Sunday 22 October 2017

Trump says 'noise' from developer halted project

The publicity about the Dallas hotel upset the Trump Organization, which is now run by Donald Trump's sons Eric and Donald Jnr
The publicity about the Dallas hotel upset the Trump Organization, which is now run by Donald Trump's sons Eric and Donald Jnr

Hui-yong Yu

A developer has dropped plans to use the Trump Organization's new Scion brand for a proposed $50m hotel in downtown Dallas after the project drew national attention in the US, scuttling the potential partnership.

Dallas Councilman Philip Kingston said he was informed by Mike Sarimsakci, founder of Alterra International, last Tuesday that he plans to team with a different hotel operator for the project.

Kingston said he met with Sarimsakci and others at Dallas City Hall at Sarimsakci's request after Kingston and another council member criticised the developer's plans to go into business with President Donald Trump's company. The Trump Organization said it asked Sarimsakci to halt the plan after he called attention to it by talking to local and national media.

"The current situation is the result of a phone call this developer made to our company asking whether he should pursue the project with the city council. We told him that he should not," Trump Hotels said last Thursday in an emailed statement.

"This developer made quite a bit of noise about a potential deal and now there is more noise about the possible dissolving of this deal."

Sarimsakci didn't respond to calls and emails seeking comment.

Sarimsakci said last February that the Scion project would be funded by individual investors in countries including the US, Turkey, Qatar and Kazakhstan. The 220-room hotel was set to open in the first quarter of 2019.

Trump's family company, now run by his two oldest sons, Donald Jnr and Eric, would have licensed the Scion brand and managed the hotel, and didn't plan to invest any equity capital, Sarimsakci said at the time. He said he had signed a letter of intent with the Trump Organization.

"Mike is trying to proceed with the project, but the Trump Organization is no longer the operator he is seeking to do a deal with," Kingston said in an interview Wednesday.

Hotel-development projects often don't come to fruition, Trump Hotels said in its statement.

Trump Hotels Chief Executive Officer Eric Danziger outlined plans for a national expansion at an industry conference in January, five days after the president took the oath of office amid calls by ethics experts to divest himself of his business holdings.

Trump Hotels' business model with Scion is to find partners to put up the equity capital while the company licenses its brand and manages the properties, a typical arrangement in the lodging industry. The company's Scion line is intended to attract travellers seeking less expensive accommodation and a more modern design than Trump Hotels' namesake luxury properties offer.

Trump Hotels had previously declined to comment on the Dallas project, citing company policy not to speak about deals that aren't signed.

"We do not announce deals that are not signed for a variety of reasons. We also take our relationships with partners and potential partners very seriously and we keep the specifics of our business dealings private. Having said that, we wouldn't want for this situation to be misconstrued or misrepresented," Trump Hotels said in its statement last Thursday.

A US agency ruling affirming Trump's right to operate a hotel in a Washington building leased from the government, meanwhile, has opened a potential new legal battle over whether the contract grants him benefits in violation of the US Constitution.

Under the so-called domestic emoluments clause, the president is prohibited from receiving any compensation from federal or state governments other than his $400,000 salary. It is being invoked by attorneys and legal scholars who say the ban was breached with the March 23 decision by the General Services Administration that the Trump Organization can keep its 60-year lease on the Old Post Office building on Pennsylvania Avenue, transformed through a $212m renovation into the Trump International Hotel Washington, DC.

"He's getting a major infusion of value from the General Services Administration," said Laurence Tribe, a professor of constitutional law at Harvard University who represents a watchdog group suing Trump over foreign emoluments. "He can use his hotel in the heart of Washington as a way of attracting still more emoluments, both foreign and domestic."

It's been 30 years since the clause has received much attention. When Ronald Reagan was president, a group representing taxpayers challenged his right to receive his pension as former governor of California.

Until last month, controversy around the hotel, which opened in September, centered on the US constitution's foreign emoluments clause that restricts public officeholders from accepting payments from foreign governments. Some lawyers put hotel patronage by overseas envoys in this category. The GSA decision has been interpreted by some as a benefit in violation of the lesser-known domestic emoluments clause, which experts acknowledge has rarely, if ever, been tested in court. The White House referred questions to the Trump Organization. A spokeswoman for the Trump Organization declined to comment beyond a March 23 statement thanking the GSA for its "diligent review".

(Bloomberg)

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