UAE investors, looking to make statements, aren't seeking bargains
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ABU DHABI, United Arab Emirates - No, no, no, he assured one of the businessmen buying the ailing Manchester City soccer club. The price tag for the British team wasn't $4 billion but a mere $400 million.
Anil Bhoyrul, editorial director of Arabian Business magazine and a confidant to some of the Persian Gulf's super-rich and powerful, thought the Abu Dhabi investor would be pleasantly surprised. He was wrong.
Even as the United States and much of the world reels from a succession of financial crises that are squelching access to credit and hampering economic growth in what one-quarter of Americans are calling a depression, the oil-rich royal families of the Persian Gulf have pockets bursting with cash they're not afraid to spend.
The investor, a member of Abu Dhabi's royal family who had earned billions last year, was not interested in a bargain - he was looking for a huge deal to make an impressive splash internationally.
A multibillion-dollar price tag, easily within his and his partners' means, would cause far more jaws to drop than anything in the millions.
"When he thought it was $4 billion, he was really excited," recalled Bhoyrul, who declined to identify the individual. "When he found out it was $400 million, he was disappointed."
Bhoyrul added, "There's a pressure to spend."
As analysts warned of a coming credit crunch that could put a damper on the gulf's explosive real-estate boom and the regional stock markets careened wildly in tune with the United States', the emirates' central bank governor, Sultan al-Suwaidi, said late last month that his nation's banks "had virtually no exposure" to the collapse of financial institutions such as Lehman Brothers
The region's economy hinges far more on the price of oil than the value of capital markets, which remain relatively small in the gulf states. Cash, rather than credit or clever financing, is the preferred financial instrument for transactions big and small.
Abu Dhabi, the richest of the seven kingdoms that make up the United Arab Emirates, has spread its wings the widest, plunking down cash for businesses and real estate, sometimes in far-flung corners such as Africa, the Balkans, Central America and the Caucasus.
The dealmaking has continued even after the global financial meltdown, with the Abu Dhabi Investment House, a sovereign wealth fund, agreeing to a $6 billion real-estate joint venture with China in recent days.
In the United States, the Abu Dhabi Investment Authority, controlled by the royal family, agreed in January to buy a $7.5 billion chunk of
A separate sovereign wealth fund, the Abu Dhabi Investment Council, bought a majority stake in Manhattan's Chrysler Building in July.
Investments that might not hold up on their own often have other long-term benefits. "The people here are extremely intelligent. They know business," said Edward Borgerding, chief executive of Abu Dhabi Media Co.
Evidence shows that the gulf states have mostly spent their recent oil windfall wisely. "This is not the 1970s," said Hassan Fattah, deputy editor of The National, an English-language Abu Dhabi newspaper, referring to the gulf's high-rolling rich during the first oil boom.
