Thursday 22 March 2018

French folly or good business? – Qatar royals invest in Paris

The feather-clad showgirls like the ones at the Lido Cabaret, one of a number of Parisien properties owned by the Qatar royal family.
The feather-clad showgirls like the ones at the Lido Cabaret, one of a number of Parisien properties owned by the Qatar royal family.

Lionel Laurent

The Champs-Elysees lures millions of tourists every year to enjoy shopping at the Elysees 26 mall, poker at the Aviation Club, plush cars and futuristic architecture in the Citroen showroom, or feather-clad showgirls at the Lido cabaret.

But for all their Parisian charisma, none of these attractions are French-owned. They belong to the royal family of Qatar, a resource-rich emirate about 3,000 miles away.

Some Muslims may frown on investments in gambling, alcohol and high-kicking dancers, but over the past few decades the buildings have helped bolster Qatar's global portfolio of trophy assets, including London's Harrods and Singapore's Raffles Hotel. The latest French addition was a chain of upscale malls under the Printemps banner, bought by a fund controlled by Qatari royals in August for €1.7bn.

For oil-rich royalty from the Arab Gulf, part of the attraction of the United Kingdom has been the fact it charges no taxes on profits foreign investors make when they sell real estate. Five years ago, Qatar sealed a similar agreement with France.

The treaty was agreed by former centre-right president Nicolas Sarkozy in 2008, and is one of the most generous Qatar has secured, exempting Qatari investors from taxes on the profits they make when they sell properties.

In a country where 3.6 million people lack decent housing, according to Abbe Pierre, a charity, that is controversial.

Politicians, including some in Francois Hollande's new Socialist government, have been critical. In April's budget, minister Bernard Cazeneuve called the treaty "an exception that we do not wish to duplicate".

Others have asked if the accord brings economic benefit to compensate for the lost tax revenue.

The government has said it is examining the treaty, but an official at the French finance ministry told Reuters that Qatar's purchases don't have to be declared, so it is impossible to see how much tax is at stake.

A Reuters examination of regulatory filings, court documents and other data sheds new light on Qatar's property assets.

Reuters mapped around 40 properties in France that are owned by Qataris, a total investment of €5.9bn over the past decade, including €4.8bn since 2008. At current values they would be worth around €6.3bn.

The Qatari state and its sovereign wealth fund own about a dozen of the properties, together worth around €3bn, Reuters found; the rest belong to members of the ruling al-Thani family. A personal fund set up by Sheikh Hamad bin Khalifa al-Thani, the previous emir, controls about nine of them; his children, including the current emir, six. The rest were bought either by other relatives, or businessmen with strong ties to the al-Thanis, such as Ghanim bin Saad al-Saad.

Each property is owned by a holding company that is itself held by one or more entities, some of them outside France. This makes it hard to track when properties change hands, to see how much tax the French have forgone with the deal.

If there had been no treaty, though, market values at the end of 2012 suggest the French government would have collected at least €145m in tax if the entire portfolio were sold and taxed at the lowest applicable rate, according to Reuters calculations which were assessed by three experts.

While that's less than a day's gas export revenues for Qatar, in France it would equate to a year's pre-tax pay for some 4,500 school teachers or nurses.

In 2008, a report for the French parliament praised the tax arrangement for encouraging Qatari investment in French real estate which "can only benefit the French economy." The treaty has several clauses to promote the exchange of information and prevent abuse, and France has similar arrangements with other rich oil states such as Kuwait and Saudi Arabia.

Qataris have been particularly active since the deal was sealed. From the Virgin Megastore flagship to the Hotel Martinez in Cannes, from soccer club Paris Saint-Germain to farmland in Normandy, Qatari royals have acquired dozens of properties.

"It is thanks to these tax advantages that the Qataris are the only ones buying French property at the moment," said Philippe Chevalier, head of French real-estate broker Emile Garcin. "I would support more of these advantages."

In May, Socialist senator Jean-Yves Leconte – a member of Hollande's own party – asked the government what measures it would take to end the tax breaks that made France "particularly attractive, if not quite a tax haven" for Qatar.

Others, such as the Communist Party's Eric Bocquet and members of Hollande's own party, have asked for clear figures showing what has been lost to the French treasury. Far-right lawmaker Marion Le Pen – niece of National Front leader Marine Le Pen – has asked the government to scrap the treaty.

Some of the objections are a populist response in a harsh economic climate, according to Karim Emile Bitar, of foreign-policy think tank IRIS. "We reached a moment when Qatar became the sum of all French fears . . . Fear of Islam and fear that France would lose its sovereignty," he said.

If France were to renegotiate the treaty, the French finance ministry official said, it would also mean sacrificing advantages: "Renegotiations are made according to our strategic priorities." (Reuters)

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