As energy revenues boost Qatar’s buying power, the Qatar Investment Authority has acquired the Grosvenor House Hotel in London. A source told Reuters that private U.S. real estate investment firm Ashkenazy Acquisition Corp. agreed to sell the hotel for an undisclosed price to the state-run Authority via its Katara Hospitality unit.
As Reuters noted, Qatar has been buying top hotel properties in western locations over the past decade as part of a drive by its $300-billion sovereign wealth fund to diversify the wealth it accumulates from gas and oil exports. It has a total investment of over £30 billion in the UK and is looking to expand this by £5 billion in the next few years.
The 13-year-old QIA, funded by the country’s gas exports, already owns London’s Savoy and Connaught hotels, and acquired The Plaza Hotel in New York City for around $600 million in July.
Ashkenazy Acquisition acquired the Grosvenor House Hotel from India's Sahara Group last year, also for an undisclosed price. The property was constructed in the 1920s and opened in 1929 as a luxury hotel near near Hyde Park, Oxford Street and Buckingham Palace. The eight-story JW Marriott hotel has 420 guestrooms and 76 suites as well as 64,110 square feet of meeting space across 26 rooms.
The acquisition brings Katara Hospitality’s portfolio of properties in operation or under development to 40.
Sanctions and Opportunities
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.
Up until 2014, under the leadership of former Qatari Prime Minister Sheikh Hamad bin Jassim bin Jabr Al-Thani, the Qatar Investment Authority acquired numerous Western financial groups that had been crippled by the 2008 financial crisis, as well as high-profile assets like Harrods in London. Following a decline in oil prices, the fund’s management has been “more measured,” as the New York Times calls it, but the recent appointments of CEO Mansour Ibrahim al-Mahmoud and Chairman Sheikh Mohammed bin Abdulrahman Al-Thani may shake things up—especially in light of the year-old sanctions hindering Qatar’s trade.
Last year, the state’s Gulf neighbors, including Saudi Arabia, the United Arab Emirates, Egypt and Bahrain, imposed economic sanctions on Qatar for allegedly supporting terrorism. Qatar has denied the allegations and has argued that the economic boycott is an attempt to undermine its sovereignty.
Since the sanctions went into effect last June, the state has refinanced emergency bank liquidity facilities provided by the fund and the nation’s central bank, the NY Times reports. Furthermore, 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—meaning that more deals like the Grosvenor acquisition could be underway in the coming years. (Reuter’s source suggested that another European hotel buy would be “coming soon.”)
The QIA has passed up opportunities to offload assets and raise more funds. Earlier this year, Katara Hospitality denied rumors that the company was planning to sell two of its hotels in Europe operated by IHG, suggesting its coffers were doing fine.
With three London hotels in its portfolio already, more hospitality investments from the QIA apparently make sense. Hotel yields in London are at their lowest in a decade, the NY Times claims, which is driving up valuations. With $300 billion in the fund, Qatar can afford some big buys, and headline-making deals like these could be seen as a deliberate thumbing of the nose at the neighboring states behind the sanctions.