ISLAMABAD: The government is likely to dispatch a team comprising of officials from the Aviation Division, the Finance Division and the Law Division to negotiate with the union of M/s Roosevelt Hotel, New York to protect it from land marking and other emergent related issues, well-informed sources told Business Recorder.
The issue of M/s Roosevelt Hotel, sources said, was highlighted during the Federal Cabinet meeting held on September 13, 2022.
On September 8, 2022, the Aviation Division submitted a summary for the ECC on “challenges to Roosevelt Hotel, New York, property of PIA-Investment Limited (PIS-IL) and way forward” with the request for in-camera session on this issue. Finance Minister/Chairman ECC allowed the request of the Aviation Division.
Roosevelt Hotel Corporation (RHC), New York was owned by PIA-Investment Limited, a subsidiary of PIAC. It was noted that hotel business had been badly affected as a result of Covid-19 pandemic around the world. The occupancy level fell into single digits in 2020 which forced PIA-IL to shut down the hotel in December 2020 with the approval of the Federal cabinet to avoid cost of $ 37 million per annum. The ECC had approved $142 million for RHC to payoff outstanding loan, severance charges of about 500 employees and other liabilities such as local taxes, insurance, etc. Subsequently, the ECC again approved $ 30.3 million on September 15, 2021 as carrying over cost for 2021. Pursuant to the ECC decisions, the Finance Division had arranged funds through loan from National Bank of Pakistan.
The forum was informed that the Cabinet Committee on Privatization (CCoP) on July 2, 2020 approved leasing of RHC site for setting up a joint venture project for prospective mixed used development, the best suited mode of privatisation as delineated in the PC Ordinance, 2000 and directed PC to initiate the appointment of Financial Advisor to undertake the exercise in its meeting held on July 02, 2020. However, the litigation in Tethyan Copper Company (TCC) in a Reko Diq case halted the process for appointment of FA. Subsequently, after out of court settlement with TCC, the Office of Attorney General of Pakistan had advised the Aviation Division to initiate the process of appointment of FA and PC was requested accordingly.
The Aviation Division further shared two serious issues that confronted PIA-IL Management, one related to illegal demand from the union employees and the other was the issue of land marking of RHC. It was stated that Secretary Aviation along with PIA-IL Board Members held discussions with all concerned, led by Ambassador of Pakistan in USA. A post visit report was also submitted to the office of the Prime Minister on May 23, 2022. The PMO had directed Secretary Aviation to brief the Board of Directors of PIA-IL of RHC and any firmed-up proposal be presented to the competent forum for further directions.
Secretary Aviation, in his capacity as Chairman PIA-IL Board convened a meeting of the Board on May 31, 2022 and briefed the Board Members on the affairs of RHC. After thorough deliberation, GoP’s decision on the following proposals was requested: (i) in view of the foregoing onerous demands by the Union, and to mitigate the risk of land marking, GoP to reconsider its earlier decision regarding permanent closure of the Hotel and to re-open it;(ii) PIA-IL/RHC to explore the option of re-opening the Hotel either on its own or through third-party short-term leasing arrangements. Firm proposals for the said option with comparative financial analysis would be presented to the competent forum after conduct of adequate due diligence by the professionals; (iii) PIA-IL/RHC would continue negotiations with the Union, and would try for restoration of status quo ante, however, if it fails, then a firm commitment be made to the Union for a component of the Hotel as part of redevelopment of the Roosevelt’s site; and (iv) the Privatisation Commission be requested to expedite the implementation of CCoP’s earlier decision for appointment of Financial Advisor to undertake the envisaged leasing of Roosevelt’s site for setting up a Joint Venture project for the prospective mixed used development through the best suited mode of privatization as delineated in the Privatization Commission’s Ordinance, 2000.
The complete report of M/s Deloitte conducted in 2019 and executive summaries of other evaluators such as PwC, HVS, Cushman & Wake filed and MVS New York were also provided to the ECC.
Secretary Aviation noted that the tentative cost of re-opening was $ 329 million, as indicated by M/s Nehmer and M/s Interstate, however, the exact cost of re-opening would be available once the bids were called.
Aviation Division also proposed that representatives of Finance and Law & Justice Divisions not below the rank of BPS-20 may also be added in the team of PIA-IL management going to New York, USA for negotiations with the Union, to protect RHC from land marking and other emergent RHC related issues.
Copyright Business Recorder, 2022