PIA owned Roosevelt Hotel in NY is closing down permanently

Pakistani government-owned Roosevelt Hotel has announced that "it is closing its doors permanently."

The hotel's management has cited economic reasons for its abrupt closure. “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,” said a statement released on the hotel's behalf.

Another statement said that 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," noted the statement further.

In July Pakistan's government decided against selling the hotel and announced to run it through a joint venture.

According to a Finance Division statement, the Privatisation Commission was to hire the services of a financial adviser to start the process of its privatization.

A report by accounting firm Deloitte from July 2019 recommended that “the highest and best use of the Roosevelt Hotel property is to redevelop the site into a mixed-use [property] (through a joint venture) of primarily an office tower over retail and condominium.”

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.

‘History of PIA Roosevelt’

The hotel originally opened in 1924, it was leased by the Pakistan International Airlines through its investment arm PIA Investments Ltd. (PIA) in 1979, with an option to buy after two decades.

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.

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.

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.

Earlier, the PPP had opposed the closure of the hotel by calling it an ill-timed move. “Is this the time to sell Roosevelt Hotel, when due to the pandemic property prices have come down significantly and it will result in a loss to Pakistan as we will not get the right price?” PPP’s leader Sherry Rehman said in a statement.

“The property is worth billions and it was making a profit when I was serving as ambassador to the US,” she added.

In July, another report revealed that the United States President, Donald Trump is interested in purchasing the PIA owned Roosevelt Hotel.

Roosevelt Hotel has been a symbol of Pakistan's culture and PIA's glory days for decades.

The Pakistani government has not explained why the hotel is closing down only two months after it decided against the decision.