Mukesh Ambani’s Reliance Industries will pay $ 98 million to acquire a controlling stake in the Mandarin Oriental Hotel in New York from a Dubai Sovereign Wealth Fund.
Opened in 2003 and located near Central Park, the hotel caters for luxury travelers – with some suites for more than $ 14,000 a night – and was majority ownership by the Investment Corporation of Dubai since 2015.
This is not the first time that the Indian energy-to-telecommunications conglomerate is investing in luxury hospitality. Last spring, Reliance bought a 300-acre British Country Club for £ 57 million, which includes a hotel, and it has invested in Oberoi Hotels.
The agreement highlights how badly the hospitality industry has been hit by pandemic-related restrictions on business travel. The 244-room hotel, located just off the Columbus Circle roundabout, was valued at $ 340 million in 2006.
But analysts say these trophy assets are petty cash for the vast conglomerate controlled by Ambani, Asia’s richest man.
“When [RIL’s] balance sheet is something close to $ 170-180 billion, [hotel investments are] not a significant proportion of [its] total balance sheet. It’s not here or there, ”says Harshavardhan Dole, an analyst at brokerage firm IIFL, whose coverage includes Reliance Industries.
“It seems that given the amount of investment, one has to see it more as a portfolio investment than strategic,” Dole added.
For Dubai’s sovereign wealth fund, the sale, announced late Saturday, concludes a chapter on a multitude of underperforming hospitality investments.
Istithmar Hotels, which belonged to Dubai government-owned Dubai World, acquired a 73 percent stake in Mandarin Oriental New York in 2006, when the Mandarin Oriental Hotel Group, headquartered in Hong Kong, decided to sell half of its shares .
It was one of a series of landmark hotel purchases in New York made by the freewheeling group. This included W Hotel Union Square, who bought Istithmar for $ 285 million and was forced to sell for $ 2 million three years later, in 2009, when Dubai’s debt crisis broke out.
The Investment Corporation of Dubai bought the Mandarin Oriental New York stake in 2015 in the wake of Dubai World’s major restructuring.
To buy the Mandarin Oriental New York, a Reliance subsidiary will buy the Cayman Islands-incorporated Columbus Center Corporation, which according to Reliance was the indirect owner of a 73.37 percent stake in the hotel. The agreement is expected to be concluded in March.
Reliance, India’s largest listed company, also offered to buy out the remaining owners at the same valuation. The Mandarin Oriental Hotel Group has retained a 25 percent stake and continues to manage the hotel. The group did not immediately respond to a request for comment.
The pandemic devastated Mandarin Oriental’s revenue – which fell to just $ 15 million in 2020, compared to $ 113 million the previous year, according to a Reliance stock exchange.
Additional reporting by Primrose Riordan in Hong Kong and Simeon Kerr in Dubai