The Real Deal New York

Man at center of 1MDB probe held 85% stake in Park Lane Hotel: report

Government's move to seize portion of property's equity could be big relief for investors

July 27, 2016 12:10PM

From left: Steve Witkoff, the Park Lane Hotel at 36 Central Park South and Jho Low

The move by the U.S. government to seize a significant stake in the Park Lane Hotel, which is connected to a Malaysian development fund scandal, could be a boon to owners of the iconic Central Park South property.

If the Justice Department is successful, it would likely sell the controversial stake — which at one point formed 85 percent of the project’s equity — and inject the 46-story hotel with new capital, the Wall Street Journal reported.

The process of selling the stake could take years to resolve, but cash flow near $25 million annually on the property should keep investors Steve Witkoff TRData LogoTINY, Howard Lorber and Harry Macklowe happy as the slow wheels of government turn.

Federal authorities last week moved to seize assets related to a money-laundering scheme that allegedly misappropriated $3.5 billion from the Malaysian investment fund known as 1Malaysia Development Bhd., or 1MDB. The complaint said individuals involved in the scandal used the money to invest in the Park Lane, as well as four luxury condominiums in Manhattan, including a $50.9 million penthouse at Walker Tower.

According to court papers, funds controlled by Malaysian businessman Jho Low contributed 85 percent of the equity in 2013 when an investor group led by the Witkoff Group paid nearly $660 million to the Helmsley estate for the Park Lane. Court papers allege that Low lied to Witkoff and other investors about the source of the money, telling the NYC-based developers that it was legitimately earned from the family business.

The other 15 percent of equity came from Witkoff, Macklowe Properties, Lorber’s New Valley and Dallas-based Highgate Holdings, the government claims. Wells Fargo Bank also provided a $266.7 million loan.

The Park Lane’s owners reportedly hired Eastdil Secured last year to refinance the hotel to leverage its cash flow and low interest rates.

Last week, Witkoff told the paper he would work with the government to make the Park Lane project “a success,” but it’s still unclear whether that means keeping the Park Lane as a hotel, or converting it to luxury condos.

As the luxury market sputtered earlier this year, Witkoff put the brakes on developing high-end residences at the hotel.

Court documents and news reports, meanwhile, show an ownership structure that’s in flux.

According to the complaint, Low subsequently sold a portion of his stake to Mubadala Development Co., Abu Dhabi’s sovereign wealth fund, though it’s not clear how much equity Mubadala received.

In April, China’s Greenland Holding Group Co. said it acquired a 41 percent stake in the Park Lane from Al-Waseet International, a Kuwaiti investor, with plans to move ahead with the condo conversion. Greenland has been mum on the scandal and its role in the project remains unclear.  [WSJ]E.B. Solomont

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