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A subsidiary of Dubai World turned over ownership of New York’s famed Knickerbocker building to lenders this week, after defaulting on mortgage payments.
Istithmar World Capital, an investment arm of state-controlled Dubai World, paid $300 million for the Times Square icon in 2006. The company said it wanted to turn the office building into a luxury hotel.
Instead, Denmark-based Danske Bank assumed control of property this week and hired Jones Lang Lasalle to sell it. Danske took over the mortgage in the wake of the collapse of Lehman Brothers, Reuters reports.
Istithmar also owned the W New York Union Square hotel, which was repossessed by lenders in December.
Istithmar’s willingness to walk away from its properties is sure to send shudders through the financial community, eagerly looking for signs on how the Emirates giant would handle its debt problems. Istithmar’s other U.S. interests include the W Washington D.C. and Mandarin Oriental New York, as well as Barneys, the retail chain.
Speculation is mounting that Dubai World may also move to sell other assets, including the Queen Elizabeth 2 ocean liner and its stake in Cirque du Soliel.
