Landmark Watergate Hotel, Vacant for 5 Years, Faces Foreclosure

WASHINGTON, DC—Watergate, a name synonymous with the late President Richard M. Nixon, (bottom right photo) is in the news again.

Getting the attention this time is the 251-room Watergate Hotel, part of a six-building office complex overlooking the Potomac River in northwest Washington, D.C.

The property gained international headlines from the June 17, 1972 politics-motivated burglary that led to Nixon's resignation on Aug. 8, 1974.

The hotel is headed for foreclosure unless the lender, New York City-based PB Capital Corp., agrees to new terms with D.C. developer-owner Monument Realty, company officials confirm. PB Capital is a non-bank subsidiary of Deutsche Postbank AG.

Monument has defaulted on a $70 million loan that came due this week, another fallout from the real estate crash and the collapse of Lehman Brothers, a partner and equity investor in the property, reports The Washington Post.

PB Capital holds $40 million of the $70 million loan.

The hotel has been closed since Monument bought the property five years ago. At that time, the developer had planned to redevelop it as a luxury hotel but the residential market soured and shelved those plans, according to Michael J. Darby, (middle left photo) a company principal and co-founder.

"Monument is still committed to the Watergate," says Darby. "We still believe it's a phenomenal asset and will have the potential to be a great hotel in the future." Monument "would want to stay involved in the project if at all possible," Darby adds.

"Everyone thought this (Watergate Hotel concept) would be a home run at the time," says Dan Fasulo, managing director of Real Capital Analytics, a New York firm that tracks commercial real estate.

But the hotel may still surface as a successful asset, some industry watchers note.

"At the end of the day, it's a landmark," says Kurt Sachs, senior managing director at PB Capital. "The fact is, we have not foreclosed. There are investors with an interest in buying this. The question is, what kind of price are they offering us?"