A contentious battle is unfolding at The Pierre, a historic luxury hotel and condominium in New York City, where a proposed $2 billion sale threatens to displace billionaire residents and lead to the termination of hundreds of staff members. The outcome hinges on a shareholder vote this fall.
Motasem Khashoggi, a Harvard-educated lawyer and cousin of the late Saudi arms dealer Adnam Khashoggi, is the beneficial owner of Sabre Park Avenue LLC, the entity behind the bid. If the sale is approved by a two-thirds majority of shareholders, Khashoggi plans to bring in the Dorchester Collection, a luxury hotel operator managed by Brunei’s sovereign wealth fund, to manage the property. This move would necessitate the sale of the 77 residential units within the building.
Shareholders who own residences at The Pierre, including notable figures such as fashion designer Tory Burch, publishing heir Austin Hearst, Princess Firyal of Jordan, musician Art Garfunkel, and producer Irwin Winkler, have expressed outrage. They allege that the board has been secretive about the deal and is attempting to force them out of their homes. Some residents claim they have received sealed envelopes detailing the sale price they will be compelled to accept if the deal goes through, with little say in the valuation.
In response to shareholder concerns about transparency, the board held a meeting where the Dorchester Group presented plans for the hotel's future, which reportedly alienated residents further. One attendee described the meeting as a "disaster with lots of shouting and tears," stating, "I learned nothing. A lot of it was optics. They didn’t share any numbers."
While a source close to the buyer asserts that the offered prices for the residences are generous, potentially three to four times their market value, some residents disagree, deeming the offers too low. The potential sale also raises concerns for the approximately 700 hotel employees who face job losses if the sale is finalized.
A History of Conflict
Last year, reports surfaced that The Pierre's board was in negotiations for the sale. This led to a lawsuit from some co-op owners, including Burch, who alleged a secret plot to evict residents. The lawsuit was later dismissed after the board released a term sheet and board minutes, with both sides claiming victory at the time.
Compounding the conflict, Howard Lutnick, a shareholder who owns the building's penthouse, has a vested interest in the sale. His sons' firm, Newmark Group, a Cantor Fitzgerald company, stands to earn a fee from the transaction, creating a potential conflict of interest.
Alternative Offers and Concerns
Adding another layer to the dispute, the Taj Group, which has operated the hotel under a lease since 2005, has proposed investing $300 million in repairs and renovations without displacing residents. However, an insider suggested Taj's offer might not be credible, citing a need for $400 million in repairs that allegedly went unaddressed during their tenure.
Tory Burch has voiced strong opposition, emphasizing issues of "morals, ethics and transparency," and condemning the "deceptive, misleading and opaque process orchestrated by some of the board members and their advisors."
David Johnson, president of The Pierre's board, declined to comment on the meeting or the proposed buyout, stating it was an "inappropriate" topic for discussion outside of the private shareholder meeting.
Residents and the buyer's representatives agree that the public dispute is devaluing the property. Those opposing the sale express concerns that if approved, it could set a precedent, making other cooperative homes in the city vulnerable. They also voice a desire to preserve the building's historic character rather than undergo extensive, potentially disruptive renovations.
The current situation leaves shareholders in uncertainty, awaiting a proxy statement that will detail the sale's terms, though no release date has been set.