Instead, James uses the Chicago property to show how Trump benefited from his alleged fraud. By overstating his net worth, Trump was able to secure better terms on loans for the building, including low interest rates, according to her complaint. Representatives of the New York attorney general’s office did not respond to requests for comment.
The pandemic devastated the hotel business—and hotel values. An index of U.S. hotel values compiled by Green Street, a California-based research firm, dropped 35% in 2020. But values have recovered lately, pushing the index up 3% above pre-COVID levels.
Still, the pandemic didn’t spare Trump’s Chicago hotel. The hotel’s revenue dropped to $19.6 million in 2020, down 62% from 2019, and it posted an EBITDA loss of $9.0 million after earning $5.6 million in 2019, according to financial statements filed with the property’s appeal.
The assessed value of Trump hotel was reduced in 2020 to $58.1 million from $83.1 million in 2019, under a sweeping reduction in commercial assessments to reflect the impact of COVID. Last year, however, Kaegi nearly tripled the hotel’s value initially to $168.2 million, triggering Trump’s appeal.
“The Property’s 2021 value should reflect the fact that Chicago hotels have not recovered to pre-pandemic levels and face an uncertain future,” Trump’s attorneys wrote in the appeal. “This Property is grossly overvalued and deserves a material reduction in value.”
The assessor’s office agreed, lowering the value of the hotel by 37%, to $105.2 million, or about $310,000 per room. But that wasn’t enough for Trump. He filed a second appeal with the Cook County Board of Review, a three-member panel where property owners can challenge the assessor’s valuations. That appeal is pending.
An attorney representing Trump in the case, Patrick McNerney of Mayer Brown, declined to comment. One of the appraisers who valued the hotel at $26.7 million, Lesley Baron of Chicago-based MVS, didn’t return phone calls. Trump representatives also didn’t respond to requests for comment.
Kaegi says real market data supports his assessments of downtown hotels.
“If you’re a hotel and you have a really bad year, you want the whole valuation to springboard off of that single bad year, because what that does is that assumes that a buyer would assume that level of real distress into perpetuity,” he says. “And if you look at actual transactions that have happened and also how collateral is being repriced by lenders, they’re not assuming that kind of nuclear winter into perpetuity.”
Recent sales support Kaegi’s argument. The Hard Rock Hotel on North Michigan Avenue, now called the Pendry Chicago, sold in September 2020 for $65.6 million, or $180,200 per room. A room at the Trump hotel costs a lot more than one at the Pendry, so the Trump hotel theoretically should be worth more. Yet Trump’s appraisal works out to just $78,800 a room, less than half the Pendry’s per-room price. In November 2020, the Waldorf Astoria in the Gold Coast, a luxury hotel more on par with the Trump, sold for $54.5 million, or about $290,000 per room–more than three time’s the appraised value of the Trump.
Another source of valuation data are appraisals performed for lenders, which are generally more reliable than appraisals used for appeals. The W Chicago – City Center in the Loop, another hotel with lower room rates, was appraised for lending purposes at $73.6 million, or $182,600 per room, in April 2021, according to Bloomberg data. A closer peer to Trump, the JW Marriott in the Loop, was appraised at $210 million, or $344,300 per room, in August 2020, Bloomberg data show. Both properties were financially distressed.
Trump’s New York-based company, the Trump Organization, also has appealed the assessor’s valuation on the nearly empty retail space in its Chicago property. The assessor values the 74,000-square-foot space at $21 million; an appraiser working for Trump values it at $13.3 million.
For assessment purposes, properties in Cook County are valued as of Jan. 1 of an assessment year. The 2021 assessment will be used to calculate the final 2022 tax bills, expected to come out in November. The Trump hotel’s property taxes totaled $3.2 million in 2020, according to the MVS appraisal.
Though Trump may stand out for his brashness and the scrutiny he is attracting from prosecutors these days, his assessment appeals aren’t unusual for Cook County. In fact, the city’s best-known luxury hotels—the Peninsula, the Four Seasons, Ritz-Carlton, Langham and Waldorf Astoria—all have appealed their 2021 assessments.
Appraisals commissioned by the attorneys representing four of the hotels range in value from $96,100 per room to $155,100 per room—arguably low for the market but still higher than Trump, at just $78,800. After all, Trump isn’t the only one who doesn’t like paying property taxes.