Pakistan approves four potential investors for PIA and endorses the joint venture deal with Roosevelt Hotel
In a move to boost the country's economy, the Cabinet Committee on Privatization (CCOP) has approved a transaction structure for the denationalization of the Roosevelt Hotel in New York under a joint venture model. This decision comes as part of Pakistan's broader strategy to privatize state-owned assets and generate much-needed revenue.
The Roosevelt Hotel, a historic 1,015-room property located in Midtown Manhattan, was acquired by Pakistan International Airlines Investment Limited (PIAIL) in 1979. However, operations at the hotel were suspended in 2020 due to financial losses during the COVID-19 pandemic, and the agreement ended in 2024 with no new revenue stream announced since.
The government aims to maximize long-term value for the country through this joint venture model, providing flexibility, multiple exit opportunities, and minimizing future fiscal exposure. The Privatization Commission has clarified that the estimated value of the hotel after denationalization is complex and depends on the transaction structure. While there have been reports suggesting a potential base valuation of around $100 million, no official base price has been determined yet, and it will be finalized during the bidding process.
By forming a joint venture with a private investor, the hotel's value could potentially increase to four to five times its base valuation, depending on the structure approved by the CCoP. This significant value increase is a result of the joint venture model, which allows for sharing of risks and rewards, offering a more attractive proposition to potential investors.
Pakistan has prequalified four investor groups for the sale of Pakistan International Airlines (PIA), but it is important to note that the Roosevelt Hotel is not directly related to the privatization process of PIACL. The hotel occupies a full city block on Madison Avenue and 45th Street, making it a valuable asset in its own right.
Pakistan's state-owned enterprises, including PIA, have been struggling financially for years. PIA, once a respected carrier in Asia, has been propped up by taxpayers for decades due to political interference, corruption, and inefficiencies, accumulating over $2.5 billion in losses in roughly a decade. The government has restructured PIA's balance sheet to make the deal more attractive and has scrapped the sales tax on leased aircraft, providing limited protection from legal and tax claims.
The privatization of state-owned assets, such as the Roosevelt Hotel, is a crucial step for Pakistan in its efforts to raise Rs86 billion ($306 million) in privatization proceeds during the fiscal year starting July 1. The government hopes that these sales will help alleviate the financial burden of state-owned enterprises, which, when subsidies, grants, and other support are included, swells beyond Rs1 trillion ($3.59 billion).
Among the bidding groups for the Roosevelt Hotel is a consortium of Lucky Cement, Hub Power Holdings, Kohat Cement, Metro Ventures, and Arif Habib Corp. Another group includes Fatima Fertilizer, The City School, Lake City Holdings, Fauji Fertilizer Company, and Airblue, which has also been approved to bid for PIA.
The privatization process of the Roosevelt Hotel and other state-owned assets is a significant step towards Pakistan's economic recovery and growth. By attracting private investment and streamlining the operations of state-owned enterprises, the government aims to create a more sustainable and efficient economy.
- The government envisions using the proceeds from the privatization of the Roosevelt Hotel to invest in sectors such as education, art, and finance, with the goal of fostering economic growth and boosting the country's long-term development.
- Upon finalizing the transaction structure, the Privatization Commission plans to make strategic investments in various business ventures, including news media outlets, to promote transparency and innovation in the sector.
- In addition to the Roosevelt Hotel, the government's restructuring efforts also aim to revitalize Pfizer Lab, a state-owned pharmaceutical company, through partnerships with private investors in the art and healthcare industries.
