Pakistan Airlines (PIA) Puts Roosevelt Hotel for Sale: Asking Price = $1 Billion

Posted on July 11, 2007
Filed Under >Adil Najam, Economy & Development
14 Comments
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Adil Najam

Old Logo of Pakistan International Airlines PIAPakistan International Airlines’ (PIA‘s) earlier failure to sell Roosevelt Hotel, the prestigious New York property that it owns, because of political in-fights and charges of corruption may yet turn into a windfall for the beleaguered airline.

The story of PIA and the Roosevel Hotel is a long and complicated one; it reads likea roller coaster with financial ups and downs, failed attempts to sell, political intrigue, Saudi princes, court cases, and more.

Roosevelt Hotel, New York, owned by Pakistan AirlinesRoosevelt Hotel, New York, owned by Pakistan Airlines

But, first, the news at hand as reported in the New York Post (12 July, 2007):

NO sooner did we whis per the Roosevelt Hotel as being a potential development site last Friday then we were tipped that it was actually coming to market – and could sell for, gulp, $1 billion as an office development site. Just over a year ago, the Pakistani government, which owns the 1,013 room hotel as PIA Investments, bought out its 50/50 Saudi partner, Prince Faisal bin Khalid of Saudi Arabia.

Infighting and Pakistani political factionalism stopped an earlier sales effort in 2003 that would have brought in around $225 million slated to be used to purchase new jets for its airline. Sources said Cushman & Wakefield will be marking the hotel through its Fab Foursome: Richard Baxter, Ron Cohen, Scott Latham and Jon Caplan. The company declined comment. At a breakfast meeting at Michael’s yesterday morning, C&W executives were bullish on the ongoing sales and leasing markets, as vacancy rates have dropped to 5.3 percent and asking rents are up to $75.79 a foot in Midtown, a 35 percent jump since this time last year.

The hotel occupies nearly a full-acre block just north of Grand Central Terminal bounded by 45th and 46th Streets, Vanderbilt and Madison avenues. Its 43,000 foot site can be built to 800,000 feet as-of-right, but attorneys say that special district air rights can be piled on to create a skyscraper that could leap to 1.5 million feet. Potential bidders are being advised to compare the hotel to the site next to the Museum of Modern Art which sold for $775 a buildable foot, but is mid-block near Sixth Avenue. Over a number of years making strategic land and air rights purchases, Macklowe Properties paid around $950 a foot for the Swisshotel Drake New York at Park Avenue and 56th Street, which they have changed from a residential hotel to offices. Office rents have since climbed markedly in the city with 18 deals completed at over $125 a foot this year alone versus 16 in all of last year.

Roosevelt Hotel, New York, owned by Pakistan AirlinesThe article suggests that a USD 1 billion price may be achievable. If so, it will come as a welcome relief to the airline that was once a ‘high flying’ operation (here and here) but has been going down, down, down with a recent spate of crashes, barred from EU airports, technical troubles, financial troubles, management troubles, and more (here, here, and here). The Roosevelt Hotel and PIA’s relationship has itself been a rocky one. Most recently it was in the news when the Saudi Foreign Minister sued the Pakistan airlines for blocking him from selling his shares in the holding company through which the hotel is owned by PIA, and therefore by the Pakistan government (since PIA is the state airlines).

The cash strapped airline has been trying to off-load this and other properties to get some much needed cash for a while. Back in August 2003 it had an offer of US$ 225 million (at which time it also had liabilities worth US$ 70 million). By February of 2005, it was being reported that the government would hold off the divestment of its PIA investments including the Roosevelt Hotel. Dawn newspaper reported then:

The action is reported to have been taken at the request of Saudi Arabia’s Prince Faisal bin Khalid who holds 50 per cent shares in The Roosevelt. The documents reveal that the PIAIL wanted to sell the hotel on a “priority basis to repay the loans obtained by the PIA”. In order to raise the much needed cash for the PIA the management has now decided to sell another prime property, Hotel Scribe in Paris, an official said [ATP Comment: This did not, in fact, happen]. According to the documents, the decision to auction The Roosevelt was approved after an amount of $65 million was spent on renovation of its “1040 classically furnished rooms.”

According to the sales documents, The Roosevelt had a net operating income of a little more than $12 million in 2002. The net income had come down immediately after the 9/11 incident; the hotel earned a profit of $29 million in 2000 with an 84 per cent occupancy rate. According to the PIA, the renovation at a cost of $65 million not only recaptured the original inspired interiors but also restored The Roosevelt to its 1920s splendour and “status as one of Madison Avenue’s finest hotels”.

Last year, however, things changed yet again when a new managing Director for PIA’s investment arm was appointed and (a) it was decided that PIA would seek a sale of Roosevelt Hotel and (b) the shares earlier owned by a Saudi Prince were acquired by PIA. According to The News (18 March, 2006):

The PIAIL, a subsidiary of PIA, owns four hotels including Roosevelt Hotel in New York and Scribe Hotel in Paris. The PIA management was the partner of 50 per cent shares in all these four hotels. However, recently the PIA has acquired the remaining 49 per cent shares of its Saudi partner in the Roosevelt Hotel by paying $67m to dispose of the hotel. Now, the PIA owns 99pc shares of Roosevelt and only one per cent share remains with the Saudi partner for taxation purposes.

Given that this was PIA and Pakistan all sorts of rumors and speculations have been floating all the time. It seems now that the Roosevelt Hotel is, in fact, up for sale. It also seems that teh US$ 1 Billion price is a realistic one. But as anyone who has ever flown PIA would attest, there can still be many ‘slips’ between the ‘cup and the lip’.

14 responses to “Pakistan Airlines (PIA) Puts Roosevelt Hotel for Sale: Asking Price = $1 Billion”

  1. Bola Tinubu says:

    I am Ashiwaju Bola Tinubu, Ex Gorvernor of Lagos State, Nigeria. I saw your real estate in my search for a real estate to invest in and i am very much interested to buy. please get back to me via my personal email address so that we can discuss the terms and conditions. my email is bolatinubu123456789@yahoo.com i want to communicate via my personal email address only for security reasons because as the immediate past gorvernor of lagos state, all my activities as well as investments are being monitored by the Nigerian Gorvernment and the EFCC.

    I will be waiting to hear back from you soonest.

    Yours Sincerely,
    Bola Tinubu
    (Ex Gorvernor of Lagos State Nigeria)

  2. Sufi says:

    For the record, PIA posted losses of around Rs. 28 billion. So almost half of the money coming in from Roosevelt will be balancing that out.

  3. Deeda-i-Beena says:

    Selling Roosevelt Hotel because the New York Real Estate market has reached a high would be a good business decision. A better decision would then be to reinvest the proceeds for further growth. But, to sell this prime property just to overcome the dire financial straits in which PIA finds itself is no solution. To sell family jewels to pay for the living expenses is certain to send them to the poor house for good. When PIA bought the Roosevelt and other properties, they were a great and profitable Airline which saved money to invest. The wisdom and abilities of those Managers have resulted today with the wealth that would pay for the mis-deeds of today’s mis-Managers.
    The problems of PIA are not cash flow. It is the gross mismanagement and parasitic, touching on suicidal behaviour and practices of each and everyone of its workers. They are unable to comprehend that if there is no PIA, there is no job for them.
    It is impossible to visualise a more callous outfit. When the Continental Airline was going into Bankruptcy, its employees rose shoulder to shoulder, took salary and benefits cuts and resurrected an almost dead ailine. Today, despite the airline industry’s malaise, it has emerged as one of the successful airline. Shame on all those who work for PIA. Whatever happened to THE GREAT PEOPLE?

  4. jayjay says:

    PIA has become a drain. There is no point in keeping this white elephant running as a public enterprise, when tax-payers have to subsidize its operational cost. Our obsession to keep PIA flying as a ‘national flag carrier’ is prejudicing the government against opening up its skies to competition and therefore making air travel cheaper. Sell the hotel, sell the airline, sell the Steel Mills and all loss making entities. It is not a government’s job to run soup kitchens of armies of ‘hudharams’. We should rather spend the billions, spent on propping up these unviable ventures, on developing infrastructure, and health and education facilities.

    No more new airplanes please when parasitical staff and manager will nullify any productivity gains.

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