It's Official: N.Y. Landmark Sold

July 10, 2008 — -- An investment fund based in the United Arab Emirates has reportedly purchased a majority stake in New York's historic Chrysler Building.

Theresa Miller, a spokeswoman for Prudential Real Estate Investors, told ABC News that the company closed on the sale of its 75 percent stake in the landmark building Tuesday.

According to published reports, the stake was sold to the Abu Dhabi Investment Council, a sovereign wealth fund, for $800 million, but Miller would not confirm the buyer or the price. The sale had been rumored for at least a month.

"When we sell a property, our view that the story is really up to the buyer to tell," Miller said.

The Abu Dhabi Investment Council could not immediately be reached for comment.

Miller did say that investors in the Prudential-managed fund that held the Chrysler building would see a 20 percent annual return thanks to the building's sale.

It's the second time in the last two months that news has broken of a foreign buyer investing big time in a prominent New York address. Time magazine reported in June that Sorgente Group, the company led by Italian real estate investor Valter Mainetti, had acquired a majority share of Manhattan's famed Flatiron Building, a historic structure known for its triangular shape.

Foreign buyers "love to come to New York," said Anne Marie Moriarty, a vice president at Corcoran Reality. Moriarty, who deals in residential New York real estate, said her business from European buyers has doubled since January 2007.

With the weak U.S. dollar, American real estate can be a bargain for overseas shoppers, and New York, she said, proves especially attractive.

"When you think about it, New York really is not that large," Moriarty said. "There's not that much inventory, so I think they feel it's a very solid investment."

According to Dan Fasulo, managing director of Real Capital Analytics, New York last year was the most popular U.S. city for foreign buyers of commercial real estate. Twenty percent of the U.S. commercial real estate bought by foreign buyers, he said, was in New York.

Fasulo said New York's appeal to foreigners has to do with familiarity.

"Foreign investors like to buy what they know," he said. "They like the postcard assets that they can bring home and show to their constituents and have a recognizable value overseas."

One of the most well-known examples of a foreign purchase of New York real estate dates back to 1989. That year, the Rockefeller family sold the landmark Rockefeller Center to Japan's Mitsubishi Estate Company.

Fasulo said foreign companies purchasing U.S. real estate often do so in an effort to diversify their portfolios.

"There's a major wave of geographical diversification going on globally right now by many different international property investors, whether it's sovereign wealth funds from the Middle East, or a pension fund from Korea, or high net-worth individuals from Europe," he said.

American companies and investment funds, meanwhile, have the same motivation for buying real estate abroad. Fasulo said that the California Public Employees' Retirement System recently announced it would invest half of its $20 billion real estate portfolio in foreign properties.

"It's going both ways," Fasulo said.

Foreign buyers accounted for $52.1 billion in U.S. commercial real estate last year, according to Real Capital Analytics, roughly double the dollar volume of deals made in 2006.

Middle Eastern funds accounted for about 16 percent, or $8.2 billion, of last year's spending.

"All these oil-rich countries in the Middle East -- their coffers are flush with capital and they need places to park that capital," Fasulo said. "Real estate's certainly part of that allocation."

But Middle Eastern real estate investments paled last year to those stemming from other regions. Investors from Australia and Europe purchased $13.9 billion and $12.2 billion, respectively, in U.S. commercial real estate.

Recent headlines about New York purchases notwithstanding, foreign real estate spending in the U.S. this year may not hit 2007's scale. Fasulo said that between January and March, deals totaled less than $4.2 billion. During the same period last year, that figure was more than $7 billion.

Fasulo explained that today's credit crunch is to blame. It makes it harder for companies to finance deals to purchase real estate, he said.

"Acquisitions are down across the board for all capital groups, including foreign investors," Fasulo said. The challenging debt markets, he added, "don't discriminate by the type of buyer."