PIA buys up Prince Faisal's share in hotels

[Abbas Ali]

KARACHI (February 16 2006): After the botched Memorandum of Understanding signed in May last year, representatives of Pakistan International Airlines Corporation (PIAC) and His Royal Highness Prince Faisal Bin Khalid Bin Abdul Aziz Al Saud have signed an agreement in London on Wednesday ending the joint ownership of three hotels, one each in Riyadh, Paris and New York City, owned through their joint venture company, PIA Investments Company Limited (PIAICL).

Under the terms of the deal, PIAC will pay $67 million to Prince Faisal for his stake in the Scribe Hotel in Paris and Roosevelt Hotel in New York and also transfer its 24.5 percent stake in the Minhal Riyadh Hotel in favour of Prince Faisal. PIAC has obtained a loan of $70 million from the National Bank of Pakistan to finance its acquisition of Prince Faisal's shares.

The terms of the PIAICL joint venture provide 'first right of refusal' to each of the two partners in the event one partner decides to sell his shares to an outsider.

After fizzling away of the MoU under which PIAC would have paid $40 million to Prince Faisal for identical change/transfer of shareholding, Prince Faisal advised PIAC that he had a buyer for $67 million, instead of $40 million that PIAC was to pay under the MoD. Left with no other option, PIAC exercised its right under the joint venture and agreed to acquire the shares for the same amount.

This deal brings to an end the long-standing dispute between the two partners on the operation of their joint venture company with an amicable resolution of the problem to the satisfaction of both. The meteoric rise in property prices in New York City and Paris has added to the value of the Roosevelt and Scribe properties that PIAC would now own, exclusively.

The Roosevelt Hotel has 1013 Keys that include 47 suites and the rooms were last refurbished in 2003 at a cost of $3 million. Situated on Madison Avenue in the heart of Manhattan, it also has 15 retail tenants occupying about 20,000 square feet of retail space. It operates under the legal title of Roosevelt Hotel Corporation Limited Liability Company (RHCLLC).

The Scribe Hotel, in Paris, has 217 rooms and is operated by an international hotel chain 'SOFITEL'. The land and building are owned by Minhal France Societe Anonyme (MFSA). Both, RHCLLC and MFSA, are wholly owned by Pakistan International Airlines Investment Company Limited, (PIAICL).

PIAICL is a partnership between PIAC and Prince Faisal on a 50:50 basis. The Minhal Holiday Inn, Riyadh, is owned by Riyadh Minhal Hotel Company Limited (RMHC), of which 51 percent is owned by Prince Faisal and 49 percent by PIAICL.

The land on which this hotel is built is not the property of RMHC but it is the personal property of Prince Faisal, and RMHC pays one million Saudi Riyals per annum to Prince Faisal as ground rent.

Source: Business Recorder