Qatar fund backs Brookfield’s $8bn Manhattan West project

Qatar Investment Authority is to take a 44 per cent stake in Brookfield’s $8bn Manhattan West real estate project, in a move aimed at stepping up the sovereign wealth fund’s presence in the US.

Manhattan West is a 7m sq ft mixed-use development in the heart of New York City, to the west of Pennsylvania Station and stretching towards the Hudson River where railroad yards once stood.

It is part of a plan to redevelop the whole of the industrial Hudson Yards area, and extend the midtown business district.

QIA’s investment comes as many sovereign wealth funds have been putting money into real estate at an earlier stage than in the past — taking on development risk in pursuit of better returns.

With central bank stimulus programmes such as quantitative easing depressing the yields on many safer investments, many funds have found buying into existing office buildings is no longer enough.

“Many sovereign funds like tangible investments,” said Ric Clark, head of Brookfield Property Partners, the New York and Toronto-listed unit of Brookfield. “There is a trend toward hard assets especially since so many funds were burnt badly with their securities holdings.”

While the QIA has invested with Brookfield before in projects such as Canary Wharf in London, its Manhattan move indicates a mandate to do more in the US.

“New York is a safe haven and a value proposition,” explained Mr Clark. “The returns are far better in New York than London or Hong Kong where the values have run up so much.”

Construction in New York, as in the US generally, has yet to return to pre-crisis levels.

However, in recent years, both sovereign wealth funds and private funds have been pouring more money into US projects. Kuwait is an investor in Hudson Yards, while Chinese groups including Anbang Insurance, Fosun International and Greenland have become significant players, buying New York properties ranging from Wall Street towers to the Waldorf Astoria flagship hotel on Park Avenue.

Sheikh Abdulla bin Mohammed bin Saud al-Thani, chief executive of QIA, said: “We are pleased to expand our relationship with Brookfield and invest in this world-class project. This joint venture is an example of our strategy to invest in high-quality real estate with strong partners. It is also a further demonstration of QIA’s long-term confidence in the US market.”

QIA recently opened an office in New York, in addition to its operation in Washington.

In recent years, following senior management changes, the QIA has appeared more willing to partner with others in new ventures, rather than go it alone, and move more quickly than some of its peers to seek opportunities.

“This was not marketed to them, they came to us, and committed quickly,” said Mr Clark.