Chrysler building: is the Middle East the new Japan?
If you haven’t heard yet, you will soon. The Chrysler Building was snapped up by the Abu Dhabi Investment Council (otherwise known as the government of a foreign country). With the U.S. still sporting a current account deficit over 5% of GDP, foreign countries around the world are piling up dollar bills in their coffers. And they are getting sick of buying treasurys.
The Abu Dhabi Investment Council has bought the landmark New York skyscraper, the Chrysler Building, for 800 million dollars, sources close to the deal said Wednesday.
Media reports had said the Abu Dhabi Investment Council, an investment fund based in the United Arab Emirates, had been holding negotiations with a subsidiary of Prudential Financial Inc. over its 75 percent stake in the renowned Art Deco building.
“We have sold our stake of 75 percent on Tuesday,” Prudential spokeswoman Theresa Miller said.
The 77-story Chrysler Building, one of New York’s best-known skyscrapers, is 25-percent owned by Tishman Speyer Properties, a privately held New York real estate firm.
Although we have friendly relations with the United Arab Emirates, of which Abu Dhabi is a part, one cannot help but see this as a ‘Pebble Beach’ style purchase. The same forces that blocked the purchase of Unocal by the Chinese oil company CNOOC and ended the Dubai Ports World ownership of U.S ports will see this purchase in a jingoistic way, fueling anti-foreigner sentiment.
The purchase may or may not be a good investment for Abu Dhabi, but where else are they to invest their dollars? This is all too reminiscent of the Japanese purchase of Pebble Beach in 1990. The Pebble Beach purchase marked the top of the market for Japanese real estate. The Japanese economy went into a major depression right after and the owners of the golf course ended up selling for a major loss.
Nevertheless, the Pebble Beach acquisition came to symbolize everything that was wrong with foreign investment in the U.S., souring U.S.-Japanese diplomatic relations. Given the climate in the U.S. today, the risks are much the same for this investment.