In a statement, the bidder, an affiliate of private equity fund LEM Mezzanine, counts itself "pleased" to have completed this step toward equity ownership of the property. "Despite the recent downturn of the hotel industry, and the defaults that led to today's foreclosure auction, we are optimistic about the future," according to the statement. "W is an excellent brand, Starwood is a premier hotel operator, and this destination hotel is well situated in one of New York City's best locations. Our intention is to ensure that the hotel continues to be well run and is made ready to take full advantage of any future market recovery." LEM acquired a portion of the mezzanine debt on the property in 2007, and foreclosure proceedings began last month after a series of defaults.

According to published reports, Istithmar, the Dubai World unit that owned the W, had submitted a bid of $2.1 million but asked for certain changes in the loan covenants. The LEM affiliate was named the winning bidder after a closed-door meeting.

The foreclosure sale comes as Dubai World, the investment unit of the emirate of Dubai, is scrambling to make payments on a debt load totaling $26 billion, and published reports say other New York properties may go on the block, including the Knickerbocker Hotel in Times Square and the Jumeirah Essex House overlooking Central Park. The Dubai government has reportedly said it will not guarantee the debt obligations of its investment fund.