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Gulf still seeks trophies, but the mantelpiece is full
It’s no surprise that Egyptian tycoon Mohamed al-Fayed has offered ‘two fingers’ to GCC investors looking to buy Harrods. But why is there still such demand for these ‘trophy assets’?
April 4, 2010 10:22 by kippreport
What do Barneys department store, the QE2 and the Cirque du Soleil all have in common? Well, in the eyes of GCC investors at least, they all look rather nice on the mantelpiece, as ‘trophy assets’.
Rich GCC investment vehicles have always shown a strong desire for big brand-name acquisitions, from posh hotels and skyscrapers to cruise liners and football clubs. ‘Fun’ investments are great for PR, not to mention for impressing your bosses back home.
Harrods, the UK department store owned by Egyptian tycoon Mohamed al-Fayed, must be the ultimate ‘trophy asset’. As al-Fayed told The Sunday Times today, “it is a pyramid for me – a monument – it is the best department store in the world. I still spend two hours every day walking the shop floors.”
In the same report, al-Fayed said that he has received offers to buy Harrods from several Gulf states, but says he has rejected them all.“People approach us from Kuwait, Saudi Arabia, Qatar. Fair enough, but I put two fingers up to them all. It is not for sale. This is not Marks & Spencer or Sainsbury. It is a special place that gives people pleasure.”
But while it is not particularly surprising that the Egyptian tycoon has offered ‘two fingers’ to these GCC investors, what is surprising is the Gulf’s continued desire for ‘trophy assets’ such as Harrods.
For such assets do not necessarily make good investments. Indeed, ‘trophy’ acquisitions by Gulf states have a habit of going wrong. Dubai World, for example, is said to be looking to offload the QE2 and several other of its high-profile investments.
This is not to say that Harrods would not make a good purchase. But the fact that GCC countries continue to lead the world in making these noisy acquisitions is worrying. One would have assumed that, in the wake of financial downturn, there would be no space for the ‘fun’ investment, only the purely rational one.