Does this sound at all familiar to anyone else?
A foreign investor, flush with cash thanks to recent economic shifts, begins buying up landmark "trophy" properties in Manhattan.
If you are old enough, that may remind you of the Japanese in the 1980s, who amongst other items, purchased Rockefeller Center.
Well, its time to update your calendar. This morning, the NYT reported that "the royal family of Dubai, the oil-rich Arab emirate on the Persian Gulf . . . plunked down more than $1.1 billion for [2] buildings: 230 Park Avenue, the gold-crowned, 34-story tower that sits astride the avenue between 45th and 46th Streets, and the Essex House, one of the grand Art Deco hotels on Central Park South."
These most recent acquisitions comes on top a 3 year billion dollar spree in U.S. real estate, including "nursing homes, office buildings, hotels and thousands of apartments in Dallas, Phoenix, Nashville and Atlanta."
The Times wonders aloud if "the emirate can . . . escape the fate that befell Japan15 years ago when it made too heavy a bet on real estate at the top of the
market and lost. . . . "
You can see the 2 properties below:
Essex House
click for larger photos
Helmseley Building
click for larger photos
Sources:
Art Deco Era Architecture in NYC
http://www.greatgridlock.net/NYC/nyc2.html
Alphabetical List of New York Buildings
http://www.wirednewyork.com/alphabetical.htm#E
Helmsley Building
http://www.thecityreview.com/helmsley.html
Arab Royals Buy 2 Pieces of the Skyline
CHARLES V. BAGLI
NYT, November 10, 2005
http://www.nytimes.com/2005/11/10/nyregion/10build.html
From Professor DeLong’s Blog:
Adam Posen, “Macroeconomic Mistake, Not Structural Stagnation”
http://www.iie.com/publications/chapters_preview/35/1iie2628.pdf
see page 21 in link above: 450 basis point increase in 14 months.
This morning also brought the story below.
Art’s last crash was around ’91, briefly lagging real estate.
—
http://news.yahoo.com/s/nm/20051109/od_nm/arts_auction_dc
Rothko painting breaks record
By Christopher Michaud Wed Nov 9, 2:42 PM ET
NEW YORK (Reuters) – A Christie’s sale of post-war and contemporary art met its advance billing as the biggest auction of its kind Tuesday, with a Mark Rothko oil painting setting a new world record of $22.4 million for any post-war work at auction.
New marks were also set for artists Roy Lichtenstein, Francis Bacon and several others, as the auction house achieved the highest total for the increasingly lucrative post-war and contemporary market, selling $157.4 million. That exceeded the presale high-end estimate of $145 million.
Christie’s honorary chairman Christopher Burge, who served as the evening’s auctioneer, said the bidding at all price levels was “incredibly buoyant.”
“We had a record number of records,” Burge said.
The sale included 18 new records among the 40 artists included in the sale. Rothko sets records for both his painting and a work on paper.
Only four of the 70 lots on offer failed to sell.
Christie’s had said before the auction that it anticipated a high total sale because an unusual amount of high-quality art had come onto the market, and said afterward the strong prices reflected a “very broad and deep market.”
The sale’s star was Rothko’s 1954 oil-on-canvas “Homage to Matisse.” It was the only abstract-expressionist piece by the artist, who died in 1970, to carry a title.
The large-scale work consisted of contrasting monolithic blocks in red, yellow and blue. Its sale price of $22.4 million included the auction house’s commission, beating its high estimate of $20 million.
It also eclipsed the old mark for a Rothko by more than $5 million, as well as that of any post-war work by nearly $2 million.
Lichtenstein’s “In the Car,” sold for $16.2 million, beating the high estimate of $15 million and the old record for a Lichtenstein of $7.16 million, set in 2002. The painting was offered by the late pop artist’s son, Mitchell.
The third-highest priced item was a Willem de Kooning untitled work from 1977, which fell well short of the artist’s record of $20.7 million and sold for $10.66 million, far above the high estimate of $6 million.
Bacon’s “Study for a Pope I” saw yet another artist’s mark fall, fetching $10.1 million.
More records fell when works by David Smith, Elizabeth Peyton, Hans Hofmann, Robert Indiana, Richard Prince, Gilbert & George, Christopher Wool, Robert Smithson, Walter de Maria, Alice Neel, Bill Viola and Kiki Smith hit the block. New marks were also set for works on paper by Andy Warhol, Ed Ruscha and Rothko.
The semi-annual sales, which have been enjoying especially strong results, wrap up Wednesday with Sotheby’s auction of contemporary and post-war art.
For those on the West Coast, the Japanese also bought Pepple Beach as well as Columbia Pictures and MCA, all much to their later chagrin. Of course, Bronfman saved them on MCA, but that’s a different story for Seagram’s shareholders….
given a) today’s market reaction to the trade deficit numbers + b) USD index breakout…..perhaps the market is lending support to Bernacke’s global savings glut argument…….as the UAE-ers have no place to park their windfall crude oil profits except for inflated US real estate.
I’m sure that the UAE-ers know that they’re paying a high price…..but it still probably beatins Parisian/Frankfurt real estate.
by the way…….did the Japanese do so bad when they overpaid for US real estate in the 1980s?
Relatively speaking, Mitsubishi Estate was better off buying Rockefeller Center than buying the equivalant commercial real estate in Tokyo.
If and when the commercial market does get into trouble, have no fear, there are so many more Public (and private) REITS around to bail them out. We didn’t have that in 1987-1990. And, who will be paying the price? Right! Shareholders, as always.
Mitsubishi didn’t do well at all. They lost pretty much the whole investment ($1.4 billion) as well as at least another $0.5 billion in operating costs (mortgage costs were higher than rental income).