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CDL Hotels to buy stake in the Plaza.

A letter of agreement has been signed by CDL Hotels International to buy a portion of the Citicorp group's stake in Donald J. Trump's Plaza Hotel. The Singapore-based company is in the middle of its due diligence period and if all goes well, will sign a contract and close in the next several months.

Citicorp dangled the Plaza's allure around the world and a half dozen serious bidders emerged to touch the marbled halls. None of them, however, were the Sultan of Brunei, several sources confirmed. CDL has been making aggressive moves in Manhattan and so far, is emerging victorious.

"I'm extremely pleased with the process and how it worked," said Trump, who declined to comment on specifics of the transaction. "I think they are an outstanding company," he said of CDL, "and will be an outstanding group to work with. I look forward to beginning relations with them."

CDL bought the Hotel Millenium as well as the Hotel Macklowe during this past year. Both hotels were purchased for less than their replacement costs from lenders - the 561-room Millenium at $75 million and the 629-room Macklowe for around $103 million - bringing the chain to about 30 hotels. Since they are making moves into the New York City market in a big way, it is also likely that CDL is bidding on the U.N. Plaza Hotel, currently being shopped by New York City as part of its privatization and cash-raising efforts.

Sources indicate the price of the complicated Citibank stock transaction for The Plaza will just top $325 million, the secret "strike" price for this year. In 1992, the year after Trump cut a pre-packaged deal with Citibank to forgive $115 million in personal debt, the strike price was $400 million, sources said, but if ever sold for more than $470 million, Trump would start getting cut into the action.

Unfortunately, Citicorp does not have much of an incentive to get more than the strike price for its stock, since there is a $300 million floating rate first mortgage on the property that also allows Trump to defer some of the debt.

Nevertheless, Citicorp is intent on staying in the venture, now that the hotel is starting to generate serious money. A total bailout and deed transaction could also trigger various tax consequences for all the parties. A Citicorp spokesperson declined to comment on the transaction.

The hotel's bottom line for 1994 was about $28.5 million. In the Seventies it was run and owned by what is now Sonesta, then Hotel Corp. of America. Under the Westin flag, the hotel made merely $7.5 million in 1988, the year Trump bought it from a group led by Robert M. Bass for some $413 million. Over its first three rocky refurbishment years, however, the hotel lost nearly $120 million between extensive capital improvement costs and debt payments.

New York City has more independent hotels than any other city in the country, said John A. Fox, senior vice president of PKF Consulting. For a landmarked facility like the Plaza, the name alone gets recognition.

"The Plaza has a great deal of recognition," said Fox. "I'm not convinced that the Plaza would not benefit as much as the Millenium benefitted by its affiliation with Hilton. Trump's keeping the name out there is of benefit to the property, but I'm not sure if that brings in more guests than any other hotel property. He's done a pretty good job of running that property."

The home of Eloise is now advertised merely as Donald J. Trump presents The Plaza Hotel, an unusual understatement for the flamboyant developer, whose name is world renown for adding value to properties.

Recently, the hotel and Trump as well became celebrities to the Nickelodeon set and their parents when "Home Alone Two: Lost in New York" was filmed there. The hotel now offers vacation packages that include a stop at F.A.O. Schwartz across the street.

It is also the preferred site for weddings - such as Trump's nuptials to then Marla Maples - and charity benefits.

CDL contracts out management of their hotels individually and it is unlikely they would bring in another flag when Trump's name and presence around the hotel is already packing 'em in. CDL Hotels did not answer repeated phone calls to their Singapore offices nor a faxed request.

According "The Architecture of New York City," by Donald Martin Reynolds, construction of the first Plaza Hotel was begun in 1883 but the builders ran out of money and New York Life Insurance Company foreclosed in 1888. It finally opened on October 1, 1890. The second, current version of the hotel was designed by Henry Janeway Hardenbergh, who had already designed the Dakota. The new Plaza Hotel opened on October 1, 1907.
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Title Annotation:CDL Hotels International Ltd.; Plaza Hotel, New York, New York
Publication:Real Estate Weekly
Date:Jan 18, 1995
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