Donald Trump’s longtime friend Thomas J. Barrack Jr. spoke glowingly about the Republican presidential nominee last week in Cleveland.
A California private-equity executive and founder of Colony Capital who has known the candidate for 35 years, Barrack praised Trump’s leadership and perseverance and told stories about real estate development deals they have done together.
One deal that didn’t come up that night: Trump and Barrack’s agreement to together develop the Old Post Office in Washington into a 263-room luxury hotel, a partnership that never came to be.
Trump and Colony bid for the project together, and when the General Services Administration selected the two companies — beating out a bevy of other hotel and real estate bidders — federal officials expected that the Trump Organization would serve as the lead developer, managing the day-to-day aspects of the project, and Colony Capital would provide financial backing.
The two firms issued a joint news release after being selected, saying they would co-invest. Barrack said he was “delighted to team with The Trump Organization to redevelop this historic American landmark while preserving its grandeur and elegance.”
“As long-term investors in hospitality, we share the GSA’s vision for transforming this iconic property into one of the finest destination hotels in the country. We look forward to working with the Trump Organization and GSA to make the redevelopment a reality,” he said in the news release.
Colony is a major global investor in real estate, which bolstered Trump’s efforts to secure the deal. At the time, Colony had already invested $45 billion in more than 14,000 corporate and real estate assets, ranking it among the top real estate investment firms worldwide.
Most commercial real estate developments are built by similarly formed partnerships; the arrangements allow multiple partners to share both the risks of a project and the potential returns if the project is successful.
But a year later, Trump said he and his daughter Ivanka, an executive at his company who leads the project, were reconsidering. Trump told The Washington Post he was “considering Colony and others” as investors and that “every bank wants to do this deal.”
“We don’t even need financing,” Trump said at an event hosted by The Post. “We could do it in cash.”
Soon thereafter, the Trumps decided to put up the equity for the project themselves, investing $42 million of what they say is their own money and borrowing about $170 million from Deutsche Bank to finance construction. GSA officials have confirmed this arrangement.
Colony decided to pull out, although it made no announcement until Monday, when the company’s public relations agency issued a statement to The Post that said: “Colony exited the joint venture after the project’s timeline became too long for the firm. As the project evolved, cheaper sources of capital for longer term investment became available to Trump. Colony simply could not compete with more attractive financing.”
Given the loan from Deutsche Bank, this suited the Trumps fine. Ivanka Trump has said on a number of occasions she wanted to keep the company in her family for generations, which is more easily achieved when their company controls the project on its own. Colony wasn’t interested in staying in that long.
Ivanka and her family are now moving full steam ahead with the project toward a Sept. 12 opening. The Trump Organization has been hiring staff, booking events and showing the building off to travel agents as construction crews work through the last few weeks of construction. Chef David Burke of BLT Prime is putting together a menu of steak and seafood offerings, and Italian suitmaker Brioni will open its first D.C. location there.
Colony’s exit will not look so good for Trump, however, if the Old Post Office deal goes sour — because then it will be his money to lose. Trump’s campaign has prompted some business partners to cut ties with him, but afforded him worldwide brand recognition.
Barrack, meanwhile, was given a prime slot at the Republican convention, preceding only Ivanka before Trump took the stage to accept the nomination. Barrack described Trump as a relentless and disciplined businessman.
“He really is better than the billing that you see, just as an administrator, as an executive, as a guy who can actually take care of the people that work for him and build teams,” he said.
Follow Jonathan O’Connell on Twitter: @oconnellpostbiz