New Buyer in the Picture for Watergate

The bank that owns the shuttered Watergate Hotel is in negotiations with a buyer, three months after D.C. developer Monument Realty defaulted on a $40 million loan, officials familiar with the discussions said.

PB Capital, the German-owned bank that held the loan, bought the landmark hotel at a foreclosure auction in July and immediately began looking for new buyers. It has rejected a bid from Monument and a group of investors to buy it back, Monument principal Michael J. Darby said this week.

Monument's financing had been backed by now-bankrupt Lehman Brothers when the company bought the Watergate in 2004. But Darby said his group had put together new financing and offered to pay New York-based PB Capital the outstanding balance on the loan but was outbid.

"We came in with the full price," Darby said. He and others knowledgeable about the negotiations said that developer Robert Holland and a group of investors are in talks with the bank to purchase the hotel, part of the complex of buildings made famous by the 1972 burglary that led to President Richard M. Nixon's resignation.

Holland is an international residential and commercial developer whose Washington projects include ones on the Georgetown waterfront and in the West End neighborhood. He has said he is working with the Dubai-based Jumeirah Group, owners of a chain of luxury hotels from New York to Dubai, which would operate the Watergate.

Holland's group is assessing how much money it would need to invest in renovations to restore the 251-room building overlooking the Potomac River to a luxury hotel, a project that real estate experts estimate will cost more than $100 million. Holland said he is under a gag order during negotiations and could not comment.

Kurt Sachs, senior managing director at PB Capital, a subsidiary of Deutsche Postbank, also declined to comment. When the public auction failed to attract any bids, the bank made a $25 million credit bid on the Watergate and began marketing it to interested buyers, most of them luxury hotel chains.