Mukesh Ambani’s Reliance Industries will pay $ 98 million to acquire a controlling stake in the Mandarin Oriental hotel in New York City from a Dubai sovereign wealth fund.
The hotel, which opened in 2003 and is located near Central Park, caters to upscale travelers – some suites ranging for more than $ 14,000 one night – and was majority detained by the Investment Corporation of Dubai since 2015.
This is not the first time that the Indian conglomerate Energy to Telecom has invested in luxury hotels. Last spring, Reliance bought a 300-acre UK country club for £ 57million, which includes a hotel, and invested in Oberoi Hotels.
The deal highlights how badly the hospitality industry has been hit by the 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 the trophies are small change for the sprawling conglomerate controlled by Ambani, the richest man in Asia.
“When [RIL’s] the balance sheet is close to 170-180 billion dollars, [hotel investments are] not a significant proportion of [its] global report. It’s neither here nor there, ”said Harshavardhan Dole, analyst at brokerage firm IIFL, whose coverage includes Reliance Industries.
“It seems that, given the amount of investments, they should be viewed more as a portfolio investment than a strategic one,” Dole added.
For the Dubai sovereign wealth fund, the sale, which was announced late on Saturday, closes a chapter on a slew of underperforming hospitality investments.
Istithmar Hotels, which belonged to Dubai World, owned by the Government of Dubai, had acquired a 73% 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 many iconic New York hotel purchases made by the freewheeling group. These included W Union Square Hotel, which Istithmar bought for $ 285 million and was forced to sell for $ 2 million three years later, in 2009, when the Dubai debt crisis erupted.
The Investment Corporation of Dubai acquired the stake in Mandarin Oriental New York in 2015 following the major restructuring of Dubai World.
To buy the Mandarin Oriental New York, a subsidiary of Reliance will buy the Cayman Islands-incorporated Columbus Center Corporation, which Reliance said was the indirect owner of a 73.37 percent stake in the hotel. The deal is expected to be finalized in March.
Reliance, India’s largest publicly traded company, has also offered to buy out the remaining owners at the same valuation. The Mandarin Oriental Hotel Group retained a 25 percent stake and continues to manage the hotel. The group did not immediately respond to a request for comment.
The pandemic has devastated the Mandarin Oriental’s revenue – which fell to just $ 15 million in 2020 from $ 113 million the year before, according to a Reliance scholarship file.
Additional reporting by Primrose Riordan in Hong Kong and Simeon Kerr in Dubai