ISLAMABAD: The Privatisation Commission on Tuesday rejected reports that Roosevelt Hotel, the property of Pakistan International Airlines (PIA) at the heart of midtown Manhattan, has been sold.
“The Privatisation Commission (PC) has not yet started the process for hiring a financial adviser/valuator for the privatisation of Roosevelt Hotel, which is the first step under the law for initiation of any transaction by PC,” a press release stated on Tuesday.
“Therefore, any allegations stating that Roosevelt Hotel has been sold are falsely fabricated,” the press release stated.
“Whenever PC initiates the said hiring process, advertisements seeking expressions of interest for financial advisory/valuator services are widely published by PC, both in the domestic and international press, as per the legal requirements,” the statement added.
It further stated that even after a Financial Advisor/Valuator has been appointed, various steps in the privatisation process need to be completed before concluding the privatisation or sale of any entity.
“These steps, which require the approval of the PC Board and the Cabinet Committee on Privatization (CCoP), include but are not limited to finalizing the transaction structure, publishing advertisement seeking Expressions of Interest from Investors, finalizing the valuation and reference price, and finalizing the bidding process and results,” the statement added.
PC categorically denied having taken any of these steps with respect to Roosevelt Hotel, and clarified that there isn’t any plan to do so at present.
The commission further clarified that no single person could make the decision to sell or decide the price of any entity being privatised, given the broad-based decision-making process, which includes engagement and consultation with many forums at each and every stage of a privatisation transaction.
“PC fully understands and appreciates the importance of transparency and integrity in the privatisation process, and always endeavors to ensure the same,” the press release added.
The Roosevelt Hotel bearing a quintessentially American name stands on the corner of 45th Street and Madison Avenue, in the heart of Midtown Manhattan.
The Roosevelt Hotel was completed in 1924 and is named in honour of former US President Theodore Roosevelt, who had previously been the governor of New York State. It has 1,015 rooms, including 52 suites. Some of the suites are among the most luxurious available in Manhattan. The hotel has a remarkably good location, adjacent to Grand Central Terminal, one of the two major railway stations in New York, and right in the middle of the largest business district in the US.
In 1979, PIA, through its subsidiary PIA Investments Limited, leased the hotel on a 20-year lease with the option to buy the hotel at a specified price at the end of the lease period. One of the investors in the deal was Prince Faisal bin Khalid bin Abdulaziz Al Saud of Saudi Arabia. The hotel is operated through a management contract by Interstate Hotels and Resorts – a subsidiary of Brookfield Asset Management, a Canadian investment firm.
In 1999, during the second administration of Prime Minister Nawaz Sharif, the government chose to exercise its option of purchase and bought the hotel, along with Prince Faisal, for $36.5 million. The previous owners engaged in a year-long battle in court, arguing that since the hotel was worth at least $250 million at the time, they should not be obliged to sell at the previously arranged price. New York courts ruled in favour of the Government of Pakistan in June 2000, though PIA was forced to pay off the $23 million mortgage on the hotel.
And so, in the early years of the Musharraf administration, the government came to own a prime piece of New York real estate and bought it at a steal of a price. Yet in reality, this was merely the recovery of what had until then been a losing deal for PIA. The Roosevelt Hotel had lost money for PIA for nearly every year between 1979 and 1999. The government bought out the Saudi prince’s share in 2005 for $40 million.
The government put up the hotel for sale in 2007 for $1 billion but was never able to close the deal, largely due to the near-simultaneous change in government in Islamabad and collapse in US real estate prices. In 2011, the government formally took the hotel off the market.