With Trump Hotel potentially up for sale, GSA faces ‘rare circumstance’ transferring lease

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As the Trump Organization considers selling its lease of the historic, government-owned building the Trump Hotel occupies, the General Services Administration once again finds itself in a “very rare circumstance,” having to oversee the potential sale and transfer of that lease.

Democrats on the House Transportation and Infrastructure Committee have clashed with GSA for years over an investigation into whether President Donald Trump’s ties to the government lease violate the Constitution.

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But committee members on Tuesday questioned whether a hypothetical sale of the lease to a foreign government or entity would raise new Emoluments Clause concerns.

Rep. Dina Titus (D-Nev.), chairwoman of the economic development, public buildings and emergency management subcommittee, also questioned whether GSA could adjust the terms of the lease with a new tenant, or whether Congress should introduce new legislation needed to oversee GSA’s outleasing process.

“Given the myriad of issues and concerns raised by the execution of this lease from the outset, I want us to make sure that the GSA and this committee have a clear understanding of the process moving forward, and that we’re not going to be repeating the significant mistakes of the past,” Titus said.

Last year, GSA’s inspector general found the agency’s legal team  “ignored” legal questions about the Emoluments Clause, but declined to weigh in on whether or not the 2012 lease violated the Constitution.

Nearly all of the GSA’s key decisions on the Trump Hotel predate GSA Administrator Emily Murphy’s tenure at the agency. But if the Trump Organization does sell its 100-year lease on the Old Post Office building, she said the agency, if asked by Congress, would vet the buyer to ensure it has the assets necessary to continue making payments on the property.

“This is going to be my first time of having that issue come before GSA when I’ve been in charge. We’re going to do the right thing,” Murphy said.

But much like the question of a sitting president benefiting from a federal lease, GSA would once again venture into unfamiliar legal territory with the sale and transfer on a lease of this scale.

Under the terms of the lease, GSA has 45 days to approve the sale and transfer of the lease once the Trump Organization has named a “qualified transferee.”

To meet that standard, Murphy said GSA would examine the buyer’s financial responsibility, their ability to pay the rent and their track record of maintaining historic properties.

The Trump Hotel, in many ways, is an anomaly in GSA’s private lease portfolio. The agency leases about 600 federal properties to the private sector, but Murphy said many of those are for parking spaces or antennas.

Only a handful of those leases, she added, has GSA struck an agreement for a private company to occupy 20% or more of a federal building.

“This is a very rare circumstance for GSA,” Murphy said.

Last Thursday marked the deadline for vendors to submit initial bids for the Old Post Office lease.  The Trump Organization is asking for about $500 million for the lease.

Lawmakers question motives for sale

The decision to accept bids for the lease has also raised questions about why Trump Organization would want to sell.

After winning the lease in 2012 following a competitive bid process, the Trump Organization spent more than $200 million restoring the Old Post Office. Prior to that, the building had fallen into disrepair and accounted for a $6 million annual loss for the agency.

Congress passed the Old Post Office Building Redevelopment Act in 2008 to allow GSA to lease out the building to the private sector while ensuring federal ownership.

Selling the lease now, said Del. Eleanor Holmes Norton (D-D.C.), the original sponsor of that bill, suggests that the Trump Hotel isn’t “as profitable as they desire and expect.”

“They paid millions of dollars to upgrade it because it was a historic property, and presumably made it profitable. But GSA should be concerned that so soon after, in fact, in a competitive process getting the hotel, they want to outlease the hotel.”

But Rep. Gary Palmer (R-Ala.) said he’s not surprised the Trump Organization would want to get out of the lease, given the level of scrutiny it’s received.

“When the lease was negotiated, they did it as a business decision. It was not a political decision. It has become a political football — another opportunity to the badger the president,” Palmer said.

The Trump Organization, in a statement last October, said it has considered selling off its 100-year lease of the building because “people are objecting to us making so much money on the hotel.”

Lawmakers continue push for documents

Talk of selling the lease, however, hasn’t settled Democratic members’ push for confidential financial and legal documents tied to the Trump Hotel.

Committee chairman Peter DeFazio (D-Ore.), in a subpoena last October, ordered GSA to turn over “unredacted documents and communications” between the agency, the Trump Organization and members of the 2016 presidential transition team.

Murphy told members that GSA provided the “vast majority” of what the committee asked for, including more than 10,000 pages of documents.

Following the subpoena, GSA has also offered members of Congress an “in-camera” review of confidential financial records, on the condition that lawmakers not publicly disclose the information contained in those records without GSA’s consent.

Murphy said GSA had asked the Trump Organization for approval to disclose those financial documents, but the company, she said, declined to do so.

The confidentiality clause in the Trump Hotel lease, she added, is standard for GSA, and intended to prevent other private businesses from gaining a competitive advantage through those lease records.

“If our tenants and other contractors see that we’re not as good as our word, we’re not living up to the bargain that was struck in 2012, they’re not going to want to do business with us in the future. They will walk away from doing business with GSA,” Murphy said.

DeFazio, however, said that for GSA to impose such restrictions on a lease for a public building is “absolutely outrageous.”

Outside Congress, the question of whether the president can benefit from the Trump Hotel without violating the Emoluments Clause is the subject of three pending lawsuits against the president.

One lawsuit from the state of Maryland and the District of Columbia claims that regional hotels have felt “competitive injury” because international leaders are more likely to stay at the Trump Hotel. A federal appeals court reheard the case last month after a three-judge panel directed another judge to dismiss the lawsuit.

In May 2018, a federal judge ordered GSA to release more Trump Hotel documents following a Freedom of Information Act lawsuit when GSA limited the FOIA search query to email records, but not email attachments.

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