The Dubai dominoes are beginning to fall.
A week after the United Arab Emirates asked for a six-month extension on its debt, the Philadelphia-based LEM Mezzanine, a private equity fund, acquired the W Hotel in Union Square from Istithmar, the private equity arm of Dubai World. LEM got the property for only $2 million dollars in a foreclosure auction this morning, but agreed to assume $212 million dollars in debt as part of the deal.
“Despite the recent downturn of the hotel industry, and the defaults that led to today’s foreclosure auction, we are optimistic about the future,” the company said in a statement. “W is an excellent brand, Starwood is a premier hotel operator, and this destination hotel is well situated in one of New York City’s best locations. Our intention is to ensure that the hotel continues to be well run and is made ready to take full advantage of any future market recovery.”
Dubai World had acquired the property for $285 million in 2006, one of the highest per-room prices ever paid for a hotel.
The request by Dubai World that its creditors wait until May of next year to collect on the company’s debt sent a ripple through the world economy, but leaders in the United Arab Emirates have insisted they will pay the debt once it is restructured.
“We are surprised by this negative campaign on the UAE and Dubai,” Sultan bin Saeed al-Mansouri told the Guardian.