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Thu 24 Jun 2010 10:25 AM

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Would Qatar fund be smarter to hold back?

Damian Reilly on how Qatari Diar has blazed an astonishing trail across Europe and the Far East.

Would Qatar fund be smarter to hold back?

Rather as Abu Dhabi Investment Fund Aabar did in the second half of last year, Qatari Diar — the property arm of the Qatar Investment Authority — has blazed an astonishing trail across Europe and the Far East in recent months. Since popping up on the consciousness of the broader international investment community in April with the purchase of the iconic Singapore hotel Raffles, Qatari Diar has pursued an aggressive buyout plan across the world, and by doing so eclipsed, for the time being at least, rival Gulf investment funds in the generation of headlines.

Over recent years, we have grown accustomed to seeing Dubai (first) snapping up high profile international assets, and latterly Abu Dhabi, but today Qatar is making the pace. Qatar’s wealth is no secret, of course (per head it is the richest country on Earth), but the question many are asking is not ‘what took you so long?’, but ‘why now?’

After all, the last time Qatar’s state investment fund made headlines it was for the disastrous attempt to buy British supermarket chain J Sainsburys for £10.5bn ($14.88bn). In fact, after its 2008 foray into Britain, QIA was left with a nursing home operator, a couple of healthcare firms, some properties, an enormously non-profitable 15 percent stake in the London Stock Exchange, and a whole lot of frustration.

This time around, however, Qatari Diar has been particularly busy (and seemingly successful) in London, where it has spent billions of pounds buying Harrods, Chelsea Barracks, the old American embassy building in the heart of Mayfair, the Park House development in the West End, and probably very soon most of Canary Wharf if the rumours about the Songbird acquisition are well founded, as most analysts think they are. There are also widely believed to be plans to buy hotels the Savoy and Grovesnor House, and no one would be surprised if Claridges, The Berkley or the Connaught fell into Qatari ownership.

Qatar now has well over £6bn ($9bn) tied up in London property, and in what must be the best news Mayor Boris Johnson has heard all year, it sounds as if there is plenty more where that came from.

Qatari Diar managing director Ghanim bin Saad Al Saad last week said: “We believe that there are a lot of opportunities available. We are looking to invest more into the UK, and in London especially, in real estate and hotels. We invest over the long term, in very safe and very strong investments. We believe there is a lot of synergy between our two countries.”

The reason some people are scratching their head over the timing of Qatar’s buying spree now is because most believe London property is about to get considerably cheaper. British chancellor George Osborne last week announced the most swingeing budget for 25 years, and at the same time market analysts Rightmove announced that all upward movement in the city’s property sector had ceased, predicting downward movement in the second half of the year.

Should that transpire, then again it will seem QIA has called the market wrongly, although they would argue that some properties are so sought after they are immune from global economic fluctuations. Besides, Al Saad says Qatari Diar are in for the long haul — and their belief in British institutions to weather whatever is about to happen will be heartening for the government of that country. Clearly there is a love affair going on between London and Doha, but as is the case in any romance, the QIA must be careful not let its heart rule its head.

That said, with an economy set to grow sixteen percent this year, as Qatar’s is, what does money matter? One thing is certain: we are going to hear a lot more about Qatari Diar’s investments over the coming months, and not just in Britain.

Damian Reilly is the editor of Arabian Business.

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