Danske Bank Takes Control of New York Building From Dubai World

Bloomberg -

Danske Bank A/S took control of a 104-year-old office building in New York’s Times Square from Istithmar World PJSC, the second loss of a Manhattan property by the Dubai World unit in three months.

Istithmar defaulted on the mortgage, said Henrik Hoffmann, executive vice president for group credits at Danske Bank, Denmark’s largest lender. The Copenhagen-based company hired Jones Lang LaSalle Inc. to sell the property, the site of the former Knickerbocker hotel, he said.

“It’s very rare that a prime corner of Times Square comes up for sale,” said Dan Fasulo, managing director of research firm Real Capital Analytics Inc. in New York. “There will be a plethora of interested buyers.”

State-owned Dubai World, which is seeking to restructure as much as $22 billion in debt, lost control of its W New York Union Square hotel in December after missing a loan payment. Its W Washington D.C. and Mandarin Oriental New York properties are on credit-rating watch lists for performance issues.

Dubai World amassed more than $4 billion in debt buying trophy hotels and office buildings in the U.S. at the top of the market, according to Real Capital Analytics. The purchases included the Mandarin Oriental in Manhattan and luxury retailer Barneys New York, which it acquired in 2007 for $942.3 million.

Lehman Brothers

Lehman Brothers Holdings Inc. provided the $290 million in financing for Istithmar’s purchase of the Knickerbocker building, according to Fasulo. Danske Bank gained control of the loan after providing credit to the New York-based investment bank before its bankruptcy filing in September 2008, he said.

“This type of project is not part of our normal business,” said Danske Bank’s Hoffmann. “It is a single commitment which we have taken over after the collapse of Lehman Brothers.”

The site, located at 6 Times Square, opened as a hotel in 1906 and is now used for offices and retail.

The top floors of the building are empty, which likely will reduce the sale value, Howard Michaels, chairman of Carlton Advisory Services Inc., said in a Bloomberg Television interview.

Dubai World also bought the Hotel Washington in October 2006 for $123.5 million and secured $155 million in debt from UBS used to finance the acquisition and convert the property into a W Hotel, according to Real Capital Analytics.

A $65 million senior loan and $5 million junior loan backed by the W Washington D.C. were 30 days delinquent this month and a debt servicer was working with the borrower, according to Realpoint LLC, a Horsham, Pennsylvania, credit-rating company.

The Mandarin Oriental is collateral for a $135 million loan that is on a watchlist, Realpoint data show. The property is also financed through a mezzanine loan of $103 million, split into three tranches, according to the rating company.

Abu Dhabi, the wealthiest member of the United Arab Emirates, provided a $20 billion bailout in 2009 for Dubai as the emirate ran into difficulties meeting payments on debt used to finance real-estate projects.