Citibank Considers Buying Out Donald Trump's Stake in the Plaza Hotel

Strategic Insights -

Donald Trump may be in a bind as Citibank, the lead bank in a group that owns 49% of the Plaza Hotel, considers purchasing the remaining 51% stake in the iconic property. If successful, Citibank could potentially force Trump to sell his half of the hotel, which is collateralized by a loan of over $400 million. The bank group, comprised of more than 70 banks, acquired the 49% interest in the Plaza as part of a settlement in Trump's bankruptcy case in 1992.

Key Takeaways:

  • Citibank is considering buying out Donald Trump's 51% stake in the Plaza Hotel, which could force Trump to sell his half of the hotel.
  • The bank group, which owns 49% of the hotel, has the right to sell the Plaza for a specified minimum price, which declines every year.
  • Trump has the right to match any offer made by the bank group, but Citibank may be tempted by a high enough bid considering the soft market for hotels.
  • Citibank has been trying to sell off many repossessed properties and has lost over $4 billion in recent years on its $21 billion real estate portfolio.
  • Trump bought the hotel in 1988 for $409 million and restructured its debts in a prepackaged bankruptcy plan in 1992, giving Citibank and five other lenders a 49% stake in the property.
  • The hotel's cash flow did not meet debt service requirements, leading to the bankruptcy restructuring and the creation of the bank group's 49% stake.

Statistics:

  • Citibank's real estate portfolio is worth $21 billion, and the bank has lost over $4 billion on it in recent years.
  • The Plaza Hotel is valued at less than $350 million in today's soft real estate market.
  • The bank group's 49% stake in the hotel is collateralized by a loan of over $400 million.
  • The minimum price for the hotel declines every year, making it a growing financial burden for Citibank.

Sources:

  • [The New York Times, "Citibank Considers Buying Out Donald Trump's Stake in the Plaza Hotel"]
  • [CNBC, "Citibank considering bid for Trump's Plaza Hotel"]