Raoul Thomas’ challenges at the Old Post Office in Washington, D.C. are escalating, though all may not be as it appears.
The Trump Organization is suing Thomas’ CGI Merchant Group after it allegedly defaulted on a $28 million loan provided by the hotel’s former owner, PincusCo reported. The Trump Org is seeking $31.5 million in the suit, which it filed in New York State Supreme Court.
The Trump Org provided the loan because CGI couldn’t cover the transfer, recordation and mortgage recording taxes for its $375 million purchase of the ground lease in 2022, according to the lawsuit. Thomas and an associate allegedly signed promissory notes for the loan.
But a source close to the situation told The Real Deal that the lawsuit was a procedural move by the Trump Org to protect its rights as a foreclosure suit and auction take shape over the Waldorf Astoria.
The D.C. tax authorities allegedly imposed a higher transfer tax on the 2022 sale than what was expected, prompting the need for the Trump Org loan; CGI is pursuing legal action against the district, according to the source.
The lawsuit states that CGI allegedly missed a November 2022 deadline to repay a $13 million portion of the loan, only paying $100,000 towards the debt, and hasn’t paid the remaining $15 million, which was due after unspecified events transpired.
The lawsuit filings include confessions of judgment signed by each of the borrowers who signed promissory notes.
The Trump Org did not respond to a request for comment. CGI declined to comment.
A $31 million lawsuit is significant, but doesn’t nearly top the list of CGI’s problems with its Waldorf Astoria. In February, CGI defaulted on a $285 million acquisition loan that was provided by MSD Partners.
After the default, entities of MSD filed an affidavit of nonresidential mortgage foreclosure, according to the Washington Business Journal. The leasehold interest in the property is set to be auctioned on June 20, though a source expected an agreement between the sides to be worked out before the gavel comes down.
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After the notice of foreclosure sale was filed, CGI said it was “engaged in productive discussions with the property’s manager, Hilton, and several other parties who want to reach a consensual financing solution that reflects the realities of today’s challenging, rising rate environment.” It added that MSD’s foreclosure notice was “possibly invalid.”
As for Trump, a disclosure made to the Office of Government Ethics last year revealed the limited liability company that owned the hotel’s leasehold profited nearly $285 million on its sale.