Dubai World Could Be Forced To Sell US Hotel Stake

The under threat Dubai World borrowed billions of dollars to buy high cost and high profile commercial properties in the US in recent years. Now that Dubai world is in serious debt trouble, it may have to sell these at a loss. The Dubai based conglomerate said that it would need at least six months to pay creditors on the $60 billion that it owes.

The debt was racked up by Dubai World during its real estate bubble that the global recession pricked, to use a simile. Dubai World owns US assets in several US luxury hotels which is the sector worst hit by the rising unemployment and plunging real estate values. Dubai World has a unit called Istithmar that holds the Mandarin Oriental in NYC for about $380 million in 2007 and a 50% stake in Fontainebleau Miami Beach for $375 million last year.

The US commercial real estate market is in the middle of the strongest downturn in decades which has led to a surge in loan defaults. But if Dubai World plans to sell some of its US assets, it would be hard pressed to find suitable buyers which lead to fears of huge losses on these investments.