Shahal Khan’s Burkhan World Investments and its partners are pitching the owner of the Roosevelt Hotel on a deal to redevelop the midtown Manhattan property, according to a document reviewed by Bloomberg News.
The proposed transaction would be structured as a joint venture, with the property’s current owner keeping a 50% stake in the entity, the document shows. The venture would take a 99-year ground lease on the property, with the option to extend the lease for another 99 years, the document shows.
The Roosevelt Hotel, dubbed “the new Ellis Island” as it processed migrants arriving to New York City in recent years, has had ties to Pakistan’s government for more than four decades, with the current owner being PIA Holding Co., and is located across from Grand Central Terminal, in a booming office corridor.
Burkhan and its partners intend to seek approval to build a new tower on the site that would total about 1.3 million square feet (120,774 square meters), in part through the acquisition of air rights, the document shows.
A representative for Burkhan said the proposed transaction is the “best deal” for Pakistan’s government because it allows the country to keep the asset and “make a significant return.” They said the proposal has been submitted and the company has yet to receive a response from Pakistan’s government.
A representative for Pakistan’s privatisation commission said that the Cabinet Committee on Privatisation is expected to consider transaction structure proposals at its next meeting.
The hotel is currently closed. Khan has previously offered to buy the property.
The Roosevelt Hotel, named for former US President Theodore Roosevelt, opened in 1924 as part of a broader effort to develop the neighborhood surrounding Grand Central Terminal. The property has since passed between a series of owners, with Pakistan International Airlines entering a lease for the property in 1979. PIA eventually bought out partners in the hotel.
Real estate brokers have been eyeing the hotel’s potential for redevelopment since at least 2020, when the pandemic pushed the Roosevelt to permanently shutter. PIA is working with Jones Lang LaSalle Inc. as an adviser, according to a statement earlier this month from the Pakistani government.
A JLL spokesperson didn’t have an immediate comment.
The hotel closed when tourism plummeted during the pandemic. Its owner later won a contract with the city, which used it as centralized intake center for arriving migrants. The arrangement cost the city roughly $75 million a year.
Redevelopment potential
The Roosevelt was far from the only New York hotel to take in migrants. At one point, about 19,000 hotel rooms, or roughly 14% of New York City’s lodging supply, was being used as emergency housing, according to Vijay Dandapani, chief executive officer of the Hotel Association of New York City.
Those arrangements provided financial lifelines for hotel owners, but came at a cost. In general, New York hotel owners who converted their properties to migrant housing can expect to spend between $30,000 to $40,000 per room on renovations needed to bring the hotels back to the lodging market, Dandapani said.
The Roosevelt’s site may prove especially attractive to developers because it sits in a zoning district, created in 2017, that makes it easier for builders to replace aging buildings with taller towers. Those rules have been used to increase the size of a projects like JPMorgan Chase & Co.’s new headquarters on Park Avenue.
Redeveloping the former Roosevelt isn’t without obstacles. While there is ample demand for high-quality office buildings, the projects take years to complete. Obtaining construction loans can also be dependent on signing up tenants ahead of breaking ground.
Vornado Realty Trust tore down the Hotel Pennsylvania on Manhattan’s west side, but has yet to move forward with plans to erect an office building in its place. RXR has planned a supertall tower on the site of a Hyatt hotel next to Grand Central Terminal, but the project is not expected to be completed for several years.
