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Ports Fiasco May Curb Arab Investment Dollars

The world’s investors may be clamoring for U.S. real estate, but the political backlash over the purchase of six U.S. seaport operations by a Dubai company may reduce the flow of cash from the United Arab Emirates into U.S. investments.

“That inevitably has an effect on their desire to pursue further investments (in the United States),” says Bill Kistler, president of the Urban Land Institute-Europe in London.

Dubai Ports World (DPW), which is owned by the government of Dubai, on March 9 announced it would offload the U.S. port operations acquired in its February takeover of Britain’s Peninsular & Oriental Steam Navigation Co. (P&O), although it hasn’t specified how a transfer will take place.

Dubai’s Jebel-Ali is one of the busiest and most advanced ports in the world, and America has missed an opportunity to tap the expertise of a world leader in port operations, says Kistler, who was visiting Dubai on a ULI study tour as the debacle unfolded. “Certainly from that part of the world, my gut sense is that [investors] have plenty of other opportunities elsewhere, where the investment will be welcomed and it won’t be as politicized,” he says.

Recent events lend credence to Kistler’s view. Shortly after DPW announced plans to divest itself of the U.S. port operations, Sultan bin Nasser al-Suwaidi, governor of the UAE’s central bank, chided Congress’ opposition to the deal and said its actions would hurt international investment and free trade. In a gesture that may have been retaliatory, Suwaidi said the central bank was considering converting up to 10% of its currency reserves, or about $4 billion, into euros from the present 2% ratio.

With so many investors clamoring to invest in the United States, however, any loss of capital from the UAE will likely be offset by investments flowing in from other sources — including domestic sources.

Privately owned Broe Cos. may make an offer to buy the former P&O port business in the United States, according to the Rocky Mountain News, which attributed its information to an unnamed executive at the Denver-based company. Broe is an international investment, acquisition, and operational enterprise with more than $1 billion in assets; its short-line railroad subsidiary, OmniTRAX, owns the port in Churchill, Manitoba, on the Hudson Bay.

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