Dubai, unable to make payments on its debt is being rattled yet again. This time it is the investment arm of Dubai World.

NEW YORK (AP) – Dubai World’s investment arm, Istithmar, lost ownership of the W Union Square New York hotel in a foreclosure auction Tuesday.One of the hotel’s interim lenders, a private equity firm called LEM Mezzanine, acquired the 270-room hotel for $2 million, according to Dow Jones. The sale was another financial blow to Istithmar, which acquired the hotel in October 2006 for $285 million, according to Real Capital Analytics, a data tracking firm.[...]

[...]At the beginning of December, owners of eight New York hotels worth a total of $985 million were in financial distress, including a Courtyard Marriott and The Time Hotel, according to Real Capital Analytics.

The W was not the only Dubai World hotel in trouble. The Fontainebleau in Miami Beach is also in financial straits. The property’s $660 million loan was due in August. Contractors also claim the owner of the historic hotel owes them $60 million.[...] (H/T butch)

A price reduction of 99.3%. And some say commercial real estate is just fine.