The Trump Organization has reached a deal that will let the company exit the 46-story Trump SoHo hotel in a trendy Manhattan neighborhood by the end of December, The New York Times reported.
According to the Times, the hotel has struggled to attract guests at five-star prices, and had to drop rates to keep rooms occupied, while condos included in the property have been slow to sell.
Under the exit deal, the Trump Organization will sever its contract with the building's owner, an investment firm in California that focuses primarily on real estate.
The Trumps do not own the SoHo hotel, but instead manage the day-to-day operations, and the Trump Organization is entitled to a cut of the hotel's revenue. The contract, however, requires the Trumps to pay the owner, CIM Group, if the property fails to meet certain financial performance standards.
With years remaining on the contract, CIM will pay the Trumps to end the arrangement early, the Times reported, citing unnamed sources, who also described talks as friendly.
A buyout enables CIM to either rebrand the property, or to buy more condo units and expand the hotel before eventually selling it. The company did not disclose the proposed price of a buyout.
The canceled deal follows an agreement reached in June for JCF Capital ULC, the firm that owns the Trump International Hotel & Tower in downtown Toronto, to exit its contracts with Trump Hotels, Bloomberg reported.
No breakup fee was disclosed for that deal, but Bloomberg, citing an unnamed source, said the amount was at least $6 million. The Toronto hotel is being rebranded as a St. Regis, one of Marriott International Inc.'s luxury flags.
The Times noted the Trump Organization has plenty of other bright spots in its portfolio — including the Trump International Hotel in Washington, which turned a nearly $2 million profit in the first quarter this year.
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