With its troubling debt problems, an arm of Dubai World lost control of the W Union Square Hotel in a foreclosure auction this morning. The Real Deal reports, "LEM Mezzanine, a Philadelphia-based private equity fund, acquired Istithmar's former W New York - Union Square hotel for $2 million, plus the assumption of $212 million in debt."

LEM issued a statement saying, "We are pleased to have completed this step to assume ownership of the W New York Union Square. Despite the recent downturn of the hotel industry, and the defaults that led to today’s foreclosure auction, we are optimistic about the future. Our intention is to ensure a seamless transition of ownership." And the Real Deal says, per sources, that it will remain a W hotel and that LEM will invest in improvements.

Istithmar paid $285 million for the hotel in 2006, which Bloomberg News says was the height of the market. Plus, "Dubai World amassed more than $4 billion in debt buying trophy hotels and office buildings in the U.S., Real Capital data show."