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The Wall Street Journal (19/Nov/2014) - Plaza Hotel Sale Draws a Crowd But Deal Is Elusive



Plaza Hotel Sale Draws a Crowd But Deal Is Elusive

A blue-chip roster of real-estate investors, financial firms, and even a Grammy-winning rap artist are among the groups angling to buy New York's famed Plaza Hotel.

But after months of courting the hotel's Indian owner, Sahara Group, would-be buyers face an unexpected problem: Sahara has been playing hard to get.

Indian securities regulators are accusing the company of "willfully and deliberately" refusing to consider offers to purchase the Plaza and two other hotels, according to a petition to the Indian Supreme Court made by regulators last month after receiving complaints from prospective buyers. A Sahara spokesman declined to comment.

Sahara put the Plaza and two other properties on the market after an Indian court ordered it to repay about 370 billion rupees ($6 billion) that the court alleges it owes bond investors.

The more-than two dozen groups that have been interested in buying the hotel include New York developer and art collector Aby Rosen and Pras Michel, a founder of the hip-hop group Fugees.

"The Plaza is a major trophy asset, and we want to own it," said David Sugarman, a New York-based sports agent who is part of Mr. Michel's group.

The scrum highlights the feverish global demand for prestige hotel assets, a favorite trophy of the new superrich as well as various institutional buyers. That interest was punctuated last month when Hilton Worldwide Holdings Inc. sold the Waldorf Astoria in New York to a Chinese insurer for $1.95 billion, a record sum for a U.S. hotel.

Few properties anywhere share the Plaza's pedigree. It has been featured in novels like "The Great Gatsby" and films like Alfred Hitchcock's "North by Northwest." Marlene Dietrich, Marilyn Monroe and the Beatles have stayed there as guests. John F. Kennedy's sister Patricia Kennedy had a lavish wedding reception at the Plaza's ballroom.

The property was previously owned by hotelier Conrad Hilton and Donald Trump, who compared it to the "Mona Lisa." In 2012, Sahara acquired a controlling stake in the landmark at the southeast corner of Central Park for about $430 million. Saudi billionaire Prince al-Waleed bin Talal owns a 25% stake in the property. It isn't clear if he would maintain that stake if Sahara sells.

Sahara's reluctance to pull the trigger could change, said people close to the negotiations. They said the owner has been near a deal before, and Sahara might feel renewed pressure to sell if the court gets more involved.

Sahara's negotiations also have included discussions with companies affiliated with the sultan of Brunei, say people familiar with these talks. An agreement dated Aug. 12 was struck between a company called Oasis Light Ltd. and a Sahara affiliate for Oasis to pay about $2.1 billion to buy the three hotels and assume debt, according to documents reviewed by The Wall Street Journal. Oasis, which also would lend Sahara $100 million according to the agreement, is described in the documents as "being connected with Brunei."

A spokesman for the sultan said in an email, "Neither His Majesty, the [Brunei Investment Agency] nor the Brunei government has been involved in the purchase of the Plaza or any other hotels in New York in recent months."

It isn't clear if that agreement is still in place or if Oasis or another Brunei investment vehicle remains interested in buying the properties.

The Securities and Exchange Board of India, or SEBI, last month asked the Indian Supreme Court to compel Sahara to disclose details of all its negotiations and offers for the Plaza, London's Grosvenor House and the Dream Hotel in downtown Manhattan. The court is considering that request.

Prospective buyers have expressed frustration to the SEBI. One London-based investor wrote that Sahara is "purposely trying to avoid selling the hotels even when a serious buyer like myself has provided an offer with proof of funds," according to an email in the SEBI's petition to the court. "They are stating to the world they are selling but in reality I don't think they want to deal."

Complicating the sales process have been legal troubles surrounding Sahara. Chairman and founder Subrata Roy was arrested in February on criminal charges after the government alleged the unpaid debts to the company's bondholders. He has been in a New Delhi jail since March, let out of his cell for periods of time to negotiate the sale of the hotels. Mr. Roy and Sahara have denied the charges and say the debt has been paid.

In addition to its allegedly unpaid bond debt, Sahara defaulted a few months ago on a $906 million loan from Bank of China Ltd., which could put the bank in position to take control of the properties, say people close to the negotiations.

Bank of China hasn't looked to foreclose on the properties but has been waiting for Sahara to clear the debt by selling the properties or refinancing the loan, these people say.

Several big financial firms have sought to refinance the Bank of China loan, including a group of Highbridge Capital Management, an investment firm owned by J.P. Morgan Chase & Co., as well as Los Angeles-based investment firm Canyon Capital Advisors, say people familiar with the matter. A J.P. Morgan spokesman declined to comment on behalf of the bank and Highbridge.

Private-equity firm Blackstone Group LP, meanwhile, has been in talks with brokers to provide financing for potential buyers, while global property investors Reuben Brothers has expressed interest in the properties, these people said.