Qatar's Love Affair with London
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On May 8th, only one month after we released our issue on Qatar, the emirate once again caught our interest when it was announced that Qatar Holding, the investment arm of the Qatar Investment Authority, had added London’s premier department store Harrods to its real estate portfolio. QH bought the city’s retail icon for a staggering £1.5 billion, becoming the fifth owner since it was founded in 1834 by Charles Henry Harrod, and the first vendor in nearly three decades. The deal came as a surprise, attracting a lot of media attention, not only because it ended Al Fayed’s 25 year reign of the London landmark, but also because in the months leading up to the sale Al Fayed confirmed that he’d had numerous offers coming in from Saudi Arabia and the Middle East – all of which he’d turned down. What is not surprising however is that when Al Fayed sold, he chose to sell to Qatar. Over the past few years the emirate has been investing in London at a phenomenal rate and has consequently built a strong relationship and reputation with the English capital. We think it’s safe to say that Qatar has its sights firmly set on London, with the purchase of Harrods following an already impressive track record.
According to Ken Costa, Chairman of Lazard International – the investment bank who advised Al Fayed on the sale – Al Fayed had wanted to sell Harrods for a while in order to spend more time with his family. He was just waiting for the right buyer. Al Fayed sold to Qatar Holding in the belief that they would uphold the traditions of Harrods. In an interview with the Times, following the sale Al Fayed said: “It’s a historical place. I know it’s important, not only for the British people but it is important for the tourism. What I can assure you is that Qatar Holding will do their best to upgrade this monument to make it even greater and better.” It’s clear that Al Fayed holds QH in high esteem, having witnessed their investment progress in the capital over the last few years.
We reported in our Qatar issue that in a bid to diversify its economy, the state has been actively seeking foreign and private investment. Something it couldn’t have done had it not been applying a prudent approach towards business investment before and during the recession. While economies around the world buckled under the weight of financial debt, Qatar weathered the slump by quickly capping the growth of property development on its own soil, opting instead to look abroad for investment. It is now the richest of the Gulf States and boasts the second highest GDP in the world, setting the emirate in good stead to begin investing when the timing was right – also a very good reason for Al Fayed to sell to Qatar and nobody else.
Qatar has been building its relationship with London since 2003 – the year its international news channel Al Jazeera launched its English-language website. The website was well received and Qatar swiftly made plans to establish a branch in London. In 2006 Al-Jazeera London opened for business as an affiliate of the BBC to bring Arabic news to the English-speaking world. Despite critics accusing Al Jazeera of sensationalizing stories over the years in order to increase its audience share, its reach to the English-speaking world surpassed hopes. According to a press release issued by Al Jazeera in October 2007, the English-speaking branch was reaching an estimated 100 million households. The commercial success of the network in the UK strengthened Qatar’s relationship with London and also paved the way for further business relations. Qatar began looking to London not just as a means of bridging the communication gap between the Arab and the English-speaking worlds, but as a way of building its foreign investment plan. Also around the same time trade imports from the UK to Qatar had increased by a phenomenal 26% in 2007 to reach QR3.8 billion.
And in September 2007 The London Stock Exchange began looking for investors. The QIA saw an opportunity to invest and purchased a substantial 20% share worth around $1.2 billion. When interviewed by Bloomberg about the purchase, LSE Chief Executive Officer Clare Furse said, “The QIA has an impressive track record of making substantial long-term investments in growth companies, so we are delighted to see that it recognizes the exchange''s unique strategic position and excellent prospects.” The purchase of LSE marked the beginning of Qatar’s investment in London’s real estate and set the ball rolling. In June the following year, Qatar Holding went after UK’s second largest bank, Barclays, paying a £1.8 billion for a 6.2% share of the wealth during the bank’s increase in capital. In October 2009, it even pocketed £615 million by selling shares, reducing its shareholding by 0.5%, although it did confirm that it would remain a long-term investor.
In the same year Sellar Property Group, a London property development firm headed up by Irvine Sellar (a former textile entrepreneur), began constructing The Shard of Glass in London’s London Bridge Quarter, just south of the river Thames. It’s London’s most ambitious real estate project to date, that according to Sellar, will look like an “iceberg sculpture emerging from the River Thames” and will shoot 72 floors into the sky, with a further 15 radiator floors in the roof. Designed by well-known Italian architect Renzo Piano, famous for designing Paris’s Pompidou Centre of Modern Art together with British architect Richard Rogers, it will be the tallest mix-use skyscraper in Europe. It will not only be home to offices, flats and restaurants, but also to a hotel managed by Shangri-La Hotels and Resorts, which will inhabit a fifth of the floor space. When Sellar Property Group started seeking investors to back the venture, it was unsurprisingly the Qataris that stepped forward. And so Sellar Property Group began negotiations with four Qatari investors that lasted just over a year. On 22nd January 2008 Sellar announced that it had secured funding from the Qatari Islamic Investment Bank QI, Qatari National Bank, Qatari Islamic Bank and Barwa, one of Qatar’s foremost real estate conglomerates. When we asked Baron Phillips, who runs Baron Phillips Associates – the property company’s PR representative – who approached who, he said that was a case of “six of one, half-dozen of the other.” In other words, they had mutual interests, and he went on to say that Qatar has “never not had its sights on London” and that Qatari investors are “actively looking for investments.”
His words further confirmed those of QInvest’s Chief Executive Officer Professor Abdul Latif Al Meer, when he stated in the 2008 press release announcing the deal that “London offered considerable advantages to Qatari companies because not only is it a global financial centre, but it is also a leading European city and a popular tourist destination.” Despite the recession and the huge knock London took to its financial and property markets, this investment is Qatar’s testament to its belief in the English capital’s ability to bounce back. Similarly Shiekh Jassim bin Hamad bin Jabr Al Thani, Chairman of the Qatar Islamic Bank, said in the press release that “investment in this project underlines our confidence, not only in the real estate market but also in the wider United Kingdom economy.” Qatar owned investment group Delta Two even put a £10.5 billion bid in for J Sainsbury Plc, the U.K.''s third-largest supermarket chain, but the deal fell through in the last round.
If Qatar has always had its sights set on London, then its recent investments have been all about timing. Firstly, The Shard is the tallest building to have ever been approved in Europe, and the first major real estate project to begin development in London since the Guerkin. Moreover, when the financial bubble burst in London companies immediately began looking abroad for financial backing and Qatar was in a position to help. In the same press release announcing Sellar Property Group’s deal with Qatari investors, Irvine Sellar added that “Qatari companies are increasingly focusing on the City of London for their expansion plans as it offers considerable advantages being a leading European city, a global financial centre and popular tourist destination.”
Finally, at the end of last year Qatar Holding invested a further £350 million in Songbird Estates, taking their share total from 15% to 24%. Songbird controls more than half the buildings in Canary Wharf’s financial district, equalling 7 million feet of office and retail space. Songbird approached its existing investors including Morgan and Stanley and Fullbloom Investment Corporation in a bid to repay an £880 million loan that was due in May to Citigroup – the world’s largest financial conglomerate.
With substantial stakes in London’s retail, financial, property, and banking industries, this small emirate of humble beginnings is rapidly establishing itself as a major player in foreign investment and London’s biggest patron. And with exports to the UK set to increase significantly in the near future – LNG exports are estimated to exceed 8 million tonnes per annum by 2010, according to the Finance Minister of Qatar – the UK will become one of Qatar’s largest trading partners. The only question left is what will Qatar invest in next in the English capital? With London’s 2012 Olympics just two years away – a conversation the Qataris have already broached with British government officials back in 2008 – it’s only a matter of time before it pumps more money into London.
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| Read full story in REAL's September issue |
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