The trendy W Hotel in Manhattan's Union Square was auctioned off yesterday for just $2 million. The purchase price is cheap, but the new owner of the hotel, LEM Mezzaine, will also be responsible for any defaulted loans that are in line ahead of its debt. The hotel was owned by Dubai World's private-equity arm, Istithmar World Capital, which paid $282 million for the property in 2006. This fall the company defaulted on $117 million of its debt. As the WSJ (subs req'd) reports the hotel was "the first major property asset of Dubai World to be foreclosed on since the government-owned fund's problems boiled over in late November."
Last month, Dubai World, a company owned by the government of Dubai, announced it was hoping to delay payment on $26 billion in debt. The stock market there has slumped since the announcement.