WHAT BECOMES A ROYAL FAMILY MOST? Could it be the $95 million in subsidies from Los Angeles taxpayers — the windfall bequeathed to the Dubai royal family, whose co-ownership of the behemoth Grand Avenue development was approved by Los Angeles politicians last month?
Taxpayer largess: "The Grand" luxury complex facing Disney Hall at far
right.
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Taxpayer largess: "The Grand" luxury complex facing Disney Hall at far
right.
A little-known group, the so-called Grand Avenue Authority, whose members are County Supervisor Gloria Molina, City Councilwoman Jan Perry, County Executive Officer William T. Fujioka and Community Redevelopment Agency boss Cecilia V. Estolano, agreed to transfer 45 percent ownership in Grand Avenue to Istithmar, a vast investment fund controlled by the royal family of Dubai. The project’s original private developer, New York–based Related Companies, will retain 55 percent, and the much-delayed project is expected to break ground anytime.
Out of the picture is the huge public investor CalPERS, representing more than 1.5 million California government workers, which backed out, citing its discomfort with “overexposure” in downtown’s real estate market.
Istithmar paid $100 million for its stake, and officials have begun referring to the project as “the Grand” — it has for years been called “Grand Avenue” by billionaire Eli Broad and its proponents.
Molina, Perry and other officials insist the project is an example of “public-private” cooperation and benefits. The Grand will sit on four parcels of choice, taxpayer-owned downtown Civic Center property and receive tax breaks of more than $66 million from city and county coffers.
While Los Angeles politicians and Broad have consistently justified subsidies for the project by touting its affordable-housing component, Brand Dubai embodies just one image: luxury. Oil money provided the original fuel for the Persian Gulf nation’s larger-than-life economy: Dubai City’s man-made islands, configured in the shape of palm trees; palatial homes; ultraluxurious developments and iconic skyscrapers; and old and brand-new cities in the desert nation on the gulf.
But the royal family that governs Dubai, which is an emirate that does not allow democratic elections, has also sought to diversify its holdings and wealth streams. By decree in 2006, His Highness Sheik Mohammed bin Rashid Al Maktoum created Dubai World, a global, sprawling 50,000-employee holding company. One of his many lucrative subventures is Istithmar, a sovereign wealth fund designed to make him and others even richer.
“There’s been a lot of publicity within the last two months about sovereign wealth funds and overseas investors having an interest in United States assets,” says Todd Millay, managing director of Choate Hall & Stewart’s Wealth Management Group, “but Istithmar was doing this two or three years ago. It was one of the earlier Dubai-based funds that was really looking aggressively at outside opportunities.”
In America, that translates to Istithmar’s ownership of opulent retail outlets and hotels. In August 2007, the investment house outbid a Japanese retailer to purchase Barneys New York, the outré, well-heeled department store, for $942.3 million. In October 2006, it purchased the W New York Union Square in Manhattan, a stopover-spot valued at $285 million.
That year, Istithmar’s CEO, Yale-educated David Jackson, told Reuters, “In the U.S., we believe in what we call ‘key gateway cities.’”
ENTER LOS ANGELES. Quietly this year, an eager circle of politicians, having heard for months they were losing CalPERS, readily agreed to the same basic deal with one of the richest families on the face of the globe, at taxpayer expense. Last month, the Dubai royal family did two things: It publicly announced its deal with Related Companies for “the Grand” and it announced a new route for its airline, Emirates, seen by some as the poshest of the posh global air carriers.
Beginning on September 1, 2008, the airline will fly from Los Angeles to Dubai, becoming the only air carrier to offer a West Coast–Persian Gulf nonstop flight. Emirates will offer such sumptuous amenities as private suites — that’s right, suites — for first-class air travelers, complete with meals on demand, individual minibars, lie-flat sleepers with massage capabilities and electronic doors for privacy. More than 1,000 channels of audio-video will be available in each seat, as well as phones for all passengers, individual screens and, should lingering questions remain over the acceptance of other faiths, kosher meals.
It’s all part of the royal family’s strategy to court high-end global tourists in their strange, far-off desert land, which got a boost in 2007 from the Dubai International Film Festival, featuring His Highness Sheik Ahmed bin Saeed Al Maktoum as honorary chairman — and George Clooney performing Hollywood royalty duties. Michael Clayton was screened, Sony and ICM sponsored, and the fest’s entertainment-industry street cred grew.
In the meantime, the Grand will now spread Dubai-brand luxury to downtown, in a project long touted by Mayor Antonio Villaraigosa, the City Council and the Board of Supervisorsas a “public-private partnership” to bring benefits, including “affordable housing,” to the Civic Center.
Solid and trusted, CalPERS had given the project much of its public do-gooder feel. But the project had been in disarray, as evidenced by delayed groundbreakings, skyrocketing costs and now-confirmed rumors of late payments from the developers to the city.
