Symbolizing banks' success in putting real estate problems behind them, an agreement in principal has been reached by developer Donald Trump and his lenders to sell the historic Plaza Hotel in New York to an international investor group.
The agreement, placing a value of $325 million on the property, will reduce the equity stake banks hold from 49% to "somewhere under 20%," according to a banking industry source.
A bank group led by Citicorp, a general partner in the hotel since a 1992 restructuring of a $125 million personal loan to Mr. Trump, now becomes a limited partner.
The buyers have agreed to pay $25 million a year for three years on a $300 million mortgage on the property. Citicorp and Industrial Bank of Japan are co-leaders of that loan.
The investors include CDL International Hotels Ltd., the same group that last year bought the Millenium Hotel from Chase Manhattan Corp. and the Hotel Macklowe from Chemical Banking Corp.
CDL and Saudi Arabian Prince Alwaleweed bin Talal bin Abdulaziz al Saud - who bought a large stake in Citicorp several years ago - will acquire a controlling stake in Plaza Operating Partners.
In addition to agreeing to pay down part of the mortgage, the group will pay for $28 million of renovations over the next two years.
Mr. Trump, who acquired the hotel for about $400 million in 1988, will retain a small interest and is expected to put together a program to develop luxury condominiums in the upper floors of the hotel building.
Bankers said the deal was of little importance to Mr. Trump, who effectively ceded control of the property to lenders in 1992.
"I intend to roll up my sleeves and work hard to maximize value at the hotel," Mr. Trump said.
The deal is scheduled to close no later than June 30 subject to approval by the banks.