Abu Dhabi fund Mubadala opposes Witkoff’s bid to lead sale of Low’s Park Lane stake

Sovereign wealth fund wants to put whole project on the block
By Katherine Clarke | February 07, 2017 07:30PM

Steve Witkoff and The Park Lane Hotel

Mubadala Development, an Abu Dhabi sovereign-wealth fund which owns a stake in The Park Lane Hotel conversion, is opposed to several key aspects of a plan to put developer Steve Witkoff in charge of selling alleged 1MDB fraudster Jho Low’s interest in the project.

Last week, the U.S. Department of Justice and Witkoff asked a federal court to approve the plan, known as a “cooperation agreement,” which called for Witkoff to lead the hunt for a replacement investor to take Low’s stake. Approval would have allowed Witkoff to move forward with plans to redevelop the hotel into high-end condominiums.

But Mubadala thinks the project’s investors would be better served by selling the entirety of the project, rather than simply Low’s stake, it said in federal court papers Friday. The fund also requested that a third-party broker, rather than Witkoff TRData LogoTINY, be put in charge of the effort to find a buyer.

Low is at the center of a massive money-laundering scandal and is alleged to have siphoned hundreds of millions of dollars from Malaysian state investment fund 1MDB.

“Mubadala believes a higher valuation, and thus a higher sale price, would be realized through an interlocutory sale of the entirety of the assets underlying the joint venture, rather than limiting such a sale to only interests held by the Low entities,” it said in court papers, filed in the central district of California.

The fund, which according to the Sovereign Wealth Fund institute has an estimated $125 billion in assets under management, said it expects a wider range of buyers would be interested in an opportunity to acquire the entirety of the assets, rather than in purchasing a portion owned by an existing structure that’s already negotiated the terms and conditions of the deal.

An independent third-party broker should be the one to “run a competitive and widely circulated bidding process to obtain the best price,” Mubadala said.

Mubadala bought a 45-percent interest in Low’s 55-percent stake in the project shortly after the original acquisition of the hotel, according to filings. Witkoff holds a 15 percent stake. Douglas Elliman chairman Howard Lorber and developer Harry Macklowe are also reportedly partners. The partners paid just north of $650 million for the building in 2013.

Mubadala’s position echoes that of several other Low-linked investors in the project.

The investors, who include Low’s brother Low Taek Szen, said Monday that the cooperation agreement was “unreasonable.”

“The agreement would provide Witkoff with the opportunity to enrich itself to the detriment of all other interest-holders,” they said in court papers. The investors urged the court to deny the motion.

Witkoff did not immediately respond to a request for comment, nor did attorneys for Mubadala or the Low-connected parties.

But in an affidavit filed last week, Gene Patton, chief of the program operations unit of the Justice Department’s money-laundering and asset-recovery section, said Witkoff was “uniquely positioned to market the asset to potential investors around the world.

Arguments in the case will be heard Feb. 27 in Los Angeles.

The Park Lane project is in a precarious position, according to the Witkoff and DOJ filing. Cash flow from the project doesn’t currently cover payments on some $480 million in debt the partners took out. The partners have made several capital calls, to which Low has not contributed.

Lenders on the project include Wells Fargo Bank, Blackstone Group, Criterion, Athene Annuity & Life Assurance Company and American Equity Investment Life Insurance Company.