Qatar’s appetite for real estate goes global

Qatar’s recent buyout of UK’s prestigious Harrods Department Store for $2.3 billion came as a surprise to many investors in the region and beyond.

But according to property advisory firm Jones Land LaSalle (JLL), the move reaffirms the fact that the country is faster emerging as the new global powerhouse and is expected to be the largest source of cross-border real estate capital during 2010.

In a Mena house view report titled ‘Qatar: The New Global Powerhouse,’ analysts predict that further investments are likely to continue in other markets across Latin America, Eastern Europe and Asia, “as Qatar continues to show an appetite for high profile opportunities on the global real estate stage.”

“Qatar is the epitome of energy rich GCC nations with a large appetite for real estate investments and also investment in real estate stage, fuelled by the rapid growth in oil and gas revenues over recent years,” the report says.

The luxury store, a historic landmark in the Knightsbridge area of London would be upgraded to make it “greater and better for tourists and the people of England,” Qatar’s prime minister, who is also chairman of Qatar Holding, told reporters earlier.

Harrods deal unseats Al-Fayed

Qatar Holding, an arm of Qatar Investment Authority (QIA), is the prime vehicle for direct investments by the State of Qatar and was founded in 2005 to strengthen its economy by diversifying into new asset classes. It’s one of the largest sovereign wealth funds in the world with an estimated $60 billion in assets.

The Harrods deal brought to an end 25 years of ownership by Egyptian-born businessman Mohammed Al-Fayed, who will become the store’s honorary chairman.

Qatar Holding has stakes in supermarket chain J Sainsbury, the London Stock Exchange and Credit Suisse.

“The present focus on London is likely to broaden to an interest in deals in other markets across Latin America, Eastern Europe and Asia,” JLL’s report says, adding “With a relatively small domestic real estate market, much of this interest is being directed towards real estate markets overseas, making Qatar an increasingly important player in terms of global real estate capital flows.”

The new study attributes the bold investment strategy to an aggressive comeback “after an adjustment period in 2009.”

“The return of the Qataris on the global real estate scene has been marked by an aggressive and bold investment strategy. As relatively young entities, Qatar- based institutions have shown a hunger for high-profile acquisitions and an eagerness to leave their footprint on the global map.”

Expansion of gas industry propels Qatar’s economy

Recent deals that have illustrated this ‘trophy-led’ investment strategy include the November 2009 acquisition of the US Embassy building in Grosvenor Square.

Qatari Diar has also acquired stakes in highclass hotels around the world, such as the Raffles Hotel in Singapore or the MAIA resort in Seychelles and the First Investor is currently looking for opportunities in Russia and Brazil.

Another feature of Qatar’s appetite for real estate is its willingness to consider both direct and indirect investments.

“In addition to the direct deals, Qatar has been a major investor in real estate vehicles around the world. A recent example of this form of investment was the £350 million investment that Qatar Holding has made to purchase a controlling stake in Songbird, the owner of Canary Wharf in London,” Jll study says.

Qatar’s wealth (it was one of the fastest growing economies worldwide in 2009 and has the world’s second highest GDP per capita at $121,400) is based on the rapid expansion of its gas industry over the past 10 years.

Qatar started to invest heavily in its gas infrastructure in the early 1990s, which has resulted in a massive increase in government revenue over the past 10 years.

“In response to this revenue windfall, the government has created a number of major investment vehicles including Qatar Investment Authority, Qatar Holding, Barwa and Qatari Diar to help the country diversify into new asset classes,” the report states.