Roosevelt: A New
York Money Making Gem Pakistan Wants to Throw Away
By
Charles V. Bagli
NEW
YORK: The Roosevelt, the dowager hotel near Grand Central Terminal,
is being sold by its Pakistani and Saudi owners, who have controlled
it for more than two decades.
Pakistan
International Airlines, which is owned by the Pakistani government,
and Prince Faisal bin Khalid of Saudi Arabia are putting the 1,013-room
hotel on the auction block in the hope of raising about $225 million.
It is not the best time to sell a
hotel, even one wrapped in limestone and antique French marble.
Foreign tourists are scarce and room rates are down. But the 20-story
hotel is being looked at by developers and hotel companies that
see the rare opportunity to buy an entire block in the city's
premier office district.
Some real estate executives said
the Roosevelt, which sits on a one-acre parcel bounded by Madison
and Vanderbilt Avenues, between 45th and 46th Streets, could even
be demolished in the future to make way for a new skyscraper.
"You don't get much more prime
real estate than this site," said John Fox, a senior vice
president at PKF Consulting, a hotel consulting company. "The
public areas are some of the nicest in New York, although the
guest rooms are a little small. The question is: Is it worth more
as something else?"
According to real estate executives,
several hotel companies as well as developers like Donald J. Trump,
Harry Macklowe, Sheldon Solow and Alan B. Friedberg are circling
the hotel, which has a gilded ceiling in the lobby, marble floors
and a brass pendant clock.
"I think the world's going to
bid on it," said one developer, who added that he would be
one of the bidders. "You could keep it as a hotel for a while
and then do office development, but I think it works as a hotel."
The Roosevelt was to go on sale earlier
this year, said Lawrence B. Wolfe, a managing director of Eastdil,
the real estate investment bank representing Prince Faisal and
Pakistan Airlines, but the process was delayed until after the
war in Iraq.
The partners have decided to sell
the Roosevelt, as well as the Hotel Scribe in Paris, to raise
cash for the airline and to continue a government privatization
effort in Pakistan.
The Roosevelt opened in 1924 as part
of Terminal City, a complex of hotels and office buildings near
Grand Central that were linked to the terminal by underground
passageways. One of the first hotels to offer a health club, child
care and a dog kennel, the Roosevelt was included in scenes from
movies over the years, like "The French Connection,"
"Wall Street," "Malcolm X" and "Maid
in Manhattan."
Like the railroad that built it,
the hotel had fallen on hard times by the 1970's. The Loews Corporation
paid $55 million to buy the Roosevelt in 1979 from the bankrupt
Penn Central Railroad, along with two other railroad hotels, the
Barclay (now the Intercontinental Hotel) and the Biltmore. Loews
quickly resold the Roosevelt to Paul Milstein, a developer, for
less than $30 million. (Mr. Milstein also bought the Biltmore,
demolished it and built the Bank of America Tower.)
Nine months later, Mr. Milstein leased
the hotel to a joint venture of the Pakistani airline and Prince
Faisal for $2.7 million to $4 million a year in rent.
The airline and its partner, however,
had more than $70 million in operating losses over the next 16
years, Aslam R. Khan, managing director of Pakistan Airlines Investments,
said in an interview in 2000. The hotel took on a dowdy cast,
with threadbare carpets and tarnished brass fixtures.
In 1996, the airline brought in a
new management company and spent $58 million on renovation, and
the hotel started to turn a profit. According to sales documents,
the Roosevelt had a net operating income of $12.7 million last
year and a 74 percent occupancy rate, down from $29 million in
income in 2000 and an 84.8 percent occupancy rate.
The
airline and the Saudi prince bought the hotel after becoming embroiled
in a legal battle in 1999 with the Milstein family over the 20-year-old
option to buy for $36.5 million. The Milsteins thought the property
was worth about $250 million, but the State Supreme Court eventually
ruled in favor of the airline. - NYT
SAT
Reporter Adds from New York:
Financial analysts are finding it
difficult to explain why Pakistan wanted to sell a business in
the heart of the largest city in the world which was giving them
more than a million dollars a month, net after all the operating
expenses.
These experts say special lobbies
within PIA and the Finance and Defence Ministries of Pakistan
had always wanted to make a kill in shape of hefty kickbacks by
selling off a piece of property which could easily pay itself
off in a few years, even though profits had come down from $29
million in 2000 to $12.7 million in 2002 because of 9/11.
"How many businesses in Pakistan
are making a million dollar a month in net profits," an expert
asked in New York. "Even PIA itself cannot claim to be making
such regular and guaranteed money. Roosevelt has been and can
always be a very solid financial backbone of PIA itself,"
the expert said.
Besides its financial aspect, owning
a prime property in the heart of Manhattan has its own political
and other advantages as well. Roosevelt employes thousands of
workers in New York and Pakistani Government leaders always have
a secure place to stay, whenever they are in New York. Selling
the hotel would deprive Pakistan of many advantages.
