Dubai World loses control of New York hotel

AP News
Posted: Dec 08, 2009 5:46 PM

Dubai World's investment arm, Istithmar, lost ownership of the W Union Square New York hotel in a foreclosure auction Tuesday.

One of the hotel's interim lenders, a private equity firm called LEM Mezzanine, acquired the 270-room hotel for $2 million, according to Dow Jones. The sale was another financial blow to Istithmar, which acquired the hotel in October 2006 for $285 million, according to Real Capital Analytics, a data tracking firm.

Calls to Dubai World and LEM Mezzanine were not immediately returned. LEM said in a statement it plans to continue to operate the hotel and hopes to "take full advantage of any market recovery."

New York hotels have struggled in the wake of the national recession and financial downturn that have curbed business and leisure travel. Many properties have slashed their rates to attract business.

At the beginning of December, owners of eight New York hotels worth a total of $985 million were in financial distress, including a Courtyard Marriott and The Time Hotel, according to Real Capital Analytics.

The W was not the only Dubai World hotel in trouble. The Fontainebleau in Miami Beach is also in financial straits. The property's $660 million loan was due in August. Contractors also claim the owner of the historic hotel owes them $60 million.

The New York auction comes almost two weeks after Dubai World revealed it was seeking at least a six-month delay on repaying $60 billion in debt. The news rattled world financial markets and credit agencies slashed the debt ratings on Dubai's state companies, saying they might consider the plan a default.