Like the luxury stores a few blocks south on Fifth Avenue, the Pierre Hotel is decked out with holiday decorations, but the residents of the hotel remain entangled in a dispute about the future of their homes.
The months-long battle between shareholders about the potential sale of the New York City landmark, which is owned by the 795 Fifth Avenue Corp. and run like a co-op, is showing no signs of ending anytime soon. In addition to being a pristine hotel, the Pierre is home to shareholders, who own one or more of the 77 residential units. Their shares are proportional to the size of their residential units.
Like many of the residents, Taj Hotels, which has managed the hotel’s operations for the past 20 years and provides some basic services to residents and contracts, was said to have been caught off guard, when news of a potential $2 billion sale to Khashoggi Capital surfaced in September. Taj Hotels acquired the 95-year-old historic hotel in 2005, and the company also owns four units in the building.
After the divide among residents severed deeper, during a board meeting last fall tenants were handed envelopes that some said were significantly undervalued estimates for their apartments. In addition to seeking more transparency about the potential sale and buyer, some shareholders were irked by the prospect of having to move out within 12 months of the completion of the sale. To push back, a handful of the Corporation’s shareholders, including Tory Burch, filed a lawsuit last month against four members alleging that petitioners had been stonewalled regarding the sale process and the “mystery buyer.”
But the Supreme Court of the State of New York dismissed that lawsuit on Nov. 30. Justice Andrew Borrok’s opinion noted that Fried Frank, “a sophisticated law firm,” had presented a “thorough and clear” PowerPoint presentation to explain an option that the board was considering to address the repairs that are allegedly needed at the hotel and the potential impact to shareholder residents of the potential sale. It also noted that the petitioners had been provided with a nonbinding Term Sheet and Access, Confidentiality and Exclusive Agreement that was dated Oct. 6 between the respondent and potential purchaser.
That dismissal set off a few letters, with the first one being sent on Dec. 1 from the board’s chairman Michael Stern and president David Johnson, who wrote that they were “pleased to report that the Corporation achieved the swift dismissal of the lawsuit” about the board’s consideration of the Khashoggi/Dorchester Group’s potential $2 billion offer to purchase the Corporation.
Their letter stated that the board remains dedicated to continuing this transparency and negotiating several viable alternatives for shareholder consideration, including a $2 billion sale, a potential sale of the Corporation’s hotel to Taj, and an amendment to the Taj lease agreement that would provide, among other things, a capital investment by Taj in the Pierre. As reported, Taj Hotels, which operates the property, is said to be willing to invest $300 million in repairs and an upgrade.
Stern’s and Johnson’s letter, which included the court’s opinion, noted that the board can’t sell anything without the approval of two-thirds of the shares, and that will not happen until the shareholders receive a Proxy statement with “full disclosure of all the material facts.”
In response, the following day, a letter was sent by the Pierre Shareholders Alliance, which is comprised of Burch’s Autumn River LLC, the Beverly Sommer Revocable Trust Agreement II, Dwight LLC, OSF Flavors, Skye Holdings LLC, Tina Benito, Lois Chiles and Austin Hearst. Challenging the claim that they have sought “to block the board’s further consideration of any strategic opportunity involving the Pierre,” they said their litigation was successful and that all they have ever sought has been information.
Noting that their petition prompted the board to “produce a six-page update on the status of the negotiations with Taj and the buyer regarding the Pierre,” as well as the Confidentiality, Access and Exclusivity Agreement that the board signed with the buyer. The alliance’s letter said that agreement does not permit Taj or anyone else to bid against the buyer.
Media requests to Khashoggi Capital and Taj were not acknowledged.
The Dorchester Collection’s global director of communications Julia Record said, “As a global hotel company, Dorchester Collection is continuously evaluating development opportunities; however, we do not comment on speculative rumors or potential future locations. We have no contract or any other agreement to manage The Pierre now or in the future. However, we would welcome the opportunity as one of the most prestigious hotel brands in the world to have a property in New York should the right opportunity arise.”
The Dorchester Collection is owned by the Brunei Investment Agency, the sovereign wealth fund of Brunei.
For now, residents are said to be in a holding pattern, as additional information is uploaded to a database that the court created for shareholders to review all drafts of the Term Sheet, starting with the board meeting minutes from 2022 to the present. That request is supposed to include all presentations to the board including the Transaction Committee or any other subcommittee related to the future of the Pierre. All proposals regarding the Pierre’s future from any counterparty from the past three years, and the board’s analysis of such proposals have also been requested.
Some of the requested information — minutes from some of the board’s meetings over the past three years — have started to be uploaded to a platform. Some board members are already anticipating that there will be a need for additional information, because of some of the information that they are looking for will not be shared in the meetings, according to one source.
In closing, the alliance’s most recent letter said they will continue to hold the board accountable to ensure it is acting in the best interests of all shareholders.
In turn, Stern and Johnson sent a response to that letter from “Litigating Shareholders” that said the “misstatements in yesterday’s Litigating Shareholders letter to all of us shareholders are numerous” without any specifics. Rather than refute “each [alleged] falsehood point by point,” they attached the Court’s Nov. 30 decision, which was also included with the Dec. 1 letter.
On Tuesday, a few employees spoke with WWD about the uncertainty of some of the long-term residents, including ones who now have great grandchildren. One employee suggested that the sale was being put in motion while New York City’s real estate market was cooling without considering the human beings who live there. The Pierre employs 550 members of the Local 6 Hotel, Restaurant & Club Employees & Bartenders Union, UNITE-HERE and approximately 150 other staffers including elevator operators and housekeeping personnel.
As reported, Taj is said to be committed to maintaining its affiliation with the Pierre and its relationship with shareholders.
It’s the kind of place where the more seasoned union hotel employees speak of its historic place in a city that is densely populated with hotels, and at least one referred to its founder Charles Pierre by name. Born Charles Pierre Casalasco in Corsica, he started out working at his father’s restaurant, before moving on to other hotels and restaurants. After stops in Monte Carlo, Paris and London, he came to New York at 25 and eventually opened his own restaurant before teaming up with Wall Street-ers like Otto H. Kahn and Edward F. Hutton in a joint venture to open the Pierre hotel in 1930.
When one staffer suggested speaking with a Taj manager at the Pierre on Tuesday, the manager advised him not to discuss the situation. A few minutes later the Taj employee returned to reiterate that Taj operates the hotel and that Taj’s contract has been renewed through 2035. He said that any questions regarding the sale should be directed at the Corporation, and asked that this reporter not take employees away from their work.
