Government commits to PIA privatisation by July, Roosevelt Hotel’s future still in limbo

ISLAMABAD: The government has given assurances to the International Monetary Fund (IMF) regarding the planned sale of Pakistan International Airlines (PIA) by July. However, the future of the Roosevelt Hotel in New York remains uncertain following the recent decision by the US to terminate an early lease agreement valued at $228 million.

In a briefing to the IMF regarding the stalled privatisation agenda in Pakistan, federal authorities indicated a commitment to privatise between five to seven entities. This includes PIA, three financial institutions, and three power distribution companies, as communicated by government sources. Among the financial institutions on the list for privatisation is Zarai Taraqiati Bank Limited (ZTBL), with hopes of completing its sale by November of this year, reported The Express Tribune.

The IMF was informed that the Cabinet Committee on Privatization (CCOP) is deliberating whether to sell the high-value Roosevelt Hotel or enter into a joint lease agreement. Owned by PIA, the hotel is situated in a premium location recognized as one of the top 1 percent of the most expensive properties globally.

The hotel boasts 1,025 rooms and had been leased to the Immigrant Housing Business by the New York City Government for three years starting in July 2023. However, the New York City government has issued a notice to terminate this lease a year early, effective July, which is projected to result in an estimated $80 million loss of business as the third-year rate was set at $210 per room.

In November of the previous year, the CCOP expressed concerns that President Donald Trump’s anti-immigration policies might jeopardise the lease agreement.

The IMF was made aware that authorities are exploring alternative business options. Despite appointing multiple financial advisors, the government has yet to reach a definitive decision regarding the privatisation of the Roosevelt Hotel.

Pakistan enlisted Jones Lang LaSalle Americas as the financial advisor for this transaction at a cost of Rs2.1 billion, which includes milestone-related payments and a success fee of 0.95 percent of the sale proceeds.

Parliamentary report links PIA’s decline to Open Sky Policy, management failures

The IMF was informed that the CCOP is expected to make a decision soon regarding the privatisation method for the hotel, based on recommendations from a committee led by Ali Pervaiz Malik, who is now serving as the federal minister for petroleum. The committee has proposed that the valuable Roosevelt Hotel be privatised through an open bidding process after Saudi Arabia declined to formally express interest in acquiring the PIA-owned asset. However, the CCOP has yet to address the committee’s findings.

The Privatisation Commission stated last year that for a government-to-government deal, a foreign government needs to formally declare its interest before invoking the Inter-Governmental Commercial Transaction Act. As of late December, no foreign government had shown any formal interest in acquiring the hotel, based on the committee’s discussions.

The special committee has put forth to the CCOP that the hotel be sold via open and competitive bidding. Nevertheless, they have also left the decision regarding whether to sell the hotel outright, develop it as a joint venture, or lease it for 99 years up to the Privatisation Commission.

In relation to PIA’s privatization, the Privatisation Ministry informed the IMF about its status, setting a deadline of July 2025 to divest the struggling entity, according to sources. Previous attempts to privatize PIA have faltered, mainly due to a lack of thorough evaluation processes, which led to the only bidder being a real estate developer who offered Rs10 billion—significantly less than the minimum requirement of Rs85 billion.

Sources indicated that the IMF was informed that the government is currently assessing market sentiment before issuing an Expression of Interest to invite potential investors by the end of this month. There appears to be some hesitation on the government’s part regarding the outcome of this second attempt, as they have resumed gauging investor confidence and interest in acquiring a company in financial distress.

Authorities mentioned to the IMF that three parties may participate in the upcoming bidding process. This includes two bidders who previously withdrew when the government did not consent to waive the 18 percent sales tax on aircraft leasing and the exclusion of Rs45 billion in liabilities from PIA’s balance sheet before privatization. The IMF has already agreed to relax these two stipulations, along with the opening of European routes, as critical incentives to encourage a successful second attempt at privatisation.