Abu Dhabi Fund Acquires Chrysler Building

Another iconic New York skyscraper has been snapped up by a Middle Eastern sovereign wealth fund. The Chrysler building was acquired by the Abu Dhabi Investment Council for an undisclosed price yesterday, only one month after Dubai-based Meraas Capital L.L.C. acquired the General Motors Building for $2.8 billion in a joint venture with Boston Properties Inc. and Goldman Sachs Group. Abu Dhabi Investment Council was set to pay $800 million for the 1.2 million-square-foot building at 405 Lexington Ave., a source told Bloomberg News, which broke the story. The New York Post also reported that the fund would take a 75 percent stake in the asset, with Tishman Speyer Properties holding on to the other 25 percent and remaining on as the building’s operator. The seller was Prudential Real Estate Investors, who has been managing its interest on behalf of a fund of German investors. In 2002, Prudential acquired TMW Real Estate Group, which purchased a $390 million stake in the Chrysler Building from Tishman Speyer in June 2001. A spokesperson for Prudential Real Estate Investors confirmed the transaction to CPN, but would not comment on the deal specifics. A spokesperson for Tishman Speyer declined comment. Since 2001, the Abu Dhabi Investment Council, formerly the Abu Dhabi Investment Authority, has made nearly $5 billion in acquisitions and nearly $500 million in dispositions, according to Real Capital Analytics Inc. It focuses primarily in prime office and mid- and high-rise apartments in the Northeast and Southeast U.S., London, West Midlands, United Arab Emirates and Sweden. In May 2006, the fund purchased Boston’s One Federal Street office tower for $514 million in a joint venture with Tishman Speyer and Lehman Brothers. Worldwide, sovereign wealth funds’ assets total approximately $3 trillion, mostly in oil money, and have had a growth rate of 33 percent over the past 18 months, noted Janice Stanton, a senior managing director of Cushman & Wakefield Inc., who was not involved in the deal. “They have a huge amount of existing income and they are looking to park it,” she told CPN. Prime assets in the U.S. office market are especially attractive. “In 2007, the U.S. office market represented half of all global real estate liquidity… and this liquidity and institutional quality puts the U.S. on the top of everyone’s list.” She added that the U.S. was the only country to show up in the top five countries for both stability and growth in a recent Association of Foreign Investors in Real Estate survey. And expect more sovereign wealth fund interest in U.S. gateway markets and prime assets, which have long-term bankability, Stanton said. They will likely look toward platform and joint venture deals, unlike foreign investors who went the wholly-owned route in the late 1980s and were burned by the market. Potential targets may include numerous office portfolios that were purchased in 2006 and 2007 at high leverage rates; Macklowe Properties, for one, had to sell its prized GM Building to help pay back short-term loans used to buy eight Manhattan buildings once owned by Equity Office Properties Trust last year. Sovereign wealth funds are expected to quadruple to over $12 trillion in seven years, noted panelists at a NAREIT panel on sovereign wealth investors last month. The funds are growing rapidly, especially in face of rising energy costs. The United Arab Emirates, Norway and Saudi Arabia are leading the pack, but China and Russia may gain ground quickly over the next five years.