Qatar is Suddenly Investing Heavily in the U.S., Bankrolling D.C.’s City Center, Other Projects
Eight years after Washington’s biggest construction project in two decades was launched, City Center was just a sad expanse of parking lots on seven blocks of prime downtown real estate, a project paralyzed by the economic downturn, according to city officials.
Then came Qatar. A tiny nation of sand dunes and salt lakes jutting into the Persian Gulf, Qatar has only about 250,000 citizens, but it is also home to the world’s largest natural gas field and, therefore, unimaginable wealth.
Qatar’s real estate investment arm decided in 2010 to pump $650 million into City Center, becoming the main owner of the $1 billion project on the site of the District’s old convention center in Northwest Washington. Last week, the first nine tenants moved into City Center apartments; office occupancy is expected next spring, with 40 shops opening in the fall.
Qatar had never invested in D.C. real estate before. And its spending spree didn’t stop there. The Qataris also invested in Chicago, where their Al Faisal Group last year bought the Radisson Blu Aqua hotel. The group has said it will seek other American properties.
This year, Qatar bought Current TV for $500 million, hired 800 journalists and launched Al Jazeera America, vastly expanding the TV news operation’s presence in the United States.
In recent weeks, Qatar Airways announced plans to expand its U.S. service in 2014 by adding Dallas, Miami and Philadelphia to a lineup of destinations that includes Houston, Washington, New York and Chicago. And last month, Qatar said it will spend $19 billion to buy 50 Boeing 777 aircraft, part of a larger deal between the U.S. aviation company and Qatar and the United Arab Emirates.
The number of Qatari students at U.S. universities has jumped fivefold in the past decade, and the Qatari Foundation International is spending $5 million this year to encourage U.S. schools to teach Arabic.
The surge in interest and investment in the United States by one of the world’s smallest countries is raising eyebrows and questions, many of which boil down to, “Why?”
The Qataris aren’t saying — the government and three major institutions declined to discuss their U.S. operations — but those who work with the Qataris say the new spending reflects a growing emphasis on boosting return on investment, as well as a desire to diversify a U.S. relationship previously focused on energy and defense.
Reading Qatar’s motives is more art than science; analysts who study the country rarely have access to its ruling family. “Qatar is a family business with a seat at the United Nations,” said Chase Untermeyer, a business consultant who was U.S. ambassador to Qatar under President George W. Bush. “It doesn’t really matter who owns Al Jazeera or Qatari Diar [the state-owned real estate investment company] because it’s all part of the same family business.”
Although the Qataris are prominent developers in more than a dozen countries on four continents, their orientation has been primarily toward London and Europe, not America. In the past six years, Qatar invested $33 billion in Britain, building, for example, the Shard, the tallest office building in Western Europe.
But when the developer of City Center, Hines Interests, sent executives to see investors in Asia and the Middle East, the Qataris responded immediately.
“The U.S. real estate market offers attractive fundamentals over the next few years, making it an important segment of any investor’s real estate portfolio,” Khalid al-Subeai, chief executive of the First Investor, the Qatari investment bank that financed City Center, said in a written statement.
The luxury complex — two buildings each of offices, rental apartments and condominium units, with a hotel to follow — was conceived during the tenure of Mayor Anthony A. Williams (D) and fills a gap between Ninth and 11th streets NW, from H Street to New York Avenue.
The deal in 2010 called for construction to start the next year, but, according to city officials, the Qataris placed a condition on their investment: City Center would have to exclude bars and banks in compliance with Islam’s bans on alcohol and interest. D.C. officials said they had preferred a retail focus on restaurants and fashion anyway.
Pedro Ribeiro, spokesman for Mayor Vincent C. Gray (D), said the District and Hines Interests accepted Qatar’s conditions because “you had to make a choice, either no development or development with certain caveats. We weren’t looking for another Adams Morgan or H Street NE, and you don’t want a bank on every corner.”
The Qataris say they didn’t force any change in the mix of retail. “The leasing guidelines agreed to by Hines and the investor did not require any adjustments to the project’s previously established design,” al-Subeai wrote. Even before Qatar got involved, the plan “did not include any stand-alone bars, liquor stores or casino establishments because both Hines and the District believed that these uses did not enhance the environment.” He said bank branches would be allowed at City Center, although none are planned.
With 674 residential units, a public plaza and pedestrian alleys, City Center is vital to the District’s plan for a downtown where people live and shop as well as work. According to the developer, the condominium units — two-bedroom apartments sell for about $1.2 million to $1.5 million — are 70 percent sold. Rentals, which just came on the market, range from $4,400 to $5,200 a month for two-bedroom units.
An investment in Washington “can’t go wrong,” Qatari Diar’s chief executive said at the groundbreaking for City Center. The head of the Qatari bank that put up the financing said the deal demonstrated “our confidence in the U.S. real estate market and is a catalyst for future projects.”
The City Center investment appears to be the vanguard of a significant flow of capital, according to those who have worked with the Qataris. Untermeyer, for example, brought investors to see a property along the Pacific Ocean in Northern California.
“They asked, ‘How far is it from here to L.A.?’ ” he recalled. “I said, ‘Six hours by car or one hour by air.’ And they said, ‘Forget it.’ They want to be in big cities. They just don’t know the U.S. as well as they know the west side of London,” where Qataris have bought trophy assets such as the Harrods department store and a stake in the company that owns Heathrow Airport.
“We can be a confusing place to them,” said Patrick Theros, ambassador to Qatar in the Clinton administration and now head of the U.S.-Qatar Business Council. “They’ll ask me, ‘What exactly does a mayor do?’ ”
But with more Qataris attending universities here, the comfort level has been rising, and when Qatari Diar got serious about City Center, the Qataris became intimately knowledgeable about D.C. tax policy, said Victor L. Hoskins, the deputy mayor for planning and economic development.
Opinions vary as to whether the new interest in U.S. investments is connected to Qatar’s efforts to become a regional power in the Middle East and North Africa in the wake of the Arab Spring revolutions. Qatar provided financial and political support for Islamist groups such as the Muslim Brotherhood in Egypt and the ruling Ennahda party in Tunisia, but it has more recently backed away from that role, especially after a military coup ousted Qatar’s allies from control of Egypt.
Some analysts say Qatar’s U.S. investments are part of a global strategy of creating “interdependencies,” protecting the tiny state against such powerful neighbors as Saudi Arabia and Iran by creating strong economic bonds with countries such as Britain and the United States.
“You have 85 percent of British natural gas coming from Qatar, so if anything were to happen to Qatar, Britain would be very vulnerable,” said Kristian Coates Ulrichsen, a fellow at Rice University’s Baker Institute in Houston who specializes in the Persian Gulf states. In 2006, after Hurricane Katrina, Qatar’s government donated $100 million to help victims of the disaster, a move a Qatari official justified by saying, “You never know, we might have our own Katrina someday.”
“This is a very small, wealthy country in a very bad neighborhood,” Theros said. “The way you establish security is to create and deepen relationships.” A Qatari airbase has been the headquarters of the U.S. Combat Air Operations Center for the Middle East since 2003.
But Ulrichsen argued that after a change in leadership in June — when the emir abdicated and his 33-year-old, British-educated son, Tamim Bin Hamad al-Thani, took over — the country became less assertive. Since then, he has seen the primary motive for Qatari initiatives in the United States shift from branding to getting a good return on investment.
“Qatar can no longer grow at 10 to 15 percent a year as they did up till 2010,” he said. “They’ve reached a plateau in exports of natural gas, and they worry about depleting their gas field.”
David Roberts, author of “Qatar: Securing the Global Ambitions of a City-State,” said: “You’ll drive yourself mad trying to find an overarching plan behind all the Qatari moves. For two decades, there’s been a view that you should go forth and prosper, get into the most prestigious sports tournaments and build the brand, not just get a return on investments.”
Now there’s a more pressing need to squirrel away Qatar’s surpluses. “They need something to do with the cash,” he said.
Whatever the motives, a warming toward America has been clear. The new emir’s sister, Sheika al-Mayassa al-Thani, educated at Duke and Columbia universities, runs the Qatari Foundation, whose U.S. headquarters will move into City Center. There, school groups will learn about life in Qatar in a mock house complete with demonstration kitchen.
The foundation was a key player in Qatar’s aid to victims of Katrina. “People in New Orleans know exactly what Qatar is capable of,” said Maggie Salem, executive director of the foundation.
She said Americans are grateful for help with Arabic language and culture classes. “The accusations that have been leveled at other Qatari institutions have been based on suspicion rather than fact,” she said. “But we’ve found schools to be welcoming. The only return we’re looking for is goodwill.”
Goodwill and influence, rather than profits and ratings, appear to have driven the launch in August of Al Jazeera America. “Their primary interest is not the number of watchers or the number of ads, but in reaching a small number of influencers,” said Untermeyer, the consultant and former ambassador. “They will pay what it takes.
The decision to expand into the United States in a big way came after years in which Al Jazeera’s Qatari executives “had a real ambivalence about the U.S.,” said Tony Burman, a Canadian who was managing director of the network’s English-language channel from 2008 to 2010 and then spent a year in Washington as a strategic adviser on the U.S. venture. “The Qataris didn’t really feel welcome in the U.S., especially after 9/11.”
“The U.S. all of a sudden became a priority for Al Jazeera” a little more than a year ago, Burman said, “when the Qatari government decided to make a real effort to win over the U.S. government.”
An Al Jazeera America spokesman said that neither its top executive, Ehab al-Shihabi, nor other officials would be available for an interview.
Some analysts believe the channel’s future depends mainly on how Qatar’s new leadership defines the country’s foreign policy — that is, whether the emphasis remains on bolstering its international brand or shifts toward shaping a domestic economy that can be sustained as energy reserves diminish.
Roberts said it’s unlikely that the new emir would have bought Current TV, “but now he has it, and improving relations with America is never going to be a bad idea.”
Qataris seem eager to deepen their U.S. ties, especially in Washington and Houston. Houston has long been the focus of Qatari business because of the energy industry; Qatar Petroleum is majority owner of Houston-based Golden Pass Products, a leading importer of natural gas that is seeking a role in exporting U.S. gas, and about 150 prominent Qatari families have moved to Houston for extended periods for medical care.
Hoskins, the deputy mayor, said the District began seeking new investments from Qatar about a year before Gray entered office. Gray, eager to keep the momentum going, announced early this year that he would visit Qatar. But the trip didn’t happen. Ribeiro said it was put off because of uncertainty after the change in government. He said Gray hopes to make the journey next year.
Meanwhile, Hoskins said serious negotiations with Qatar about another real estate project have progressed enough that he hopes to announce a deal next spring.
Marc Fisher
The Washington Post