ISLAMABAD - Though mystery shrouds over the fate of Pakistan-owned historic Roosevelt Hotel in New York, a senior lawmaker of the ruling Pakistan Tehreek-e-Insaf (PTI) Saturday said that the government would only sell shares of the precious property located in one of the world’s major commercial hubs. 

“The ownership of the property would remain with the government of Pakistan as we are going to sell only its shares,” said PTI lawmaker Muhammad Bashir Khan, the Parliamentary Secretary of Privatization. 

As Khan was unaware about the future use of the hotel building, he only said that the management of the building would be on shared basis — the government and private holder of shares of the property — in future. 

The remarks of the treasury lawmaker came following this week’s announcement of The Roosevelt Hotel that it would shut its doors permanently on guests on October 31. “Due to the current economic impacts, after almost 100 years of welcoming guests to The Grand Dame of New York, The Roosevelt Hotel, is regretfully closing its doors permanently as of October 31, 2020,” the announcement said. 

The opposition parties have shown their serious concerns over the decision of shutting down the hotel, one of the most prime properties of the world located in the heart of Manhattan. They say that a property of having high commercial value is perhaps being sold in a “shady way.” 

The government keeps mum over the shutting down announcement. In July this year, the Cabinet Committee on Privatization (CCoP) had announced not to privatize the hotel rather to redevelop the site for a “mixed use” through a joint venture. It had taken the decision after reports emerged that the hotel, which opened its doors in 1924 and is named after US President Theodore Roosevelt, was being privatized.

Pakistan to sell only shares of Roosevelt Hotel

“I have no information about the property,” said Abdul Sattar Khokhar, senior joint secretary and spokesperson of the Aviation Division which is the administrative ministry of Pakistan International Airlines (PIA) that actually owns the hotel. 

He said that PIA, the state-owned operator, can better answer the queries of The Nation.

Abdul Hafeez Khan, a spokesperson of PIA, also avoided to comment on the issue and only said that a detailed statement containing version of The Roosevelt’s management would be shared with the media soon. 

The Privatization Commission (PC) is of the view that it has nothing to do with the shuttering of the hotel but it was in the process of appointing Financial Advisor (FA) Consortium to undertake the leasing of Roosevelt Hotel site.

“We have no role in shutting down the hotel as Privatization Commission has to play role in its future,” said Samreen Zahra, the official spokesperson of the commission that is responsible for privatizing those state-owned properties that are on the privatization list of the government. 

She said that the commission has almost finalized the TORs (Terms of References) for appointing Financial Advisor (FA) Consortium to undertake the “envisaged leasing of Roosevelt Hotel site for setting up a joint venture project for prospective mixed-use development.” 

The spokesperson informed The Nation that the process of appointing Financial Advisor would take time under the law. “The Financial Advisor would give a better picture of the future of Roosevelt Hotel.”

In compliance with the Cabinet’s decision taken on 7th July, 2020, the PC has developed ToRs in consultation with the concerned entities including PIA and administrative ministry (Aviation Division) for the appointment of Financial Advisor Consortium, she said.   

“The FA Consortium will recommend the best suited Transaction Structure under the modes of privatization provided in the PC Ordinance /Rules and in consultation with relevant stakeholders,” the spokesperson of PC said. She added that the proposed transaction structure will be presented before the PC Board and Cabinet Committee on Privatization (CCoP) for recommendations and for approval/ratification by the Federal Cabinet. 

The officials aware of the development informed that the decision of shuttering Roosevelt Hotel was not taken in sudden. They said that the hotel was facing financial losses for the last few years, which resulted in its closure. The hotel had suffered a loss of $1.5 million during 2019. The hotel was earning profit till 2015, according to the officials of Ministry of Privatization. 

The board of Roosevelt Hotel in its emergency meeting held on July 3 this year had proposed that the hotel’s operations should be shut down because it has fallen into a debt trap.  

The Economic Coordination Committee (ECC) in August this year had approved $105 million for the payment of all liabilities and responsibilities of the hotel. At that time, the ECC was informed that even partial operations of the hotel were not sustainable at the moment.

Roosevelt Hotel had acquired a loan of $105 million from JP Morgan, an American financier, at an interest rate of 5.05% with maturity in April 2021, according to some official documents seen by The Nation. Annual interest payment had been calculated at approximately $6 million. JP Morgan later sold its loan of worth $68.25 million to MSD PCOF Partners. The sale of the loan complicated the situation for Roosevelt Hotel due to certain reasons. For the past several years, MSD has been expressing its desire to be a joint venture partner in the development of Roosevelt Hotel’s site, an official said. MSD may attempt to leverage its position in achieving the goal, the official sources said adding that it also holds air rights in the vicinity of Roosevelt. 

In July, the Cabinet Committee on Privatization (CCoP) had decided not to privatize the hotel. The committee also directed PC to hire a Financial Adviser to start the process for the transaction in the light of the report of Ms Deloitte from July 2019 which 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”. 

In July this year, an official of PIA had informed the National Assembly Standing Committee on Privatization that US President Donald Trump had shown interest in purchasing the Roosevelt Hotel. 

Management Director of PIA Investment Limited Najeeb Sami had told the meeting after former foreign minister Khawaja Asif had asked him whether anyone had shown interest in purchasing the hotel. 

However, an official of PIA on the condition of anonymity said that Trump was interested to buy the property before becoming the President of America. He said that Trump’s team had once visited the site but latter the proposed sell-out plan was shelved. 

The opposition parties have said that the entire matter of the sale of hotel should be brought before the parliament for a detailed discussion. “We are against move to sell this property because of its high commercial value,” said the opposition Pakistan People’s Party (PPP) leader Farhatullah Babar. He demanded that the entire matter should be brought be the parliament as earlier the government had announced that it would not privatize the hotel. He reminded that some efforts were made to sell the hotel in mid-90s and it has always been observed that some people with having vested interests have been found involved in its sale and purchase.