https://arab.news/p9csj
- Global real estate firm JLL resigned as financial adviser for hotel’s partial sale in July over conflict of interest concerns
- Economists say JLL’s resignation was a setback but would not detail privatization, demand timely decisions
ISLAMABAD: Pakistan’s government has initiated the process to hire a new financial adviser for the partial sale of its New York-based Roosevelt Hotel, Adviser to the Finance Minister Khurram Schehzad confirmed this week, clarifying that the transaction would be completed this year.
Pakistan plans to sell a minority stake in the century-old Manhattan hotel and is seeking a redevelopment partner as part of a broader effort to offload loss-making state-owned assets under a $7 billion agreement with the International Monetary Fund (IMF). The Roosevelt Hotel, viewed as one of Pakistan’s most valuable foreign holdings, was closed in 2020 and has since operated intermittently, including as a migrant shelter.
Global real estate firm Jones Lang LaSalle (JLL) last month resigned from its role as financial adviser for the hotel’s privatization, citing a conflict of interest due to client interest in the property.
A report in English-language newspaper ‘The News’ on Thursday claimed that if the Privatization Commission accelerates the process of hiring JLL’s replacement, it would require 18 months to do so. The delay will burden the national exchequer with at least $50 million in the form of debt servicing and maintenance, the report claimed.
“The advertisement for the new financial adviser has already been published and the selection process is underway,” Schehzad told Arab News on Thursday, responding to the report.
Pakistan has said it would not carry out an outright sale of the hotel but has decided to adopt a joint venture model to maximize long-term value.
Schehzad said JLL completed the entire transaction structure for the joint venture, which was approved by the Privatization Commission and the federal cabinet.
He said the new adviser would proceed with the same structure and would only be responsible for finding a development partner for the venture.
“Therefore, there will not be a delay of one-and-a-half years as reported,” the finance official clarified. “Instead, the transaction will be completed within this year as planned.”
Schehzad said JLL resigned from the process as the firm was interested in becoming a partner on the buyer’s side, which would have created a conflict of interest.
“They even committed to returning all the money they had received in their role as the financial adviser,” he said, adding that there were many parties interested in investing in the hotel.
The report had also said that a financial body had sent an official communication to the finance ministry, inquiring about the fate of its loan of $142 million to the Roosevelt Hotel after JLL resigned.
The report said the finance ministry did not respond to the institution, warning that debt servicing would continue to burden the national exchequer. It said the financial body had lent the money to the Roosevelt Hotel in 2020.
Schehzad confirmed the loan had been issued by the National Bank of Pakistan, saying its communication with the finance ministry was “a routine matter.”
“This issue will also be addressed when the partnership agreement is signed,” he said.
‘BETTER PLANNING, BETTER ENGAGEMENTS’
Pakistani economists viewed JLL’s resignation as a setback but said it would not derail the privatization process.
Dr. Sajid Amin, deputy executive director at Islamabad-based think tank Sustainable Development Policy Institute (SDPI), said it was unfortunate authorities were unable to privatize the property despite its prime location.
“We need better planning and better engagements so that we can privatize a prestigious property,” Amin told Arab News.
Amin believed the advisory firm’s withdrawal would not have a significant impact on the IMF reforms agenda that Pakistan had agreed to, since JLL had stepped down over a potential conflict of interest.
“The government will start looking for a new financial adviser firm and it will be sufficient to prove that the IMF commitments are on track,” he added.
Dr. Ali Salman, executive director of the Policy Research Institute of Market Economy (PRIME), an Islamabad-based independent economic policy think tank, said privatization has many models, and a joint venture — instead of a direct sale — was an impressive approach.
He said that the cost of the delay could be recovered through a joint venture deal if it was carried out professionally and transparently, according to the approved structure.
“We need to increase the capacity of the Privatization Commission to ensure timely and well-informed decisions,” Salman added.