ISLAMABAD: The government has directed the Privatisation Commission to proceed with the privatisation of the Roosevelt Hotel in New York through competitive bidding, leaving the decision on whether to pursue an outright sale or a partnership model open for further consideration. This decision was made during a meeting of the Cabinet Committee on Privatisation (CCOP), chaired by Deputy Prime Minister Ishaq Dar, based on recommendations from the Ali-Pervaiz Committee, led by Petroleum Minister Ali Pervaiz.
The Ali Committee recommended privatising the high-value Roosevelt Hotel via open bidding but advised that the Privatisation Commission determine the most suitable transaction structure, considering potential risks and the time required to secure full proceeds. The final structure would then be presented to the CCOP for approval.
The Privatisation Commission had initially proposed exploring privatisation under a government-to-government arrangement, keeping all three options—outright sale, joint venture, or a 99-year lease—open for negotiation. However, this approach differed from the financial advisor’s recommendations.
The financial advisor, Jones Lang LaSalle Americas, suggested three options: a 100% sale of the hotel land, a joint venture with a development partner for future construction, or a 99-year ground lease with an identified developer. The advisor favored the joint venture option as the most profitable, citing its potential to maximize gains.
According to a statement from the Deputy Prime Minister’s Office, the CCOP reviewed ongoing privatisation efforts, including the Roosevelt Hotel, and emphasized the need to expedite the process. Dar urged the Privatisation Commission to accelerate the hotel’s privatisation.
The Privatisation Commission had earlier informed the International Monetary Fund (IMF) that the CCOP would decide the privatisation structure based on the Ali Committee’s report. This decision comes as the New York City government terminated its agreement with the hotel a year early, effective July, potentially resulting in an $80 million loss. The city had leased the hotel at $210 per room for the third year.
Sources revealed that the Privatisation Commission also raised concerns about the hotel being reclassified as a heritage site if the deal with New York City ended. Earlier, the CCOP had expressed worries that former U.S. President Donald Trump’s immigration policies might impact the $228 million three-year agreement. The IMF was informed that alternative business options were being explored.
Pakistan engaged Jones Lang LaSalle Americas as the financial advisor for the Roosevelt Hotel privatisation at a cost of Rs2.1 billion. The advisor recommended a joint venture with a development partner for constructing a multi-story, mixed-use skyscraper, citing it as the most viable option for maximizing returns. However, the Privatisation Commission board cautioned about potential governance and litigation risks in joint ventures between the government and private entities.
Under the outright sale option, bidders would base their offers on the land value at a floor area ratio (FAR) of 30+, with all approvals secured within three years. The initial deposit would be paid after the bidding process approval, with the remaining amount due post-approvals. This option, while low-risk, is expected to yield the lowest net proceeds for Pakistan.
The 99-year ground lease option would involve bidders offering based on land value at FAR 30+, with a contribution agreement signed post-bidding and a ground lease finalized within three years. This model would provide long-term fixed payments over 99 years, with the government retaining land ownership. The financial advisor noted moderate to high interest in this option, which carries medium risk and offers higher net proceeds than an outright sale but less than a joint venture.
The Ali Committee was tasked with evaluating the legal, financial, technical, and international aspects of the proposed transaction structures, considering the evolving political and economic landscape in the U.S. The Privatisation Commission informed the committee that no formal offers had been made by any foreign government under a government-to-government arrangement, highlighting the lack of foreign investment interest in Pakistan.
Despite Pakistan’s efforts to offer the Roosevelt Hotel to Saudi Arabia in October and November 2024, no progress was made. The Privatisation Commission clarified that under a government-to-government arrangement, a foreign government must formally express interest, which has not occurred. This underscores the challenges in attracting foreign investment for such high-value assets.
