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Qatar revamps investment strategy after Kushner building bailout

Qatar revamps investment strategy after Kushner building bailout

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LONDON/NEW YORK/DUBAI (Reuters) – When information emerged that Qatar could have unwittingly helped bail out a New York skyscraper owned by the household of Jared Kushner, Donald Trump’s son-in-law, eyebrows have been raised in Doha.

FILE PHOTO: U.S. President Donald Trump, flanked by White Home senior advisor Jared Kushner, meets with Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman on the Ritz Carlton Resort in Riyadh, Saudi Arabia Could 20, 2017. REUTERS/Jonathan Ernst

Kushner, a senior White Home adviser, was an in depth ally of Saudi Crown Prince Mohammed bin Salman – a key architect of a regional boycott in opposition to Qatar, which Riyadh accuses of sponsoring terrorism. Doha denies the cost.

Brookfield, a world property investor during which the Qatari authorities has positioned investments, struck a deal final yr that rescued the Kushner Firms’ 666 Fifth Avenue tower in Manhattan from monetary straits.

The bailout, during which Doha performed no half and first realized about within the media, has prompted a rethink of how the gas-rich kingdom invests cash overseas by way of its big sovereign wealth fund, two sources with data of the matter advised Reuters.

The nation has determined that the Qatar Funding Authority (QIA) will purpose to keep away from placing cash in funds or different funding automobiles it doesn’t have full management over, in response to the sources, who’re aware of the QIA’s technique.

“Qatar began wanting into how its identify obtained concerned into the deal and came upon it was due to a fund it co-owned,” mentioned one of many sources. “So QIA in the end triggered a method revamp.”

A QIA spokesman mentioned: “QIA had completely no involvement within the 666 Fifth Avenue growth and the claims about QIA’s funding technique will not be true. There was no change in funding technique close to taking majority management.”

The QIA didn’t handle different detailed questions from Reuters together with about its future investments by way of funds and any want to have extra management over these cash flows.

Canada’s Brookfield Asset Administration Inc bailed out 666 Fifth Avenue by way of its actual property unit Brookfield Property Companions, during which the QIA acquired a 9 p.c stake 5 years in the past. Each dad or mum and unit declined to remark.

The QIA’s strategic shift was made late final yr, in response to the sources. It affords a uncommon perception into the pondering of one of many world’s most secretive sovereign wealth funds.

The revamp might have important implications for the worldwide funding scene as a result of the QIA is likely one of the world’s largest state buyers, with greater than $320 billion beneath administration.

The wealth fund has poured cash into the West over the previous decade, together with rescuing British and Swiss banks in the course of the 2008 monetary disaster and investing in landmarks like New York’s Plaza Resort and the Savoy Resort and Harrods retailer in London.

QATARI BOYCOTT

Kushner was chief govt of Kushner Firms when it acquired 666 Fifth Avenue in 2007 for $1.eight billion, a file on the time for a Manhattan workplace constructing. It has been a drag on his household’s actual property firm ever since.

The debt-laden skyscraper was bailed out by Brookfield final August, when it took a 99-year lease on the property, paying the lease for 99 years upfront. Monetary phrases weren’t disclosed.

The QIA purchased a 9 p.c stake in Brookfield Property Companions, which is called BPY and is listed in Toronto and New York, for $1.eight billion in 2014.

BPY has about $87 billion in belongings, a part of greater than $330 billion managed by its dad or mum Brookfield. The stake buy by QIA was consistent with its technique to spice up investments in prime U.S. property. The funding gave QIA no seat on the board of BPY.

The Qatari wealth fund was not concerned within the 666 Fifth Avenue deal, a supply near Brookfield Asset Administration advised Reuters. There was no requirement for Brookfield to tell the QIA beforehand.

The rescue rankled with Doha, in response to the 2 sources aware of the QIA’s technique, as a result of Kushner – married to U.S. President Trump’s daughter Ivanka – had lengthy been one of many key supporters in Washington of the Saudi crown prince, who’s the king’s favourite son and inheritor to the throne.

Prince Mohammed was a chief mover in main regional states to severing hyperlinks with its neighbor Qatar and embargoing the small nation since mid-2017. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain accuse Qatar of sponsoring terrorism. Doha denies the allegation and says the opposite nations merely wish to strip it of its sovereignty.

“There is no such thing as a upside in investing via funds for somebody like QIA. Qatar desires full visibility into the place its cash goes,” mentioned the second supply aware of the QIA’s technique.

He added that one of many causes for Doha’s considerations concerning the deal was that it may need been seen as an try by Qatar to affect the Trump administration, which was not the case.

The QIA is not going to wind down current investments with Brookfield or others, however will quite now not put money into comparable offers, in response to the 2 sources.

The supply near Brookfield mentioned relations with the QIA have been nonetheless robust.

STILL GOING BIG

The QIA’s strategic revamp additionally adopted a reshuffle on the prime of the fund final November when its long-serving chief, Sheikh Abdullah bin Mohamed bin Saud al-Thani, was changed by its former head of threat administration, Mansour Ibrahim al-Mahmoud. Overseas Minister Sheikh Mohammed bin Abdulrahman Al Thani was named QIA chairman.

Qatar, whose wealth comes from the world’s largest exports of liquefied fuel, doesn’t present knowledge on how a lot cash it locations with exterior fund managers.

“What we’ve got seen these days is that it has haven’t been putting a lot,” mentioned a Western fund supervisor who usually sources cash from wealth funds. “Both they’re investing themselves or they’re simply sitting on numerous money.”

The Qatar shift in its method displays a wider development amongst sovereign wealth funds to cut back reliance on exterior funding managers, in an try to maintain tighter management over their cash.

The Abu Dhabi Funding Authority, for instance, mentioned final yr that 55 p.c of its belongings have been managed by exterior managers in 2017, down from 60 p.c the yr earlier than.

But, even when the QIA is being extra cautious in its selection of funding automobiles, there may be little indication that its urge for food for large worldwide acquisitions has diminished.

In December, new QIA chief Mahmoud advised Reuters the fund was specializing in “traditional” investments within the West similar to actual property and monetary establishments, and would additionally speed up funding in expertise and healthcare.

“The directions from the highest are to exit and do huge offers,” mentioned a Western banker who has held talks with Qatari officers.

He mentioned QIA’s dealmaking had not stopped even in the course of the top of the Gulf embargo, which initially compelled the fund to place in about half of the $43 billion injected by public-sector companies into Qatari banks to mitigate the impression of outflows.

With oil and fuel costs rising over the previous two years, Qatar has not departed from what it’s best recognized for – snapping up big-name properties.

FILE PHOTO: A constructing at 666 Fifth Avenue, owned by Kushner Firms, rises above the road in New York, U.S., March 30, 2017. REUTERS/Lucas Jackson

In 2017, QIA pledged to ramp up its investments in Britain to 35 billion kilos ($45 billion) from 30 billion. Since then, it has spent about 1.7 billion kilos on actual property and one other 1.1 billion on infrastructure within the nation.

In latest months, Qatar has purchased New York’s Plaza and London’s Grosvenor Home accommodations.

($1 = zero.7724 kilos)

Further reporting by Eric Knecht; Writing by Dmitry Zhdannikov; Enhancing by Pravin Char

Our Requirements:The Thomson Reuters Belief Ideas.

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