Jho Low blow for Witkoff’s Park Lane Hotel as 1MDB taint spreads

‘Low Family Capital built from our Grandparents, down to the third generation’ — not so, Jho Low, says Justice Department

Instagram picture of Malaysian businessman Jho Low with actor Leonardo Di Caprio at the 'Wolf of Wall Street' premiere.

In 2013, as an investor group led by New York developer Steve Witkoff was closing on its $US654 million purchase of the Park Lane Hotel, a Witkoff executive asked the group’s largest investor for more specific information on where he was getting his money.

The email to Malaysian businessman Jho Low said: “We are getting down to the end with the lender, they’re asking for specifics on where the money on your side of the deal is coming from given it is international money,” according to court papers filed last week by the US Justice Department.

Mr Low responded that same day: “Low Family Capital built from our grandparents, down to the third generation now,” according to the papers.

Mr Low wasn’t telling the truth, according to the papers filed in US District Court in Los Angeles as part of the Justice Department’s effort to seize his stake in the Park Lane and other assets. Instead, the papers allege, the money came from a Malaysian government investment fund named 1Malaysia Development, or 1MDB.

Investigators in the US have been looking into whether Mr Low and others siphoned money out of 1MDB for their personal use. Mr Low was deeply involved in the creation of 1MDB and in the middle of the alleged fraud, according to Justice Department’s filing.

Mr Low’s investment in the property was one of the largest he made using 1MDB funds, the government alleges.

The investment has turned out to be a big headache for the other members of Mr Witkoff’s group, including big names such as developer Harry Macklowe, Howard Lorber, chairman of brokerage Douglas Elliman, and Highgate Holdings, a Dallas hotel investment company.

When the group purchased the Park Lane from the estate of Leona Helmsley, it was studying the possibility of converting the property into ultra-luxury condominiums, among other things. But as the 1MDB investigation has intensified in recent months, the group hasn’t been able to move ahead with its plans to refinance, convert and upgrade the 46-story tower overlooking Central Park, according to people familiar with the matter.

Last week’s seizure effort could provide some relief for the group because, if successful, the government’s next step would likely be to sell it. Such a sale would bring in fresh capital, remove the taint from the property and allow the group to move ahead with plans.

New York’s ultra-luxury condo market has slowed since late 2013, when the investor group closed the deal.

The number of contracts signed for units at $US4m ($5.36m) or more during the first 25 weeks of this year fell 22 per cent compared with the same period last year, according to luxury broker Olshan Realty.

But riding out the tough times should be easier for the investment group because it has increased the property’s cashflow.

The hotel’s income was about $US8m a year in 2013 when it was being marketed for the Helmsley estate by CBRE. Today its annual income is closer to $US25m.