And the W Hotel Union Square was foreclosed and sold for $2 million. No I didn’t forget any zeros next to that lonely “2″. Dubai World’s investment arm, Istithmar World fetched around $50 million in cash and borrowed the remaining $232 million to buy a 90% stake in the W Hotel Union Square (New York) in October 2006. A few months ago, Istithmar bought the remaining 10% stake from UBS AG for a mere $4 million. According to the Wall Street Journal, Realpoint LLC, a credit-rating company, estimates that the hotel is now worth $137.5 million. One of the junior debt-holders with $20 million at stake, LEM Mezzanine, bid $2 million to salvage whatever debt it can from the hotel. It also assumes the liabilities. I guess LEM Mezzanine is betting that they can recover value from the hotel as the hotel market recovers and they would be able to pay off the senior debt and theirs. Dubai leaves empty handed.
Dubai World’s investment arm, Istithmar World, went on a cursed spending spree at the peak of the bubble buying prized assets at inflated prices in 2006 and 2007. Dubai leveraged its way into deals as it didn’t have the oil revenues of its cousin Abu Dhabi. Leverage was huge in these deals and everything was going just great. According to Monitor Group, Istithmar invested $3.8 billion of its capital which it leveraged up to $14 billion and bough trophy assets at inflated prices such as Barneys, Queen Elizabeth 2 cruise liner, Cirque du Soleil, and the Mandarin Hotel-New York. Now the deleveraging phase takes over and let me tell you: it hurts and will hurt for a while.
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Loading ...Tags: Default, dubai, Dubai World, Istithmar World, W Hotel Union Square
“W” for “Woe” (distress or grief)
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leverage is like a carrot or a cucumber (depending on where you’re from). also with that 2MM they are liable for the remainder of the debt as you noted although it is most likely non-recourse.
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Wow, that’s bad. I hear that Dubai government has been placing a very tight sensorship on media lately. And of course putting all blame of their suck up on thee media.
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[...] in December 2009, Keynesian wrote an article titled Dubai’s W Hotel-Union Square Sold for $2M where Istithmar World PJSC was forced to accept $2M for its W Hotel in New York at a foreclosure [...]
Now, the hotel shouldn’t have been sold for a mere 2 mills. They completely overlooked the alternatives.
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