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Largest property investors considers arab deal { November 15 2007 }

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Colony debates selling stake to Mideast
By James Politi in New York

Published: November 15 2007 23:27 | Last updated: November 15 2007 23:27

Colony Capital, the US private equity group and one of the world’s largest property investors, is considering selling a stake to a Middle Eastern sovereign wealth fund, according to Thomas Barrack, its founder, chairman and chief executive.

“We have been approached by some of them, and, depending on who and when and why, it is an interesting concept,” Mr Barrack said in an interview with the Financial Times.

Colony declined to comment on which Middle Eastern sovereign fund it was discussing a deal with.

Mubadala, an investment arm of the Abu Dhabi government, in September struck a deal to acquire a 7.5 per cent stake in Carlyle, the Washington-based private equity group. The Abu Dhabi Investment Authority in July acquired a large stake in Apollo Management of New York. Last month, Och-Ziff Capital Management, the US hedge fund, agreed to sell a 9.9 per cent stake to Dubai International Capital.

Mr Barrack added that such deals offered private equity and hedge fund managers “liquidity...without forfeiting governance or control” as well as “a deep pocketed, well-heeled institutional investor on the hip for additional capital investment”.

A stake sale also helps “set a floor price...for a future initial public offering or pre-IPO pricing purposes,” Mr Barrack said.

If the talks advance, Colony would sell a stake of between 5 and 10 per cent, according to people familiar with the matter, who cautioned that no deal was imminent.

Colony, which is based in Los Angeles, this month closed its largest acquisition yet when it took control of Station Casinos, the US gaming company, for $8.8bn.

But most of its recent investments are outside the US. It owns, for example, a large stake in Carrefour, the French retailer, and Singapore’s Raffles Hotel.

Colony has close ties with the Middle East. In June, it agreed a landmark $3.5bn deal to buy a majority stake in Tamoil, the refining group, from the Libyan government. Colony is also part-owner of Fairmont Hotels, the Canadian luxury lodging group, alongside Kingdom Holdings, the investment vehicle of Prince Al-waleed bin Talal of Saudi Arabia. Mr Barrack is the grandson of Lebanese immigrants.

“I tell my young warriors that the Wild, Wild West is the East. Windfall petrodollars combined with a reluctance to invest in a less tolerant West has produced a boom. The Middle East, India and China are the current boom,” he said.

And yet, Mr Barrack, who made millions in the late 1980s during the savings and loans crisis, appears to be gearing up for a new round of deals in the troubled US financial services industry.

“In the midst of confusion lies the greatest opportunity. To acquire a financial institution, which can initiate new products without the cancerous deterioration of its old portfolio, may be the opportunity of the moment,” Mr Barrack said.

Copyright The Financial Times Limited 2007

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