In a sign that Dubai World may struggle to keep its prized assets, the sovereign wealth fund’s investment unit Istithmar lost control of its W Hotel in Manhattan in a foreclosure auction on Tuesday for $2 million, after buying the property for $282 million in 2006.
LEM Mezzanine, a Philadelphia private equity firm, ponied up $2 million for control of the 270-room hotel on Park Avenue South. As part of the deal, LEM will also assume $212 million in debt.
Given that LEM will assume the debt, the haircut on the deal represents a 24% loss.
The banks won’t be hurt by the default, since LEM is assuming the debt load. So they at least have that going for them.