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July 3, 2013 7:21 pm
The government of the gas-rich state of Qatar is rethinking the way it invests billions of dollars of state funds in property in an attempt to introduce a commercial rigour to its dealmaking and to end its reputation as a trophy investor.
The Gulf state is reviewing scores of deals made through government-funded vehicles since 2007 as it shapes its investment strategy, according to people familiar with Qatar Investment Authority, the asset manager with more than $100bn in assets, under whose auspices most property deals are made.
“They find the idea that they have overpaid distasteful in the extreme,” said one person who has worked on a number of property deals for Qatar. “They want to shake the impression they are trophy hunters; they only want to do commercially logical deals.”
Qatar has in the past six years become a leading player in the global property market. Using its vast cash reserves, it has taken advantage of the depressed credit markets to build a portfolio spanning skyscrapers, luxury shopping malls and development land from Cuba to Cairo.
Recently, though, senior government officials have raised concerns about the economic wisdom of certain acquisitions, including high-profile deals in London and Paris.
One part of the state-funded property-buying apparatus reported to be under particular scrutiny is Qatari Diar, the QIA’s development arm. Its international operations, which include the stalled development of the Chelsea Barracks in London, are, according to one former executive, “effectively in standstill mode”.
The property rethink comes amid an internal review at the QIA, and its direct investment arm Qatar Holding, and coincides with political transition. Since last year, the fund has hired PwC and McKinsey to help it reorganise its internal workings, people familiar with the review said.
The tighter management of property investment is likely to lead to a reduced reliance on middle men – a shift that would bring international operations more in line with Qatar’s domestic property buying – and to a swing towards joint ventures with established property investors.
However, people involved with the emirate’s property portfolio worry that the world’s changing investment landscape may hamper its leading position as a buyer. Increasing competition and Qatar’s reluctance to overpay will restrict the sort of deals it can achieve, said an investment banker close to the QIA.
The wider review of Qatar’s operating model, which is intended to professionalise the eight-year-old fund, started months ahead of last week’s abdication of the emir in favour of his son and the subsequent shake-up of the financial management.
The emir Sheikh Tamim bin Hamad Al-Thani on Tuesday promoted Ahmad al-Sayed, a 37-year-old former lawyer who has been managing Qatar Holding, to the more overarching role of chief executive at its parent the QIA. The appointment is likely to accelerate the alignment of the fund’s asset management business closer with its direct investment arm.
As part of the changes, the powerful former Prime Minister, foreign minister and dealmaker Sheikh Hamad bin Jassim Al-Thani, widely known abroad as “HBJ”, was ousted from his role as QIA chief executive.
The move towards improved governance has been triggered partly by the proliferation of rival sovereign wealth investors. “They’ve had a few years of shooting fish in a barrel but those days aren’t going to last forever,” says one person familiar with the fund.
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