but in a letter of credit. Trump himself was listed as the personal guarantor of the project, records indicate, signing a $40 million guaranty. (The GSA has redacted his name from the lease, but in separate records he is clearly listed as the guarantor.) The $40 million guaranty can be reduced based on how much equity Trump contributes to the project, the GSA said in a report on it to Congress.
A side agreement attached to the lease makes it clear that “Donald J. Trump and/or Ivanka Trump (acting singularly)” would be the “designated representatives and points of contact” to the GSA in connection with the project. It’s unclear if Donald Trump’s role as a key point of contact changed once he became an official presidential candidate, or how it might change if he were to become the leader of the federal government.
Once the hotel was up and running, Trump promised to pay a base rent of $3 million a year, plus an additional amount that would depend on a formula that the government has refused to release and that the Trump executive declined to discuss.
The Trumps said they were so enthralled by the Old Post Office that they hoped Ivanka’s baby daughter would one day run it.
As for Trump’s business partners and financial backers, the GSA has refused to reveal the investors in Trump Old Post Office LLC, redacting what appear to be more than 50 names on documents related to the deal that the agency has made public.
Trump made one more major financial deal on the hotel. A year after signing the lease with the federal government, he put that very lease up as collateral to secure a $170 million construction loan from Deutsche Bank. If Trump doesn’t finish his hotel or if he defaults on payments, the bank could take over the lease, according to the terms of the loan, just as a bank would take over the mortgage on a home when the owner falls behind on payments.
Deutsche Bank declined to comment. The executive speaking on behalf of the Trump Organization said the plan was always to get a large bank loan for construction, regardless of Colony’s involvement.
In the end, from the public records that are available, Trump appears to have invested little of his personal fortune on the deal.
The total cost, according to records submitted by Trump to the National Capital Planning Commission, is about $196 million. Trump is borrowing $170 million of that from Deutsche Bank, records show, leaving unmet costs of $26 million.
But Trump has applied for a federal tax credit aimed at encouraging preservation of historic sites. According to documents filed with the National Park Service, the rehabilitation will cost an estimated $160 million. The value of the tax subsidy to Trump could be 20% of that, or $32 million, more than enough to cover the project’s unmet costs.
The Trump Organization executive declined to provide financial details, saying only that Trump-owned entities have “invested over $40 million of equity” to develop the project. (In a financial disclosure filed last July, Donald Trump valued his stake in the hotel development company at between $5 million and $25 million.)
Trump Presidential Ballroom
To win the preservation tax credit and to comply with the terms of the Old Post Office deal, Trump would have to meet the basic standard for rehabilitating historic landmarks: retaining the original building’s “fabric” — its character and materials.
At first, there were a lot of “seemingly strong and sincere comments from Ivanka” that the Trumps intended to preserve the building’s historical features, said a source who witnessed the conversations. But soon, contentious debate flared up between historic preservationists and the new Trump designers. “They were doing things to the building that were inappropriate” and “inconsistent with the fabric of the building,” said another source who worked for the Trump team.
This source said that when it came to preservation, the Trump team had a doctrine: “Their motto,” he said, “is 'Apologize, do not ask.'”
Another insider agreed, and said the Trump’s strategy was “We’ll agree to all of this, because seriously, when we get into the details of the actual construction, who’s going to be there knowing whether we actually used authentic this or original that?"
These participants said the Trump team steamrolled the preservationists.
In the interior corridors, the lower part of the walls were originally decorated with a distinctive, dark marble wainscoting, richly flecked and threaded with white. The frames around the doors and windows were dark natural wood. But Donald Trump, according to a source, disliked the look of the corridors and wanted to rip the old materials out.
After intense arguments, his team pushed a solution that some preservationists loathed: covering much of the marble and plaster with drapery.
Covering up original architectural details violates basic precepts of preservation, said one insider who worked on the hotel project. But, he said, at least Trump was blocked from carrying out his original proposal — destroying the marble and wood altogether. Another insider said the draperies were a useful compromise.
When it comes to historic preservation, one source said, “Their motto is ‘Apologize, do not ask.'”
The floor of the corridors was white marble dating back to the building’s grand opening. Trump disliked them as well, calling them “too old,” and at first he wanted to rip them up, according to a source who worked on Trump’s team and was familiar with the project’s design. But then Trump decided to just cover them with carpeting. To some preservationists, that’s like carpeting over the floor of the Jefferson Memorial.
In 2012 and 2013, government agencies involved in the project’s design fought back against the effort to carpet over the historic marble floors. The eventual compromise was to partially cover the corridors: The minutes from a November 2013 meeting show that “the design exposing more marble on the edges was deemed acceptable.”
Yet five months later, in a new proposal for the tax credit signed by Ivanka Trump, the borders were gone: The white marble tile would be covered, borders and all, just as Trump had initially wanted it.
“Whatever you see is new,” said the Trump team member familiar with the design.
Trump’s properties are famous for their glitz — an aesthetic that clashed with the more stately design of the Old Post Office. “He wants to use gold on everything,” said this member of Trump’s team, but in the building’s original design, “there was never any gold.”
Hany Hassan, the architect who succeeded Arthur Cotton Moore, submitted five pages of renderings of what the lobby would look like, all labeled “Interior Paint and Gold Leafing.” Among the surfaces to be gilded was the elegant coffered ceiling.
Government experts insisted that gold decorations violated historic preservation standards. At one meeting in 2013, for example, everyone, according to the minutes, “agreed that there was no precedent for the building for any gold leaf and it should not be used.”
The issue appears far from closed: The 2014 tax application says the ceiling may be “touched up or repainted.” The Trump Organization’s website for the hotel says its central courtyard will be furnished “with gold accents.”
“There is going to be gold,” predicts a former member of the Trump team. “They’re going to do it the way they want to. He wants to use gold on everything.”
One long-running battle between Trump and the government agencies concerned the size and locations of signs bearing his name on or near the historic building. The name for the main event space also raised eyebrows. It was originally called the “Grand Ballroom,” but more recent renderings show an adjustment. The space is now called the Presidential Ballroom.
One of the signs puts a slightly finer point on the matter: “TRUMP Presidential Ballroom,” it proclaims. His team says it will open in the fall of 2016.