Airline has best routes; concerns to be resolved in due course, says minister
- Hotels’ proceeds will be used to pay off PIA debt
- Twofold increase in floor area ratio of Roosevelt Hotel expected to hike its price
Islamabad: Increased Foreign Exchange from Roosevelt Hotel Sale
Pakistan could expect much higher foreign exchange proceeds from the sale of the Roosevelt Hotel — an upscale property in New York’s Manhattan district — with an improved mix-use sell-off transaction proposed by US advisers.
Concerns Over PIA’s EU Ban
Pre-qualified bidders for Pakistan International Airlines (PIA) have expressed concerns over the European Union’s ban on Pakistani airlines, which could affect the bid price for the national flag carrier that is currently up for sale. This was the crux of a news briefing on Wednesday, led by Privatization Minister Abdul Aleem Khan and federal secretaries of the privatization division and privatization commission, Jawad Paul and Usman Bajwa, respectively.
Roosevelt Hotel: Due Diligence and Proposed Options
Mr. Bajwa stated that Jones Lang LaSalle Incorporated (JLL) — a Chicago-based global real estate services firm hired to advise on the privatisation structure — had submitted a comprehensive due diligence report to the government and proposed three options. The report suggested that the floor area ratio (FAR) of the building currently stood at 1:15 (650,000 sq. feet retail area) which could be doubled to 1:30 (about 1.3 million sq. feet), thus increasing the retail sellable area, with support from the metropolitan authorities and secondary market.
“The increase in Roosevelt’s FAR provides a difference of a few billion dollars,” said Minister Aleem Khan, emphasizing his personal expertise in real estate. He assured personal responsibility for ensuring the Roosevelt transaction meets its true potential and best value.
Transaction Options for Roosevelt Hotel
The cabinet had approved a joint venture option with international investors for mix-use development. Mr. Bajwa explained that the report would be taken up with the federal cabinet, and options could include an outright sale, long-term lease, or joint venture operations depending on all the pros and cons, aiming for maximum proceeds over a period of time.
PIA’s Privatisation and Bidders’ Concerns
Talking about the PIA’s privatisation, Mr. Bajwa said the six pre-qualified bidders — Air Blue, Lucky Group, Arif Habib Group, Blue World, Pak Ethanol, and FlyJinnah — were currently conducting due diligence on the PIA’s data and had concerns over the European Union Aviation Safety Agency (EUASA) ban on Pakistani airlines, which also applied to PIA. He noted that the PIA management had informed the bidders that the airline had been cleared by the EUASA, but the ban could not be lifted due to regulatory functions related to the Civil Aviation Authority (CAA) and their standard operating procedures, currently under restructuring.
Addressing Safety Concerns and PIA’s Value
The minister acknowledged issues with the safety and security of planes but expressed confidence that these would improve once new investors take over and airports are also privatized. He highlighted PIA’s valuable international routes and spots, which he believes would make the airline profitable under private ownership. The minister assured that bidders’ concerns would be resolved in due course.
Financial Structure and Sale Process
Mr. Khan stated that the PIA hotels’ proceeds had been separated from the core PIA, with its Rs630bn debt to be paid off over ten years under an easy payment plan with banks. The hotel proceeds would finance these PIA debts. Mr. Bajwa explained that PIA bidders would complete their due diligence in a week, and the timeline for bidding would be set within ten days in consultation with bidders. He anticipated very healthy competition among the bidders.
Shareholding and Government’s Role
The minister added that the cabinet had authorized the divestment of 51-100% shares and it would be decided within a few days, in consultation with bidders, how much shareholding should be offered for bidding. He mentioned that the government might retain some shareholding for a better dividend or improved return, based on available finances for fresh investment.
Nation’s Conviction in Privatisation Programme
The minister emphasized the nation’s conviction in the privatisation programme, under which 24 entities are on the active sale list, spanning five years. He criticized former Chief Justice Iftikhar Muhammad Chaudhry for causing irreparable losses to privatisation and the country’s economic interests, calling for a public apology and restitution for the national losses caused by his actions.
