Qatari Investors Continue Property-Buying Spree In London

17th Jun 2010 12:48

By Anita Likus Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Developer and investor Barwa Real Estate Co. (BRES.DO) Thursday said it will buy Park House development in London's fashionable West End district for GBP250 million, as Qatari investors continue to snap up prime real estate in the city. "Qatar has emerged as a new global powerhouse and is expected to be the largest source of cross-border real-estate capital during 2010," said property adviser Jones Lang LaSalle. Qatar's wealth is based on the rapid expansion of its gas industry over the past 10 years and, in response to a windfall of revenue, the government has created a number of major investment vehicles including Qatar Investment Authority, Qatar Holding, Qatari Diar and Barwa, which have been buying up prime London properties and stakes in companies. Recent purchases of property in central London by Qatari investors suggest that they have called the bottom of the market and are still benefiting from the weakness of sterling. Qatar, which operates some of the world's largest sovereign wealth funds, last month paid GBP1.5 billion for Harrods, one of the world's most famous department stores. Late last year, Qatari investors bought the U.S. Embassy building in Mayfair for $664 million, and in 2007 they paid almost GBP1 billion for the 13-acre Chelsea Barracks site in the heart of London. Qatar also has a 24% holding in Songbird Estates PLC (SBD.LN), which owns most of London's second financial district, Canary Wharf. Jones Lang La Salle expects more deals. Qatari investors are preparing to make an offer on London hotel the Grosvenor House, said a person familiar with the matter. The property is expected command a price tag of about GBP500 million. According to media reports, Qatari investors also are looking to buy a share in landmark Savoy Hotel. Barwa, which is 45% owned by Qatari Diar, the property unit of the country's sovereign wealth fund, the Qatar Investment Authority, will pay Land Securities Group PLC (LAND.LN) GBP225 million immediately for Park House and GBP25 million when building work is completed. It will also meet all of the construction costs. On top of that, Barwa will pay a share of the profit to Land Securities, the U.K.'s largest landlord and developer. Based on current expectations for office and retail rental values, this profit share is estimated at about GBP33 million and is capped at GBP50 million. Land Securities started developing Park House, at 453/497 Oxford Street, in May and acted directly on the sale. According a person close to the company, Barwa started looking at the Mayfair site six months ago. The project, which covers an entire city block of just over an acre on a prime Mayfair site, with frontage onto Park Street, North Row and Oxford Street, would have cost Land Securities GBP412 million, of which the remaining capital expenditure to complete the plan was GBP179 million. Park House is a development of 330,000 square feet comprising offices, retail space and residential accommodation. Land Securities will still complete the development, acting as manager responsible for delivery of the project. Completion is due in November 2012. "The investment demonstrates our commitment to Europe as part of our growth strategy and signals our interest in strengthening our portfolio interests in London," said Ghanim bin Saad Al Saad, chairman and managing director of Barwa. The acquisition is the first major wholly owned investment made by Barwa in the U.K. and fits its strategy to invest in international commercial property. Barwa also has a minority investment in The Shard building in London and is currently in the process of taking over Qatar Real Estate Investment Co. Barwa is looking for other mixed-used opportunities of a similar size in London, which it will finance with debt and cash, depending on how much cash banks are willing to lend, according to a person close to the company. "Park House is the largest speculative development in Mayfair for a generation and this sale enables us to realize the majority of our profit ahead of schedule, with significantly reduced risk and with no capital employed," said Robert Noel, managing director of Land Securities' London portfolio. Land Securities plans to invest the capital into its growing speculative development pipeline. -By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; [email protected] (END) Dow Jones Newswires June 17, 2010 07:48 ET (11:48 GMT)