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 There
can be few bolder statements of the UAE's global
reach than it snapping up iconic buildings in the
heart of New York City.
Earlier this month, the spectacular purchase of the
towering Chrysler Building by Abu Dhabi Investment
Council (Adic) made headlines around the world and
further raised the profile of the Emirates.
But the acquisition is simply the latest of many by
the UAE in the Big Apple – all of which, experts
say, are shrewd investments.
Importantly, they also signify the diversification
of a traditionally oil-dependent economy into
established real estate markets.
"The UAE has an appetite for these markets and at
the moment circumstances are in its favour," said
Eamon Alashkar, head of corporate investment at real
estate experts Colliers International, Dubai. "It
gives companies a foothold in these Western real
estate markets and gets them recognised, and other
investors can then follow suit.
"Properties such as the Chrysler Building are trophy
buys but they are also core real estate
opportunities that will also interest investors."
The Chrysler Building deal was a good piece of
business, according to Isam Salah, head of the
Islamic finance practice at King and Spalding, a New
York law firm that specialises in investments in the
Middle East.
"This is a good time to invest in property in
America and Abu Dhabi probably got a favourable
deal," he said. "The Chrysler Building is much-loved
by all New Yorkers and I'm sure Abu Dhabi will
maintain its appeal. I don't know what the plans are
but Adic has bought a striking feature of the New
York skyline and a prominent address.
"This is not the first buy of its kind for the UAE
so people are not suspicious about the purchase as
they have seen other successes in the city."
Indeed, buying landmark properties in New York is
something the UAE is becoming expert at.
Adic's 75 per cent stake in the Chrysler Building
was bought for $800 million (Dh2.9 billion).
Yet, the Abu Dhabi Government's investment arm is
following an example of Dubai Investment Group and
Istithmar which have also invested in real estate in
America's financial capital.
Dubai Government-owned holding company Istithmar got
the ball rolling in April 2005 when it bought a
99-year lease on 450 Lexington Avenue, a 32-storey
office tower built over the eight-storey Grand
Central Post Office, for $600m.
In September 2005, Dubai Investment Group paid $440m
for Essex House – now named Jumeirah Essex House
after the Dubai hospitality firm was brought in to
spruce up the luxury hotel overlooking Central Park.
Two months later, Istithmar purchased 230 Park
Avenue – which is better known as the Helmsley
Building – for $705m.
The following year, 2006, was the busiest to date:
In June, Istithmar bought 280 Park Avenue, an office
property spread across 1.2 million sq ft – whose
tenants include Deutsche Bank, the National Football
League and financial services firm AG Edwards – for
$1.2bn.
That same month, the company completed a $300m deal
for the former Knickerbocker Hotel at 1466 Broadway.
And in October that year Istithmar acquired the W
Hotel Union Square in Manhattan for $285m.
In 2007, Istithmar acquired the Mandarin Oriental
Hotel. Nakheel subsequently sold 230 and 280 Park
Avenue – making a profit of $595m. The company
offloaded number 280 to Broadway Properties in
November 2007 for $1.35bn and number 230 to a group
including a fund managed by Goldman Sachs Group for
$1.15bn last December.
Joe Sita, CEO of Nakheel Hotels, said: "We took the
opportunity to realise some significant value by
selling the Helmsley Building and 280 Park Avenue
just before the credit crunch hit.
"There were a number of assets that Istithmar Hotels
owned that came under Nakheel Hotels when Dubai
World decided to consolidate its hotel business to
create a fully integrated hotel investment company –
Nakheel Hotels – in 2007.
"The ownership of the Mandarin Oriental Hotel and W
Hotel reflects Nakheel Hotels' investment strategy
for the hospitality sector in the US market of
targeting prized assets and its strategy of
investing in luxury hotels in key gateway cities
around the world. New York is a gateway city and
Nakheel Hotels believes in the growth of the hotel
sector in New York."
Nakheel, however, refused to comment on the
Knickerbocker Hotel investment.
Alashkar, of Colliers International, said acquiring
trophy overseas properties was a shrewd business
move.
"It redeploys the liquidity of a company – what they
are doing is diversifying into established markets."
The numbers
75%: The stake bought by the Abu Dhabi Investment
Council in New York's Chrysler Building
$800m: The amount paid by Adic to buy the stake in
Chrysler Building
$595m: The profit made by Nakheel Hotels by selling
230 and 280 Park Avenue
$705m: The amount paid by Istithmar to purchase 280
Park Avenue
$440m: Was the amount Dubai Investment Group paid
for acquiring Essex House – now named Jumeirah Essex
House
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