Qataris Buy $622M Stake in NYC-Based REIT

An affiliate of the Qatar Investment Authority has acquired a 9.9 percent interest in Empire State Realty Trust.

By Scott Baltic, Contributing Editor

Jim Costello, Real Capital Analytics
Jim Costello, Real Capital Analytics

New York—A 9.9 percent interest in Empire State Realty Trust Inc. has been acquired by an affiliate of the Qatar Investment Authority through a new $622 million investment, the New York–based REIT announced late Tuesday.

QIA purchased approximately 29.6 million worth of newly issued Class A common shares of ESRT at $21.00 per share, equivalent to a 9.9 percent economic and voting interest on a fully diluted basis. This interest represents a 19.4 percent ownership of Class A shares, but QIA can only vote shares equivalent to 9.9 percent of all voting securities, with the balance of their shares to be voted by ESRT in accord with the votes of all other voting securities.

“With the recent expansion of the Company’s unsecured revolving credit facility to $1.1 billion and now this addition of QIA’s equity investment, our ability to drive long-term value for all ESRT shareholders is further enhanced,” ESRT Executive Vice President & CFO David Karp said in a prepared statement.

ESRT, which owns office and retail properties in Manhattan and elsewhere in metropolitan New York, did not respond to Commercial Property Executive’s request for further information.

Darcy Stacom of CBRE Group introduced Qinvest, Qatar’s leading investment bank, to ESRT. Goldman, Sachs & Co. and Eastdil Secured acted as financial advisors to ESRT, and Goodwin Procter, Proskauer Rose, and Clifford Chance U.S. acted as ESRT’s legal counsel. QInvest acted as financial advisor to QIA, and White & Case was QIA’s legal counsel.

“With oil prices down the way they have been in recent years, there was a fear that investors out of the Middle East would not be as active this year as they had in the past,” Jim Costello, senior vice president at Real Capital Analytics, told CPE. He added that the pace of deal flow by Middle Eastern buyers does indeed seem to be lower than last year, but “the percent being directed to the U.S. is higher.”

For the year to date, funds out of the Middle East have been involved in direct property acquisitions totaling $8 billion in the United States, which represents roughly 60 percent of Middle Eastern investments globally, Costello continued. By contrast, for 2015 overall, Middle Eastern investors deployed only 38 percent of their capital for direct property acquisitions in this country.

Overall, Costello calls the QIA-ESRT deal “an investor vote of confidence on the future of New York.”

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