RCA in the commercial property press:

Istithmar May Lose Control of W Union Square Hotel in Auction

Bloomberg reports: Istithmar PJSC, the Dubai-based investment company, may lose control of the W New York Union Square hotel in Manhattan at a foreclosure auction next month by holders of the mezzanine debt on the property.

The Istithmar Hotels Union Square Mezz 2 LLC will be sold to the highest bidder on Dec. 8 in New York at the offices of Allen & Overy LLP, according to newspaper advertisements by the law firm.

"The winner of the auction may file to foreclose on the equity and wrest control of the property," said Ben Thypin, senior market analyst at New York-based research firm Real Capital Analytics Inc.

Abdelaziz Al Mazam, a spokesman for Istithmar, said on Nov. 18: "As Istithmar World has demonstrated repeatedly throughout the financial crisis, we have stood by the investments in our portfolio. As signs have begun that the global economy is recovering, we expect to continue to do so with increased confidence."

Istithmar is a unit of state-owned holding company Dubai World.

The average daily rate among hotel chains with the costliest rooms fell 17 percent to $240.93 in the nine months through September, according to Hendersonville, Tennessee-based Smith Travel Research. In New York, rates for all hotel types slid 25 percent to $201.03, a record drop among the top 25 U.S. markets.

Mezzanine loans are intended to make up the gap between a first mortgage and the borrower’s equity. Unlike a mortgage, where the bank has a lien on the actual property, a mezzanine loan is secured by a pledge of equity ownership in the borrowing entity that bought the property.

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Posted by: Matthew Stone

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