Dubai World, the embattled state-owned real estate and ports conglomerate in the midst of restructuring approximately $22 billion in debt, has handed the keys back on large real estate asset near New York’s Times Square.
According to a report in the New York Times, the firm’s private equity unit, Istithmar World Capital has handed the 300,000 square foot Knickerbocker Hotel at 42nd and Broadway back to lender Deutsche Bank after it defaulted on a $300 million loan taken out on the asset.
It is the latest New York asset to be relinquished by the firm. In December, Istithmar handed back the W Hotel Union Square building in New York following a “foreclosure auction”.
Originally used as a hotel, The Knickerbocker Hotel has most recently been occupied as an office building. Istithmar was midway through a plan to revert its use back to a hotel and as such, has not been renewing leases. As a result, the building is currently 50 percent vacant. Istithmar had also purchased an adjoining site for $76 million as part of its strategy to transform the site.
According to the report, the building is regarded in the New York real estate market as one of the best development sites in the city and its sale is expected to drum up a lot of interest. Deutsche Bank has hired property services firm Jones Lang LaSalle to market the sale. Among early interested bidders for the asset, the report said, was Sitt Asset Management, the New York based firm that originally sold it to Istithmar in 2006, around the height of the property boom.
Dubai World rocked world markets at the end of last year when it requested a debt moratorium on large parts of its $60 billion debt pile.
With aid from Abu Dhabi, the state-owned business has reduced its liabilities slightly but it is still working to reduce its loan exposure further, particularly in its real estate businesses Nakheel and Limitless. While it said that its restructuring programme would not include its private equity units, such as Istithmar, Dubai World did confirm it would consider individual asset sales to help its cause.