The Curious Case Of Roosevelt Hotel
The Cabinet Committee of Privatisation which had been tasked to deliberate on the future of Roosevelt Hotel has decided against its privatisation and has given the green light to form a joint venture to run the hotel. The commission has also been tasked to hire a financial advisor to proceed with the transaction.
Located in Midtown Manhattan, New York, the 1,025 room Roosevelt Hotel is one of the prime assets owned by the government of Pakistan through a holding company called, Pakistan International Airlines Investments Limited.
In November 2019, the Competition Commission of Pakistan formed a task force in order to determine the terms of reference for a new lease of the majestic hotel. While the hotel fell in the ambit of the Aviation ministry, the task force was led by Privatisation Minister Mian Soomro and Special Assistant to Prime Minister on Overseas Pakistanis Zulfiqar Bokhari.
Sources privy to the developments claim that Shahrukh Nusrat who served as the Aviation secretary objected to the sidelining of the Aviation department under this deal.
Transparency International Pakistan has also raised concerns about the dubious lease of the hotel including, the irregular appointment of PIAIL chief as well as a $25 million renovation contract.
In a letter dated 13 March 2020, Justice (R) Ghous Mohammad who serves as the Vice President of Transparency International Pakistan addresses PIA Chairman highlighting the violation of Public Procurement Rules 2004 in the award of a $25 million renovation contract for Roosevelt Hotel along with the irregular lease of the hotel.
Justice Ghous Mohammad writes, “Leasing contracts of the two hotels (Roosevelt Hotel, New York and Scribe Hotel, Paris) have also been awarded by MD Najib Sami worth over $500 million without open bidding in violation of PPRA Rules 2004, which under PPRA Regulation Rule No. 50, is misprocurement.”
According to Transparency International Pakistan, “The Audit of Accounts of Pakistan International Airlines Investment Limited, which owns Roosevelt Hotel NY and Scribe Hotel Paris, were never performed by the Auditor General of Pakistan, which is mandatory according to Articles 169 and 170 of Constitution. Not only this, even PIA’s internal auditors have not been allowed by Najib Sami to check the books of accounts of PIAIL, and PIA Board behaved as silent spectators.”
The letter states, “According to Federal Government Policy, retirement age is 60 years and in PIA also 60 years is retirement age except for Pilots. But in gross violation of Federal Government retirement age limit policy, PIACL & PIA Boards have many times amended retirement age limit of MD for retaining Najib Sami, from 60 to 63, and then from 63 to 65, and then from 65 to 70, and even now he is still allowed to work as MD PIAIL.”
After the strongly worded letter, several news stories were run which claimed that Transparency International had taken back the letter but this was denied by TIP in a recent press release.
The press release stated, “Karachi, Friday 5 June 2020: Chairman TI Pakistan Sohail Muzaffar refutes PIA recent Clarification telecasted in Electronic Media that the Vice Chairman TI- Pakistan has withdrawn his letter to PIA of 12 March letter on award of renovation contracts of over US 25 Million, and the irregular leasing out Roosevelt Hotel NY by irregular CEO aged over 70 years, PIA Investment Ltd, and that PIA never replied or contacted Vice Chairman TI- Pakistan.”
Speaking to this correspondent, former Ambassador Adil Gillani who works for Transparency International Pakistan confirmed that TIP had received no response from PIA regarding its recommendations.
A leaked secret document by the Cabinet Division dated 29th June shows that a meeting was conducted by several federal ministries with a single point agenda to discuss the terms of the lease of Roosevelt Hotel. Surprisingly, the PM’s special advisor on Overseas Pakistanis, Zulfiqar Bukhari was not invited to attend this meeting on the document.
After the meeting, an official announcement by the finance ministry was made, “The CCoP also directed the PC (Privatization Commission) to hire FA Adviser to start the process for transaction in the light of the report of Ms Deloitte from July 2019, which recommended ‘that the highest and best use of the Roosevelt Hotel Property is to redevelop the site into a mixed use (through Joint Venture) of primarily office tower over retail and condominium”.
An official of the finance ministry confirmed that an investment of at least $1 billion was required to fully utilise the hotel by converting it into a state of the art premises with multidimensional uses. A previous task force which sought the lease of the hotel was also denotified with a new team being tasked to look for a ‘joint venture’ for the hotel.
It should be noted that no independent auditing or valuation of the hotel has been conducted by the government, neither has there been transparent open bidding that shows which parties are interesting in buying, leasing or being part of a joint venture with the government of Pakistan.
None of Transparency International’s recommendations have been followed up.
Roosevelt Hotel’s deal is being considered at a time when PIA has been banned from flying to the EU and the UK after the Minister for Aviation claimed that a third of pilots had dubious licenses. This story not only caused an international embarrassment to PIA but also tarnished its image, reducing the present market value of its assets according to sources privy to these developments.
Aviation insiders believe that PIA is purposely being sidelined to pave the way for a new airline and also to sell its valuable assets for massive kickbacks.
Several opposition members have also alleged that there is a severe lack of transparency in the deal concerning Roosevelt Hotel and that members of the PTI government are seeking to sell the hotel for much less than it is worth in order to gain a hefty commission on the sale.
Senator Sherry Rehman, who served as Pakistan’s Ambassador the US questioned the timing of this transaction, “Is this the time to sell Roosevelt Hotel, when due to the pandemic property prices have come down significantly and it will result in a loss to Pakistan as we will not get the right price?”. She further mentioned that the property was worth billions of dollars and was profitable at the time when she served as Ambassador.
Commenting on the details of the joint venture, a government official who spoke on the condition of anonymity said, “We will have to reply to different institutions so all the required process will be followed in the Roosevelt Hotel case in accordance with the privatization law and prescribed rules and regulations.”