Qatar and Crown to buy stakes in iconic New York properties
Sovereign wealth fund investment includes landmarks on Times Square and Fifth Avenue
Qatar’s sovereign wealth fund has teamed up with US real estate group Crown Acquisitions to acquire a stake in some of New York’s most iconic properties in Times Square and along Fifth Avenue, including the St Regis hotel and luxury jeweller Harry Winston.
Crown and Qatar Investment Authority will each acquire a 24 per cent stake in a portfolio of properties controlled by Vornado Realty Trust which they estimate to be worth $5.6bn. The portfolio includes 910,000 square feet of space, including retail up and down Fifth Avenue and counts Victoria’s Secret, Polo and Salvatore Ferragamo as tenants.
The deal is likely to attract scrutiny given the close ties between the Qatari royal family and US president Donald Trump’s son-in-law Jared Kushner, whose own family real estate empire ran into difficulty in recent years and was indirectly helped by QIA.
The Kushner Companies had reached a deal in 2018 to lease 666 Fifth Avenue to Brookfield Asset Management, a property group in which the Qatari government has placed investments, a move that helped the family of Mr Trump’s son-in-law exit a lossmaking real estate bet. That deal came months after Vornado agreed to sell its stake in the top of the tower back to Kushner, while retaining the retail portion of the building at the bottom.
As part of the new deal, Crown and QIA will both take a stake in the retail property at the bottom of 666 Fifth Avenue, which counts both Hollister and Uniqlo as tenants. Vornado said it would use $390m of the $1.3bn in cash paid by Crown and the Qataris to pay off a loan on 666 Fifth Avenue, according to a filing with US securities regulators.
The properties on Fifth Avenue included in the deal are blocks from Trump Tower, stretching from 51st Street up to 55th Street. An increased security presence after the 2016 presidential election initially weighed on sales for a number of retailers in the area, with Tiffany & Co warning sales at its flagship Fifth Avenue location had tumbled.
The deal also comes at a time when the New York real estate market has softened and landlords have come under pressure from a spate of new openings, including the multibillion-dollar Hudson Yards development on the far-west side of Manhattan.
“It’s been a market that has gone from being one of the hottest with significant growth to one that has had large reductions in value and elevated levels of vacancy,” said James Sullivan, an analyst at BTIG.
Times Square’s popularity with tourists has shielded it from the broader downturn, added Mr Sullivan. “It’s a market that is to be distinguished from some of the other markets in Manhattan,” he said.
But Fifth Avenue is now being tested by a slew of new additions that are splintering its hold as the premiere luxury shopping destination, particularly with several venerable retailers — including Ralph Lauren — closing their doors.
Upper Fifth Avenue, between 49th and 59th streets, saw asking rents for ground floor retail decline 24 per cent year over year to autumn 2018, according to a report from the Real Estate Board of New York, while the stretch of retail space between 42nd and 49th dipped 14 per cent.
The fight for luxury retailers has now reached the southern tip of Manhattan, where real estate behemoth Brookfield has opened a luxury mall, up the West Side Highway to Hudson Yards, to the bottom of Central Park, where Nordstrom is in the midst of building the second of two department stores in the area.
Vornado has been selling many of its Manhattan properties in recent months as rents for retail space have fallen. The drop in lease prices has been spurred by collapsing store sales as consumers — even those considering a $4,000 Gucci handbag or $890 Prada pumps — increasingly buy goods online.
For the Qatari fund, the deal represents its latest move to deepen its presence in the US, where it plans to invest as much as $45bn in the coming years.
“This investment underlines QIA’s ambition to substantially increase our US investments over the coming years, and our belief in the exciting long-term possibilities offered by New York City,” said Mansoor Al-Mahmoud, chief executive of QIA.