Wednesday, July 22, 2009

Infamous Watergate Hotel Is On The Market

The owners of the historic Watergate Hotel have defaulted on their loan and the building was put up for auction. In a sign of the times, the auction received zero bids. For more on this, see the following article from HousingWire.

The Watergate Hotel, a Washington, DC landmark brought to international prominence by the 1972 burglary of the Democratic National Committee headquarters — which ultimately led to the resignation of President Richard Nixon — is on the auction block.

Owner Monument Realty defaulted on its loan for the building, and a 30-day city notice of foreclosure that expired Thursday lists a $40m outstanding balance.

The Watergate Hotel has seen better days. It’s been closed since 2004, and while Monument fought with neighbors over its original plans to convert the building into luxury co-ops — a fight Monument ultimately lost, leaving the firm resigned to redevelop the site as a hotel —partner and equity investor Lehman Brothers went bankrupt, and the recession hit, putting the project in turmoil.

Now, auction firm Alex Cooper is accepting bids for the 12-story, 251-room building. The winning bidder will be required to make a $1m down payment.

The auction comes after failed negotiations between Monument and lender PB Capital.

The auction of such a high-profile piece of commercial property could be a defining moment in what some see as the next phase of the recession. Market observers have their sights set on the commercial real estate market over concerns that it could face similar difficulties as the housing market.

What does it say about the state of commercial real estate when the owner of the famed Watergate Hotel, whose name and infamy gave rise to major political scandals getting the “–gate” suffix applied to it — Bill Clinton’s Whitewatergate, George W. Bush’s Lawyergate, the 1970s Koreagate, just to name a few — can’t refinance its outstanding debt?

In his appearance before the House Financial Services Committee Tuesday, Fed Chair Ben Bernanke fielded questions on the state of the commercial real estate market, and unfortunately, the chair couldn’t provide many definitive answers.

Clearly, this issue will linger as the country navigates through economic recovery.

This article has been republished from HousingWire.

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