Arab Royals Buy 2 Pieces of the Skyline
By CHARLES V. BAGLI
Published: November 10, 2005
They are two trophy buildings in Manhattan, familiar if not instantly nameable by anyone who knows the city: 230 Park Avenue, the gold-crowned, 34-story tower that sits astride the avenue between 45th and 46th Streets, and the Essex House, one of the grand Art Deco hotels on Central Park South.
And now they have a new landlord: the royal family of Dubai, the oil-rich Arab emirate on the Persian Gulf.
In lightning moves reminiscent of the Japanese real-estate shopping spree in the late 1980's, two companies controlled by the royal family plunked down more than $1.1 billion for the buildings. The family's representative, Sultan Ahmed bin Sulayem, flew into town yesterday to make the announcement this morning over breakfast at Michael's, the cafeteria for New York's media elite on West 55th Street, and raise Dubai's profile.
Two buildings, even famous ones, may not make a new real estate dynasty, but the purchases have the New York development community humming because they constitute Dubai's first - and probably not the last - foray into the hot market here.
The hugely wealthy emirate, one of seven city-states that make up the United Arab Emirates, has turned itself into one of the fastest-growing tourist destinations in the world and is now an avid real estate investor in the United States and England, because its oil reserves are slowly running dry. The crown prince, Sheik Mohammed bin Rashid Al Maktoum, is intent on diversifying.
One of the royal family's companies, Istithmar, closed this week on the $705 million purchase of 230 Park, known variously as the Helmsley Building and the New York Central Building. A separate Dubai company closed in September on the $440 million acquisition of the Essex House, home to Alain Ducasse, the restaurant which recently won a coveted three-star rating in the Michelin guide to New York City.
The big question now is not whether the emirate can afford the buildings, but whether it will escape the fate that befell Japan 15 years ago when it made too heavy a bet on real estate at the top of the market and lost.
"New York is a world unto its own as far as real estate is concerned," said David S. Schaiman, a managing director of Sonnenblick-Goldman, the real estate investment bank that oversaw the sale of the Essex House. "Everybody wants to buy in New York."
In an interview yesterday afternoon, Sultan Ahmed bin Sulayem said he believed that there was still opportunity for growth in New York: "This shows our confidence in the real estate market in New York. We believe the market is very good here. If we see another opportunity, we'll return."
Slightly smaller than Delaware, Dubai has become an international banking center as well as a major tourist spot. Oil accounts for only 8 percent of the city-state's national income, while tourism accounts for 17 percent, government officials said.
Golf and tennis tournaments feature Tiger Woods and Venus Williams. Rod Stewart reportedly bought an island there, and the soccer star David Beckham and his wife, the former Spice Girl Victoria Beckham, are frequent visitors. Indeed, some 5.45 million travelers visited Dubai in 2004, nearly 20 times the number of a decade earlier.
Over the past three years, Dubai has also quietly invested more than $1 billion in real estate in the United States, putting money into nursing homes, office buildings, hotels and thousands of apartments in Dallas, Phoenix, Nashville and Atlanta.
Last year, the crown prince made a splash in London when his companies bought Madame Tussaud's wax museums and the office building at 1 Trafalgar Square.
Now it is plunging into one of the most expensive and most lucrative markets in the world, New York. Essex House last sold for $250 million in 1999. A year earlier, 230 Park was sold for $225 million. With both properties, real estate brokers say, Dubai moved quickly, blowing all other offers out of contention.
To some observers, it sounds like Japan all over again.
With their economy booming in the 1980's, the Japanese paid top dollar for landmark buildings and golf courses from New York to Los Angeles. They bought $7.4 billion worth of real estate in Manhattan alone over three years ending in 1990, including Rockefeller Center, which touched off a xenophobic reaction over the sale of American patrimony.
But in 1990, the Tokyo stock market collapsed and property values in Manhattan plummeted. Japanese investors lost hundreds of millions and most of the buildings found their way back into American hands.
Andrew Farkas, a partner with Istithmar in 230 Park and some other deals, said that the crown prince's strategy had no parallel with that of the Japanese in the 1980's.
"This is much more strategic in nature," said Mr. Farkas, a scion of the Alexander's department store family and the ex-chairman of the Insignia Financial Group. "It's part of a focused, deliberate decision-making process that would appear to be asset by asset, not a broad, sweeping ambition to acquire things."
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