The Plaza,
has been struggling in recent years after a conversion into condominiums. It
took nearly seven years to convert the units, and buyers — who spent as much as
$50 million on their homes — complained about the quality of the renovations.
But on Monday, the Plaza’s owner,
Elad Properties, a real estate company owned by the Israeli businessman Yitzhak
Tshuva, said the Sahara group had agreed to buy a controlling stake in the
property for $570 million. Elad has a 60 percent stake in the hotel, and Saudi
Arabia’s Kingdom Holdings owns the rest. Once the deal is completed, Kingdom
Holdings’ stake will be reduced to 25 percent. The hotel will continue to be
managed by Fairmont Hotels & Resorts.
Financial analysts said the hotel
should be viewed as more than a “trophy asset.”
“I think it is a well-thought-out
business decision,” said Praveen Chakravarty of AnandRathi Financial Services.
“Looking at the hospitality market in Europe and the United States and the
valuations available, it makes sense for anyone with liquid cash to spare to
pick up assets, be patient, do some cross synergies and wait for the market to
rejuvenate.”
The Sahara group is cash-rich, he
added, and the deal is not expected to harm the company’s finances.
This is not the Sahara group’s first
overseas hotel acquisition. In December 2010, the company purchased the iconic Grosvenor House
Hotel in the Mayfair area of London from
the Royal Bank of Scotland for $726 million. The company plans to add an Indian
restaurant, nightclub, spa and swimming pool to the hotel, which will continue
to be managed by Marriott International. The group has also reportedly bid £750
million, or $1.18 billion, for
a group of Marriott hotels in London being offered by the Royal Bank of Scotland, though it has
not confirmed that bid.
The Sahara group did not make an executive available for comment.
The availability of Indian capital, along with a slowdown in the hotel industry in Europe and the United States, which has caused a drop in property values, has accelerated this, analysts said.
“It has become more prevalent for Indian capital, both hoteliers and investors, to evaluate foreign hotel assets,” Mr. Jain said. “Certain markets could be more attractive than deals available in India at the moment because of the state of the economy and different business cycles.”
“There seems to be something about the hospitality business that so many Indian entrepreneurs feel that they could do a better job at it than their Western counterparts,” he added.
Sahara India Pariwar, founded in 1978 by the billionaire Subrata Roy, has interests in finance, infrastructure, real estate, media and entertainment, manufacturing and information technology. In 2004, Time magazine famously called the Sahara group India’s second-largest employer after the railways. The company also owns a 42.5 percent stake in Force India, the Formula One Team, and the Pune Warriors, an Indian premier-league cricket team.
“The Sahara group has shown an inclination to be in high-profile, consumer-facing businesses,” Mr. Chakravarty said.