|23 February, 2020

Why is New York one of the hottest destinations for Gulf property investors?

Investors from region splurge $300mln on commercial towers in 2019

in The Statue of Liberty stands in the foreground as Lower Manhattan is viewed at dusk, September 8, 2016 in New York City.

in The Statue of Liberty stands in the foreground as Lower Manhattan is viewed at dusk, September 8, 2016 in New York City.

Gettyimages

Investors in the Middle East are snapping up properties in New York City (NYC) and selling them for higher profits, or using them for long-term investments, as real estate returns in the city remain among the world’s highest.

According to data supplied by Level.ae, an Abu Dhabi-based tax consultancy firm, buyers from the region purchased close to $300 million worth of commercial assets in the city last year, with Kuwait and UAE investors topping the list of transactions.

Some of these deals include a high-rise midtown Manhattan tower and the iconic Coca-Cola Building on 5th Avenue. One buyer also acquired the entire floor of a commercial office tower in the city.

Historically, New York has been one of the destinations for foreign investors, not only because it offers high rental returns, but because properties there tend to get pricier every time they change hands. 

Level.ae extracted a list of the 20 biggest transactions closed by foreign buyers during 2019.

Top buyers

Out of the 20 biggest deals in 2019, Middle Eastern buyers claimed five, putting them among the biggest foreign investors in New York. Investors from Europe, however, stole the show, with 11 deals closed during the last year, while Asian investors were mostly absent from the list.

According to Omar Kamal, the managing director at Level.ae, investors from the Middle East are attracted by the high returns offered by properties in New York. 

“The returns [in this market] are higher than in the Middle East region, and New York commercial properties are a better long-term investment since they tend to get pricier with each sale,” Kamal told Zawya.

“Rents are also very high in NYC, and there will always be high demand for office space in the city, so it’s a safe bet on that part, too. Not to mention that owning commercial property in NYC tends to bring prestige to any business,” he added.

Biggest deals

In August last year, a partnership of Wafra Capital Partners, a subsidiary of Kuwait-based Wafra Inc., and Nightingale Group, acquired the Coca-Cola Building on 5th Avenue for $909 million. However, a month later, the Kuwaiti investor and its partner sold the same property for $28 million more, at $937 million. 

The world’s largest sovereign wealth fund, Abu Dhabi Investment Authority (ADIA) buying Vornado Realty Trust’s 25 percent stake in a 39-story Manhattan office tower for $100 million was the next major sale. 

Consequently, in November, ADIA sold the property to Germany-based Munich Re for $875 million.

Another investor from the region, the Qatar-based Alduwaliya Asset Management, closed two major office deals in Manhattan last year for a sum of $138.1 million. 

Saudi Arabia spent $59.2 million in July to purchase the entire sixth floor of United Nations Plaza from The Carlyle Group.

NYC real estate investments, yields

As of July 2019, New York was the 7th most expensive city for buying a home, just behind Hong Kong, Singapore, Shanghai, Vancouver, Shenzhen and Los Angeles, according to CBRE’s fifth annual Global Living report.

According to real estate services provider Savills, the total real estate investments in New York reached $33 billion during the first six months of 2019, making it the most popular place for property investors.

In terms of rental yields, data from Global Property Guide showed that New York, which has a rental yield of 2.91 percent per annum offers more returns than in many markets around the world, including London (2.76 percent) and Shanghai (2.1 percent), but it still lags behind Dubai, which has a rental yield of 5.19 percent. 

(Reporting by Cleofe Maceda; editing by Seban Scaria)

Cleofe.Maceda@refinitiv.com

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2020