The Real Deal New York

Here’s why any deal for the Plaza Hotel is going to be tricky

Minority owner and Qatari fund are eyeing $550M Plaza buy, but numerous competing interests will complicate a sale

July 19, 2016 01:00PM

From left: Subrata Roy, the Plaza Hotel at 768 5th Avenue in Midtown and Al-Waleed bin Talal

From left: Subrata Roy, the Plaza Hotel at 768 5th Avenue in Midtown and Al-Waleed bin Talal

Last month, speculation ran wild that an unnamed member of the Saudi Royal family was looking to partner with a British investment firm to buy the Plaza Hotel for $352 million. But that was last month! The new rumors, courtesy of the New York Post, have it that Saudi Prince Al-Waleed bin Talal and his investment vehicle Kingdom Holding plan to purchase the 282-unit hotel alongside Qatar’s sovereign wealth fund for around $550 million.

But any deal would have to wend its way through the web of owners and stakeholders with often-competing interests, including majority owner Sahara India Pariwar, the Chatwal Family Trust, which holds a small stake; Sant Chatwal’s Dream Hotel Management, which operates the hotel’s restaurants and bars; Fairmont, which manages the hotel; the union United Here, Local 6; and Prince Al-Waleed, who already has a 25 percent stake in the hotel. Because it’s such a labyrinth, we created something of a primer to sort out what’s going on with the iconic hotel.

What’s in play? The hotel portion of the Plaza Hotel is up for sale, meaning the 282 rooms at 768 Fifth Avenue, not the 800 rooms converted to condos by the prior owner, the Elad Group TRData LogoTINY.

Why the need to sell? Majority owner Sahara India Pariwar, led by embattled Subrata Roy, bought a 75 percent stake in the Plaza from Elad for $575 million in 2012. Roy is currently in jail over an alleged real estate fraud scheme. He’s trying to sell the Plaza and Dream hotels, as well as London’s Grosvenor House, to repay debts to billionaire brothers David and Simon Reuben, who hold an $800 million note on the Plaza and Dream hotels. A sale of the Plaza, the Dream Downtown and a London hotel for $1.55 billion would get Roy out of the big house.

What are QIA and Kingdom planning? Kingdom — whose minority stake would give it a role in the hotel’s refinancing should a sale go through — and QIA want the Plaza to protect an agreement with Fairmont, which manages the hotel, according to the New York Post. QIA, Kingdom and an Ontario pension fund owned Fairmont’s parent company FRHI Holdings Limited until its recent sale to France’s AccorHotels for $3.2 billion last week. QIA and Kingdom, however, hold Accor stakes of 10.4 percent and 5.8 percent, respectively. Both QIA and Kingdom have members on Accor’s board.

Fairmont’s management contract must be a big deal then, right? You bet. Managing the Plaza is worth millions each year, and Fairmont — which won control in 2007 — “would fight to the death to keep their name on the property,” Lodging Advisors President Sean Hennessey told the Post. If the hotel is sold, a new owner would likely replace Fairmont.

Will the Oak Room and Oak Bar return? The Plaza’s iconic eateries closed in 2011 after Donald Trump sold the hotel to Elad. Culinary director and chef Geoffrey Zakarian, who re-launched the Palm Court, hadn’t re-opened the Oak rooms before being let go from the job he took in 2013. Following his ouster, Zakarian sued Sahara (with whom he had a contract) for $1.5 million, alleging Sahara owed him a termination fee and started a “whispering campaign” against him. The suit has since been settled. While sources said the delayed re-opening had to do with negotiations with Local 6 union, a Plaza spokesperson said renewed plans for the Oak Room are being discussed. [NYP]E.B. Solomont

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