KARACHI: The Roosevelt Hotel, New York owned by Pakistan International Airlines (PIA) is going to close its doors for guests, permanently by October 31, 2020.
The announcement was made public through its website “theroosevelthotel.com,” which stated that the hotel is regretfully closing its doors permanently as of October 31, 2020, due to current economic impact.
Moreover, it stated all reservations beyond October will be offered alternative options by the hotel management. "For those guests with future reservations, we are working on communicating alternative accommodations," the statement said.
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. Later, 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.
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. However, 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. It is an extremely valuable asset hence there were reports that the US President is also interested to buy it.
Although the consolidated financial statements of PIA also showed that the hotel contributed a negligible amount in terms of annual cash flow to the airline, the incumbent government had put this hotel in privatization list last June, which triggered severe criticism on the government. Later it was delisted by the Privatization Commission with the decision to hire services of a financial advisor to lease out the Roosevelt Hotel site in Manhattan, New York, for setting up a joint venture project.
M/s Deloitte in its draft report dated July 18, 2019, after analysing multiple options recommended that the highest and best use of the Roosevelt Hotel property was to redevelop the site into a mixed use of primarily office tower over retail and condominium if necessary. Meanwhile, PIA spokesman said that the decision was made to save operating costs in a down market.