A Flashy Qatari Deal Hints at the Nation’s New Investment Style

A Flashy Qatari Deal Hints at the Nation’s New Investment Style

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The reported purchase of an upmarket London hotel by Qatar suggests that the state’s $300 billion national wealth fund is shifting its investment focus.

Qatar is reportedly buying the high-profile London hotel Grosvenor House, according to Reuters, which cited unidentified sources. The acquisition of the hotel had reportedly been agreed on Tuesday with the vendor, the private U.S. real estate investment firm Ashkenazy Acquisition Corp., for an undisclosed sum. Qatar already owns other hotels in London, including the Connaught, the InterContinental London Park Lane and Claridge’s, as well as one of New York’s most iconic buildings, the Plaza Hotel.

Since its 2005 formation, the Qatar Investment Authority, which is fueled by Qatar’s natural gas wealth, has been through three phases. Until 2014, under the sway of the former Qatari Prime Minister Sheikh Hamad bin Jassim bin Jabr Al-Thani (known as “HBJ”), it blazed an aggressive acquisition trail that involved buying Western financial groups that had been crippled by the 2008 financial crisis, as well as high-profile assets like Harrods, the upmarket London department store.

But Since Sheikh Tamim bin Hamad Al-Thani became emir and oil prices collapsed, the fund’s management has been more measured.

The interesting question is whether its new chief executive, Mansour Ibrahim al-Mahmoud, and chairman, Sheikh Mohammed bin Abdulrahman Al-Thani, who were both appointed within the past two months, will return to an HBJ-style approach.

A purchase of Grosvenor House suggests they might. Although terms weren’t disclosed, hotel yields in London are at their lowest in a decade, according to one analyst, which means that valuations are sky-high. Paying top dollar for such assets is not necessarily seen as foolish in Doha: under HBJ it had the virtue of showcasing Qatar on the global stage. In 2018 that projection carries an additional security element, because the state has since June 2017 been blockaded by Saudi Arabia, Egypt, Bahrain and the United Arab Emirates.

Even if the Qatar Investment Authority’s new management team is inclined to be more circumspect, Qatar’s outlook suggests that there is scope to elevate geopolitical concerns above immediate returns. The state has refinanced emergency bank liquidity facilities provided by the fund and the nation’s central bank during the blockade, and a projected 40 percent rise in gas production by 2024 implies that tens of billions of dollars will be added to the Qatar Investment Authority’s resources.

A more considered approach would be to invest in energy technology. But the fundamentals suggest that there is plenty of scope for showy purchases as well.

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