Privatisation of Roosevelt Hotel moves forward as CCOP weighs sale vs. partnership options

ISLAMABAD: The government has directed the Privatisation Commission to proceed with the privatization of the profitable Roosevelt Hotel in New York through competitive bidding. However, it was undecided whether to pursue a complete sale or a partnership-based management approach.

The Cabinet Committee on Privatisation (CCOP), led by Deputy Prime Minister Ishaq Dar, made this decision based on the recommendations from the Ali-Pervaiz Committee, chaired by Petroleum Minister Ali Pervaiz.

The Ali Committee advised that the Roosevelt Hotel should be privatised through open bidding, but it suggested that the Privatisation Commission determine the most suitable transaction structure for the sale.

This structure should take into account potential risks and the necessary time to maximise proceeds, with final decisions presented to the CCOP for endorsement.

In contrast, the Privatisation Commission board proposed exploring privatization via a government-to-government model, keeping three transaction options open for negotiations: outright sale, joint venture, or a 99-year lease.

However, this recommendation diverged from the financial advisor’s proposal.

The financial advisor recommended three alternatives: a complete sale of the hotel land, forming a joint venture with a potential development partner for future construction, or a 99-year ground lease with an identified developer, with the joint venture option favoured for maximizing returns.

A statement from the Deputy Prime Minister’s Office revealed that the CCOP assessed the status of ongoing privatisation initiatives, including the Roosevelt Hotel, and stressed the need for the Privatisation Commission to expedite the process.

Earlier, the Privatisation Commission had notified the International Monetary Fund (IMF) that the CCOP would determine the hotel’s privatisation structure, based on the Ali Committee’s report.

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Adding to the urgency, the New York City government has issued a notice to terminate its deal effective in July, one year before its expiration, which could result in an estimated $80 million business loss. The city government had previously agreed to a rate of $210 per room in the third year of the deal. Additionally, sources indicated that the hotel might be designated as a heritage site again if the agreement with the city ends, reported the Express Tribune.

Previous concerns were raised by the CCOP regarding the potential impact of President Donald Trump’s anti-immigration policies on the $228 million three-year deal. The IMF was informed that alternative business options were being explored.

Pakistan hired Jones Lang LaSalle Americas as the financial advisor for the Roosevelt privatisation process at a cost of Rs2.1 billion. The advisor emphasized the joint venture option for future development of a multi-story mixed-use skyscraper, citing its expertise in the New York real estate market.

Despite this, the Privatisation Commission board expressed reservations about potential governance and relationship management issues that could arise in joint ventures, cautioning against possible legal disputes.

According to the financial advisor’s report, under the outright sale option, bidders would propose offers based on the land value at a floor area ratio (FAR) of over 30, with all necessary approvals already secured. The successful bidder would be required to secure final approvals within a three-year timeframe.

The advisor noted that the number of interested parties would be limited in the case of an outright sale, which, while carrying the lowest risk, would yield the lowest net proceeds for the Pakistani government.

Under the 99-year ground lease model, bidders would also submit offers based on land value at FAR of over 30. This option entails long-term revenue through fixed payments across 99 years, allowing the government to retain ownership of the land. This approach presents medium risk and is expected to provide the second-highest net proceeds for Pakistan—higher than an outright sale but lower than the joint venture option.

The Privatisation Commission reported that no official offers had been made by any foreign government for the hotel under a government-to-government arrangement, reflecting a reluctance from foreign nations to invest in Pakistan.

No formal interest had been expressed by foreign governments, which is necessary for invoking the Inter-Governmental Commercial Transaction Act.

Previously, Pakistan twice approached Saudi Arabia to consider acquiring the Roosevelt Hotel, first in October and again in November 2024, but there was no progress despite meetings with Saudi officials, according to the Privatisation Commission.