Qatar's Growing Stake in the Luxury Industry

Doha, Qatar

Photo Courtesy of Luxury Society
Harrods, LVMH, Porsche, Tiffany & Co and some of Europe’s leading luxury hotels, we take a look at the extent of Qatar’s Investment Authority involvement in the luxury industry

According to Forbes, Qatar is officially the richest country in the world. Not bad for a country with an (estimated) population of fewer than two million. In 2010, Qatar had the world’s highest GDP per capita, while the economy grew by 19%, the fastest rate in the world at the time.

Most of the country’s wealth – GDP of $181.7bn – is said to come from its oil and gas reserves, estimated at 25bn barrels of oil and more than 25tn cubic metres of gas. Petroleum alone is though to account for more than 70% of total government revenue, more than 60% of gross domestic product, and roughly 85% of export earnings. And as cash reserves have grown, the luxury industry has become a key focus for the country’s sovereign wealth fund, the Qatar Investment Authority.

The fund owns 95% of the Shard in London, Western Europe’s tallest building, and is the largest shareholder in Barclays Bank. It has spent over £13bn in London alone in recent years, snapping up Chelsea Barracks, Harrods and the Olympic Village.

QIA was part of an investment group known as Filmyard Holdings, which purchased Miramax from Disney for $660 million. It has acquired a 3% stake in Royal Dutch Shell, 6% stake in Credit Suisse and bought-out French football club Paris Saint-Germain, in a deal valuing the club at $130 million. This is without taking into account any of the real estate or luxury investments made in the past five odd years.

Luxury Brands & Retailers

As recently as February 2013, QIA increased it’s stake in Tiffany & Co. from 8.7% to 11.3%, with the acquisition of an additional 3.2 million shares of the luxe retailer, giving it a total of 14.3 million shares.

According to Reuters, Borletti and RREEF had been talking to Qatari investors about selling French department store Printemps for approximately €2bn. The deal would be executed by Qatar Holding through its Luxembourg-registered Divine Investments (Disa), the operating arm of the nation’s sovereign fund Qatar Investment Authority.

Back in July 2012, news broke that private-equity firm Permira was offloading Valentino to Mayhoola, an investment vehicle backed by a private investor from Qatar. The value of the acquisition wasn’t disclosed, but was rumoured to be €600 million. It later emerged that Mayhoola was indeed controlled by Qatar’s royal family.

Qatar Holding amassed a stake of slightly more than 1% in French luxury goods group LVMH Louis Vuitton Moet Hennessy in March 2012, for an estimated €699 million. Mohammed Al Fayed famously sold London department store Harrods in 2010, to the Qatari royal family’s investment company for a reported £1.5bn.

The investment fund is said to own a number of buildings on Paris jewellery Mecca Place Vendome, as well as a 17% voting stake in Germany’s Volkswagen, owner of Porsche, where it has a seat on the supervisory board the luxury automaker.

Luxury Hotels

Late last week, Mohamed Al-Fayed was forced to squelch speculation that he had sold his Paris jewel, the Ritz hotel, to Qatari investors. A spokesperson for the colourful business titan told WWD “the rumours are unfounded. Mr. Al-Fayed has not sold the Ritz Paris.”

Whilst allegedly unfounded, the rumours are indeed in keeping with the fund’s aggressive acquisition of top luxury hotels in key metropolitan cities. The upcoming Peninsula Hotel in Paris has been funded, in part, by Qatari Diar, a real estate subsidiary of the QIA. The Shangri-La Hotel in London, opening later this year within the Shard, is also property of the sovereign wealth fund.

Qatar’s Constellation Hotel Holdings, indirectly controlled by Qatar Holding, paid €800 million euros to acquire the luxury portfolio of Louvre Hotels, controlled by Starwood Capital. The portfolio includes Hotel du Louvre and Concorde Lafayette – both in Paris, Hotel Martinez in Cannes and Palais de la Mediterranee in Nice.

Italian media reports suggest that Qatar is set to acquire the Four Seasons Hotel Firenze, housed within the historical 15th century Palazzo della Gherardesca, surrounded by four hectares of lush gardens. The rumours followed news that Qatar Holding would back a €650 million luxury hotel development in Sardinia, which has since been put on hold pending police investigation.

Made in Italy

As part of Italy’s attempt to breathe life into a weak economy, Qatar has agreed to invest as much as €1 billion into Italian companies, negotiated by Prime Minister Mario Monti. The joint venture between Italy’s strategic investment fund and state-owned Qatar Holding will invest in sectors including food, fashion and luxury goods, furniture and design, tourism and leisure, according to Reuters.

The “IQ Made in Italy Venture” will start with 300 million euros of capital, with potential of up to €2 billion, provided equally by both partners over the first four years. “We have four or five ideas (for investment in Italy) we are studying at the moment,” Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani said at a news conference without elaborating.

The Future

Investment looks set to continue, as Qatar launches a new $12 billion investment firm, backed by blue-chip assets from its sovereign wealth fund, to be listed on the local stock exchange. The new fund, to be called Doha Global Investment, will receive about $3 billion in assets from Qatar Holding and seek to raise the same amount in a share sale to nationals.

“You name it – shares, bonds, real estate, private equity. We will look at every sector in every country around the world,” Hussain al-Abdullah, Qatar Holding’s vice-chairman, said at a news conference. The fund sees investment opportunities in distressed assets in the next decade, said Aladdin Hangari, head of adviser Credit Suisse in Qatar that will advise on the creation of the fund.

Sophie Doran

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