The Pakistani government has taken a significant step forward in privatising the Roosevelt Hotel in New York, following recommendations from the Ali-Pervaiz Committee. However, concerns remain regarding the transaction structure and potential risks involved.

Cabinet Committee on Privatisation Approves Plan

The Cabinet Committee on Privatisation (CCOP), led by Deputy Prime Minister Ishaq Dar, has directed the Privatisation Commission to proceed with the privatisation of the Roosevelt Hotel through competitive bidding. However, the exact mode of privatisation—whether an outright sale, joint venture, or long-term lease—remains undecided.

The Ali Committee, chaired by Petroleum Minister Ali Pervaiz, recommended open bidding for the transaction but left it to the Privatisation Commission to determine the most suitable structure. The final decision will be presented to the CCOP for approval.

Privatisation Commission Board Raises Concerns

While the Privatisation Commission board initially suggested exploring government-to-government arrangements, no foreign government has expressed interest in acquiring the property. The board has now kept three options on the table:

1. Outright Sale: A full transfer of ownership.
2. Joint Venture: Partnering with a private investor for redevelopment.
3. 99-Year Lease: Retaining ownership but leasing for long-term development.

However, the board’s approach conflicts with recommendations from the financial advisor, Jones Lang LaSalle Americas, who strongly advocates for a joint venture to maximise returns.

Financial Advisor’s Recommendations and Risk Assessment

Pakistan hired Jones Lang LaSalle Americas for Rs2.1 billion to structure the Roosevelt Hotel privatisation. The financial advisor proposed three primary options:

1. Outright Sale of the Hotel

• Parties bid based on land value at a Floor Area Ratio (FAR) of 30+.
• Approvals required within three years.
• Full proceeds expected within three years.
• Lowest risk but also the lowest financial return.

2. Joint Venture for Future Development

• Involves collaboration with a private development partner.
• Offers the highest potential proceeds.
• Requires efficient governance and legal safeguards.
• The advisor recommended this option as the most profitable.

3. 99-Year Ground Lease Agreement

• Bidders compete based on land value at FAR 30+.
• Fixed long-term payments over 99 years.
• Government retains ownership while securing revenue.
• Moderate to high interest expected from investors.
• Medium risk, yielding better returns than outright sale but lower than a joint venture.

Challenges Facing the Roosevelt Hotel Privatisation

1. Foreign Governments’ Lack of Interest

Despite initial expectations, no foreign government has shown formal interest in acquiring the hotel under a government-to-government arrangement. Pakistan had offered the Roosevelt Hotel to Saudi Arabia twice in 2024, but discussions failed to progress.

2. Heritage Site Concerns

If the ongoing deal with New York City is terminated in July, there is a possibility that the Roosevelt Hotel may be declared a heritage site again, limiting redevelopment options.

3. Legal and Governance Issues

The Privatisation Commission has flagged governance and litigation risks associated with joint ventures. Government-private sector partnerships often face disputes, potentially delaying the project.

Impact of Privatisation on Pakistan’s Economy

Privatising the Roosevelt Hotel could generate substantial revenue for Pakistan, helping improve foreign reserves. However, delays and uncertainty in selecting the transaction structure might impact investor confidence.

The International Monetary Fund (IMF) has been informed that the final structure of the Roosevelt Hotel’s privatisation will be determined by the CCOP, ensuring compliance with economic reforms.

Future Outlook and Government Strategy

The Pakistani government aims to fast-track the privatisation process, as per Deputy Prime Minister Ishaq Dar’s directive. Key focus areas include:

• Finalising the transaction structure.
• Addressing legal and regulatory concerns.
• Attracting serious investment interest.
• Ensuring transparency in the bidding process.

FAQs

1. What are the privatisation options for the Roosevelt Hotel?
The three main options are outright sale, joint venture, or a 99-year lease agreement.

2. Why has no foreign government shown interest in acquiring the Roosevelt Hotel?
Despite offers to Saudi Arabia and other nations, no formal government-to-government proposal has been made.

3. What are the risks associated with privatisation?
Risks include governance challenges, litigation issues, and potential designation as a heritage site, which could hinder redevelopment.

4. How will privatisation impact Pakistan’s economy?
A successful transaction could generate significant revenue and improve foreign reserves, but delays could reduce investor confidence.

5. When will the final decision on privatisation be made?
The CCOP will determine the final structure after reviewing recommendations from the Privatisation Commission and financial advisors.