ISLAMABAD:
On Friday, Pakistan approved the hiring of an American real estate management firm for the privatisation of its prized real estate asset, the Roosevelt Hotel, located in the heart of New York. The badly managed property is currently owned by Pakistan International Airlines (PIA).
The Privatisation Commission’s board granted approval to appoint the consortium led by Jones Lang Lasalle Americas Inc (JLL) as the financial advisor for the “privatisation and joint venture development of Roosevelt Hotel, New York,” according to a statement by the Privatisation Commission.
Jones Lang Lasalle (JLL) is a Chicago-based real estate management firm chosen to formulate a transaction structure for the hotel’s privatisation. The decision to hire a financial advisor was made in July 2020, and it took two and a half years to finalise the selection.
Jones Lang Lasalle’s net worth is $7.4 billion, exceeding the total official reserves held by the State Bank of Pakistan (SBP).
Federal Minister for Privatisation Fawad Hasan Fawad granted approval for the appointment of the Financial Advisor (FA) for the privatisation and joint venture development of the Roosevelt Hotel in New York, according to the Privatisation Commission’s statement.
The advertisement inviting technical and financial proposals for the Roosevelt Hotel transaction was published this year, and after an extension, four parties submitted proposals. The consortium led by Jones Lang Lasalle Americas Inc (JLL) was declared the “Top ranked Interested Party” based on the evaluation criteria.
The board also established a negotiating committee and assigned it the task of concluding the financial services agreement with the Chicago-based firm.
The Roosevelt Hotel, situated in the heart of the global commercial and tourism hub, is currently owned by the financially troubled PIA. The PIA owns the hotel through PIA-Investment Limited, which holds its stakes through a subsidiary registered in the British Virgin Islands. The hotel, located at a prime location, was closed in December 2020. In May, Pakistan approved leasing the Roosevelt Hotel at a nominal rent to the New York City government.
The Roosevelt Hotel also faces the possibility of being declared a heritage building by local authorities in New York. Pakistan’s Foreign Office has previously urged the US ambassador in Islamabad to request New York authorities not to declare the property a heritage building.
A 2019 report by Deloitte recommended that the “highest and best use of the Roosevelt Hotel Property is to redevelop the site into a mixed-use (through Joint Venture) of primarily office tower over retail and condominium.” It remains unclear whether the new financial advisor will follow these recommendations.
Read: Roosevelt Hotel may be declared cultural heritage
The Privatisation Commission Board on Friday also approved the delisting of two entities from its already thin privatisation list.
The Board recommended delisting the 425 MW Nandipur Power Plant (NPP) and 747 MW Guddu Power Plant (GPP) from the privatisation programme, citing longstanding issues pending for over five years related to these power plants. The Board recommended seeking delisting approval from the Cabinet Committee on Privatisation (CCoP).
The Privatisation Commission has been criticised for hiring financial advisors at hefty fees, conducting global road shows, and subsequently delisting entities without achieving intended objectives, resulting in significant financial losses. The board members also charge fees for attending board and technical committee meetings, yet their output remains low.
In 2016, the Commission conducted international road shows for the Kot Addu power plant but failed to resolve issues, such as providing comfort to foreign investors regarding major agreements. The matter of Rs27 billion in liquidated damages and the expansion of coal-fired power plants remained unaddressed.
The interim government has already approved the delisting of Pakistan Steel Mills from the active privatisation list.
The board was also briefed about the financial services agreement recently concluded with Ernst & Young LLC, Dubai-led consortium for the divestment of PIA. The board gave approval to a transaction committee headed by the secretary, privatisation commission, to oversee the implementation of the Financial Services Agreement (FASA) for PIACL divestment.
The board, after considering issues and litigation in the case of Pak China Fertilisers Limited, directed the Privatisation Commission to pursue the speedy disposal of cases in various courts to recover outstanding dues and to hire the services of an expert lawyer for this purpose.
Published in The Express Tribune, December 2nd, 2023.
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