Watergate Hotel sold; luxury rebirth planned for landmark
Thursday, May 27, 2010
The Watergate Hotel was sold Wednesday to a European real estate group that plans to restore the fabled, 251-room property to a luxury hotel.
Euro Watergate Hotel, a holding company of Euro Capital Properties, closed on a cash deal worth about $45 million for the landmark overlooking the Potomac River, part of a complex of buildings made famous by the 1972 burglary that led to President Richard M. Nixon's resignation. The sale comes 11 months after former owner Monument Realty defaulted on a $40 million loan, forcing the bank that foreclosed to sell it last summer at auction.
Euro Capital principal Jacques Cohen said the 12-story hotel, mothballed since 2007 and neglected for years, will be restored to a trophy property worthy of a "very upper upscale market." Rooms will fetch more than $300 a night, he said.
"There's no other property in walking distance of Georgetown and that close to the White House and the Kennedy Center," Cohen said, "and that has the most gorgeous views in Washington."
Some space on the upper floors might be converted to luxury condominiums, he said.
Cohen said no operator has been chosen for the hotel.
Euro Capital, with headquarters in Paris and New York, specializes in redeveloping pre-World War II properties into upscale hotels and some offices and condominiums. Its flagship is the Hilton Arc de Triomphe Paris, a landmark rated among that city's top 10 hotels. In the late 1990s, the company restored the Hamilton Crowne Plaza Hotel at 14th and K streets NW, a downtown Washington gem dating to the 19th century. The property had fallen into disrepair after being converted into offices.
"The Watergate is exactly the profile of what we've done and redone many times," Cohen said, "with the difference that the Watergate is even easier" because it is relatively newer.
Renovation plans include a spa, ample meeting space, restaurants and bars, an extravaganza that Cohen said would "improve the whole Watergate complex" and the neighborhood around it.
Cohen and a group of investors showed up at the auction in July but did not bid because "too much about the property was unknown at the time," he said. PB Capital, the German bank that foreclosed on Monument, bought the hotel for $25 million and immediately began marketing it to prospective buyers who would have time to determine renovation costs. Cohen said his company expects to spend $50 million on renovations.
One prospective buyer was Monument, which bought the hotel in 2004 with financing backed by Lehman Brothers, which went bankrupt in the failing credit markets. Over the past year, Monument principal Michael Darby made several attempts to put together new financing and buy the hotel back, unsuccessfully. Another developer, Robert Holland, working with a Dubai-based luxury hotel chain, the Jumeirah Group, signed a contract with the bank in fall but could not secure financing.
Marc Magazine, who led the team that handled the sale for brokerage firm CB Richard Ellis, said the bidders ultimately narrowed to five. "It was a combination of pricing and terms" that won the deal for Euro Capital, said Magazine, now a principal with McLean-based Humboldt Hospitality Advisors.
Potential buyers were derailed by a legal battle over the valuable parking garage under the hotel. Monument and previous owners had leased the 83-space underground garage, along with meeting space, from the neighboring Watergate East cooperative for $12 a year. But the garage fell into disrepair, with falling chunks of concrete and other problems. Watergate East sued Monument, and eventually PB Capital, to retake the space and recoup $1 million in damages. After claims and counterclaims, Cohen said, the lawsuits were settled before the closing. He did not provide details.