Istithmar World Capital Defaults on Property in Times Square
Wall Street Journal reports: The former Knickerbocker Hotel site near the heart of Times Square has become the latest Dubai World investment to go belly up, as well as the target of investors wanting to pick up the property at a discount price.
Istithmar World Capital, the private-equity arm of the Dubai government's investment fund, recently handed back the keys to the 300,000-square-foot building at 42nd and Broadway to its lender, Danske Bank A/S, after defaulting on its $300 million mortgage. The beaux-arts-style office building was purchased in 2006 near the height of the CRE boom as a part of the Dubai firm's ill-fated strategy of running "upmarket hotels in gateway cities," said a person familiar with the matter.
Istithmar had hoped to convert the office building back to a five-star hotel, with up to 300 rooms, but last fall abandoned those plans when it became squeezed for cash.
While there are plenty of struggling properties on the market, the building is attracting interest because it represents one of the best development sites in the Times Square area for a new hotel. Its appeal is enhanced because, besides paying $300 million for the building, Istithmar also spent $76 million to buy an adjoining vacant lot.
"The highest and best use for this property is a hotel," says Dan Fasulo, managing director for real-estate research firm Real Capital Analytics.
The firm's turnover of the Times Square building marks the latest setback for Istithmar. In December, it lost the W Hotel Union Square in New York City in a foreclosure auction. The following month, its chief executive officer, David Jackson, resigned.
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