The inauguration of President Donald Trump, titan of commercial real estate, marked the start of a great number of legal fights concerning his numerous undivested CRE holdings. One set of concerns raised by the political opposition centers on what it means legally for the sitting President to be doing business with foreign governments, something that appears to be happening routinely within the context of his ownership of Trump International Hotel in Washington, DC, just blocks from the White House. The broad argument from political opponents goes: with each hotel bill paid by a foreign government staying at the luxury hotel comes a potential conflict of interest as long as the President continues to own that hotel.
Any guest-related potential conflicts aside, the development details of the hotel itself may hold unprecedented potential conflicts. The hotel property was redeveloped inside a former Post Office owned by the US Government — more specifically, the General Services Administration, an independent federal agency established in 1949 that contributes to the management of around half a trillion dollars of US federal property including over 8,300 owned and leased buildings.
GSA is the owner of the Trump International building. The lease has a reported 60-year term with two 20-year options. The lease has clauses that are drawing attention from industry and governmental players in a way that promises much fighting in the future.
Breach? No Way To Know Yet
The legal confusion is not made clearer by the political forces interested in it. Efforts by Congressional Democrats to undermine the administration have called certain lease clauses into question: As USA Today reports:
The [hotel] lease reads: “No member or delegate to Congress, or elected official of the Government of the United States or the Government of the District of Columbia, shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom; provided, however, that this provision shall not be construed as extending to any Person who may be a shareholder or other beneficial owner of any publicly held corporation or other entity, if this Lease is for the general benefit of such corporation or other entity.”
Thus far, the landlord does not see a breach — GSA has not been moved to act on the strength of these inquiries, stating:
“GSA does not have a position that the lease provision requires the President-elect to divest of his financial interests. We can make no definitive statement at this time about what would constitute a breach of the agreement, and to do so now would be premature. In fact, no determination regarding the Old Post Office can be completed until the full circumstances surrounding the President-elect’s business arrangements have been finalized and he has assumed office,” the statement reads. “GSA is committed to responsibly administering all of the leases to which it is a party.”
For a in-depth look at the lease, read Steven Schooner and Daniel Gordon’s legal analysis piece at Atlantic “Has Trump’s Election Breached His D.C. Hotel Lease?”
The potentials for conflict are certainly there – without them, GSA might not respond – and the wrangling over the outcome will no doubt continue for much, much longer.
Add this to the giant pile of unprecedented commercial real estate issues raised by the inauguration of Donald Trump.