ISLAMABAD : The Cabinet Committee on Privatisation (CCoP) is to approve privatisation of Roosevelt Hotel in G2G mode under the IGCT Act, 2022 on the recommendations of PC Board.
Sources told NewzShewz that the CCoP was scheduled to be held on November 14, 2024 to approve the proposal of PC but it is deferred till the arrival of Deputy Prime Minister/ Foreign Minister, Senator Ishaq Dar who is Chairman of the CCoP and on a foreign visit .
The Cabinet Committee on Privatisation (CCOP) in its meeting held on December 26, 2022 directed Privatisation Commission (PC) to initiate the process of appointment
of Financial Advisor (FA) to undertake the envisaged leasing of Roosevelt Hotel Corporation (RHC) site for setting up a Joint Venture Project for prospective mixed-use development, through the best suited mode as delineated in PC Ordinance, 2000 Resultantly, FA hiring process was initiated and Financial Advisory Services Agreement (FASA) was signed with Top Ranked IP i.e. Jones Lang LaSalle Americas, Inc (JLL) on 2nd February, 2024.
FA was tasked with comprehensive Due Diligence, covering areas such as audited financial statements, existing NYC migrants housing lease, leases with retail tenants,
tax documents, labor and union contracts; analysis of land area and subsurface considerations, market studies and comparable related to contemplated structures, review of various risks, during, and after development of RHC Asset, Zoning (ULURP / Additional Air Rights), MTA Negotiations, Labor / Hotel Union, Market backdrop, Construction related considerations, Operational considerations etc. The FA was also required to submit a Transaction Structure Report, assessing alternate transaction structure options, funding sources, undertake analysis of investment required, target investor profile, regulatory approvals required and recommending the preferred Transaction Structure.
The Transaction Structure report (TSR) was submitted by FA on June 13, 2024. It was shared with the stakeholders (PIAIL, Aviation Division, Finance Division, Law
Division) on June 28, 2024 for their review and comments . The stakeholders (Aviation Division, PIAIL and Finance Division) was briefed on TSR by FA during a meeting
on July 12, 2024. Following this meeting, the stakeholders provided their comments and the FA updated the TSR. The following three transaction structures were evaluated by FA besides sharing the analyses of each option, additional FAR scenario, risk evaluation and mitigation strategy, remedies in the event of Partner’s default etc:
(i) 100% interest Sale (100% sale of the RHC Land) ;(ii) Joint Venture with prospective development partner/investor for future development of multi-story mixed used sky scrapper ; and (iii) 99-year ground lease with identified developer and investor(s) for the future development of multi-story mixed used sky scrapper key highlights of the transaction structure report for consideration.
The FA, based on the analysis presented in the Transaction Structure Report and its experience of New York Real Estate Market recommended “Joint Venture” as the most
suitable Transaction Structure for maximizing the expected proceeds.
In terms of Regulation 3(1) of Privatisation Commission (Conduct of Board Meeting) Regulations, 2019 and Regulation 3(8)(iv) of the Privatisation Commission
(Delegations of Power) Regulations, 2002, the transaction structure options for privatising Roosevelt Hotel Corporation were presented to the PC Board in its meetings held on August 20, 2024 and August 29, 2024 .
During the deliberation, PC Board observed that keeping in view the potential relationship management and governance issues in JV projects between the government and private partners, while also noting that this project is to be executed in United State of America (USA) under USA/New York laws with foreign partners, there will be risks associated with such an arrangements in joint ownership and capacity of the Government to take quick commercial decisions as required by private JV partner which may affect the project and lead to potential litigation. The Board observed that carrying out the transaction in G2G whether in JV structure or Outright Sale or Long-term
Lease can optimally balance the associated risks and expected returns. It was also suggested that the transaction structure report proposed by the FA can be used for negotiating with potential investors in G2G mode.
The PC Board, after detailed deliberations on pros and cons on each transaction structure option and mode to be adopted, recommended the following for consideration of the Federal Government/CCoP:
“The PC Board resolved that privatisation of Roosevelt Hotel may be considered in G2G mode under the IGCT Act, 2022 and all three transaction
structure options i.e. JV, Outright sale and Long-term Lease may be kept on the table for negotiations with potential investor”.
The sources said, PC has recommended the CCoP to approve the recommendations of PC Board privatisation of Roosevelt Hotel may be considered in G2G mode under the IGCT Act, 2022.
Ends
