Steven Witkoff, the billionaire New York real estate executive whom President-elect Donald J. Trump has named as his special envoy to the Middle East, was in a jam.
The year was 2018 and Mr. Witkoff’s co-investor in a Manhattan hotel project had been indicted by the Justice Department on fraud charges. A plan to convert the hotel into luxury condominiums was also on hold. But there was a two-part rescue of sorts from the kind of real estate angels that New York property investors have increasingly turned to.
First, Abu Dhabi’s sovereign wealth fund expanded its stake in the troubled hotel, Park Lane, which sits at the southern edge of Central Park. Then, in an even more crucial move, the Qatar Investment Authority last year dispatched $623 million as a leveraged buyout of Mr. Witkoff and his partners.
The transactions — involving two oil-rich sovereign wealth funds from the Middle East — are a hint of the enormous flow of dollars pouring into U.S. real estate firms from entities associated with countries like Qatar, the United Arab Emirates, Saudi Arabia and Kuwait.
For Mr. Witkoff, it will create complications as he takes up his new job and will soon be negotiating with leaders of nations that are past, and potentially future, lenders to or buyers of his family real estate projects.
Mr. Witkoff, who did not respond to requests for comment, has not indicated whether he intends to step down from his post as chairman and co-chief executive of Witkoff Group, which he runs with his son Alex Witkoff.
“Steve will be an unrelenting Voice for PEACE, and make us all proud,” Mr. Trump said in his announcement of his intention to name Mr. Witkoff to his new post.
Mr. Trump and Mr. Witkoff, who has no diplomatic experience, have not yet disclosed the terms of Mr. Witkoff’s new assignment.
If he formally took a federal job, he would be required to step down from his real estate company and file a financial disclosure form detailing all of his holdings. In addition, he would be prohibited under federal law from taking any official action that could directly benefit his personal finances. He might also be required to sell off certain investments.
But Mr. Witkoff might claim that he is simply working as a nongovernmental adviser to Mr. Trump. This would allow him to potentially continue to do business with Middle Eastern investors, even as he advises the White House on U.S. diplomacy in the region. The Trump transition team did not respond when asked how this would be handled.
Mr. Witkoff is slated to speak next month at a cryptocurrency conference in Abu Dhabi. He helped set up the cryptocurrency company the Trump family recently launched, World Liberty, and his sons Alex and Zach are also co-founders there.
The organizers of the crypto conference have already identified Mr. Witkoff as a “special envoy to the Middle East,” even though the Trump administration has not yet started.
‘If Trump Can Do It’
In Mr. Trump’s circle, there are already several examples of aides who went on to secure multibillion-dollar investments from Middle Eastern leaders after serving as part of the Trump administration, including Mr. Trump’s son-in-law Jared Kushner.
Mr. Kushner, in fact, played a very similar role as the one Mr. Witkoff has been tapped to take over, helping the first Trump administration negotiate an agreement, called the Abraham Accords, that led to normalization of relations between Israel and two of its neighbors, the United Arab Emirates and Bahrain.
Not long after Mr. Kushner left the White House, he secured $3 billion in commitments, mostly from the sovereign wealth funds of Saudi Arabia, Qatar and the United Arab Emirates, to set up his own new private equity fund that Mr. Kushner calls Affinity Partners.
Steven Mnuchin, who served as Treasury secretary during Mr. Trump’s first term, also set up his own $2.5 billion private equity fund after leaving office, with an undisclosed chunk of the money coming from the same Saudi fund that backed Mr. Kushner’s effort.
Mr. Witkoff has had a particular interest in Qatar, the small nation that sticks out into the Persian Gulf and hosts the largest U.S. military facility in the Middle East. He visited Doha, the capital of Qatar, in May to participate in an economic forum alongside a top government official who regulates real estate projects in the country to talk about the opportunity for new projects in the region.
“Qatar is very, really impressive,” Mr. Witkoff said during his appearance at the real-estate forum, adding later in his remarks: “Tourism is up. The hotels here are magnificent. Who wouldn’t come back to this region?”
Mr. Witkoff’s son Alex was separately in Qatar last month at an event sponsored by Qatar’s prime minister that featured top officials from the country’s sovereign wealth fund to ”explore promising opportunities in Qatar’s real estate sector.” Alex Witkoff did not respond to a request for comment.
Mr. Trump and Mr. Witkoff have been friends and business partners for more than two decades, with Mr. Trump, during a 2018 event while he was president, describing Mr. Witkoff as “my pal” and a “special guy.”
Their relationship stemmed, at least in part, from work Mr. Witkoff did as a young real estate lawyer for Mr. Trump’s family company decades ago, before Mr. Witkoff started his own firm in 1997. In the years that followed, his firm, now named Witkoff Group, has invested in, financed or helped build over 70 properties, mostly in New York, Los Angeles and South Florida.
“He saw me do it,” Mr. Trump said in 2018, referring to comments Mr. Witkoff made to him before he started his own real estate company. “And he said, ‘If Trump can do it, I guess I can do it, right?’”
Storied History
Mr. Trump and Mr. Witkoff have remained close friends in the years since.
Mr. Witkoff, who has donated nearly $2 million to Mr. Trump’s political causes over the last decade, was playing golf with Mr. Trump in September during a second assassination attempt against Mr. Trump.
“I got a sense of what it’s like to be Donald Trump in this type of environment,” Mr. Witkoff said in a CBS News interview after the episode. “It’s a pretty difficult role to play.”
Mr. Witkoff’s deals with Abu Dhabi and the Qatar Investment Authority both involved the Park Lane Hotel, which has a storied history in New York,
The Park Lane was once owned by the billionaire real estate mogul Harry Helmsley and his wife, Leona, the self-styled hotel queen. Built in 1971, the building had uninspiring architecture, but it offered magnificent views of Central Park and the Helmsleys made their home at the top, in a three-story penthouse that featured a 22-foot-long swimming pool.
When Mrs. Helmsley’s estate decided in 2013 to sell the building, Mr. Witkoff joined with the Malaysian financier Jho Low and Abu Dhabi’s sovereign wealth fund to buy it for $660 million, of which $135 million came from Mubadala Investment Company, Abu Dhabi’s fund, court records show.
The plan was to potentially demolish the hotel and rebuild with a luxury condominium and hotel complex near an area dubbed “Billionaires Row,” because of the other high-rise luxury towers that were rapidly being built on that desirable strip of property.
Things quickly went awry with this plan. First, the Manhattan luxury condo market took a downturn, and by 2016 Mr. Witkoff put the conversion plans on hold.
Two years later, Mr. Low was indicted by the Justice Department on charges of embezzling billions of dollars from 1MBD, Malaysia’s investment development fund, and for using some of this money to make his own investments, including his share of the Park Lane Hotel. Other alleged corrupt investments by Mr. Low included a $27 million pink diamond necklace and even his role in backing Hollywood films like “The Wolf of Wall Street,” according to the Justice Department.
No questions ever emerged about Mr. Witkoff during this investigation. Mr. Low was just an investor to him. “Little did we know we’d face circumstances like this,” Mr. Witkoff told The New York Times after the criminal case emerged. (Mr. Low remains a fugitive and has not been brought to trial.)
The U.S. government soon moved to seize the Park Lane Hotel as part of an effort to recover some of the assets, and involvement with Middle Eastern investors in the property accelerated.
First, Abu Dhabi’s Mubadala Investment Company increased its stake in the hotel, adding another $140 million, to help block an effort by the federal government to take over the hotel and secure a new loan to restructure debt on the building.
That is when the Qatar Investment Authority entered the picture, using through the aptly named Central Acquisition Co. The authority purchased the Park Lane for $622.9 million, buying out Mr. Witkoff.
‘Massive Involvement’
These investments came as no surprise.
Sovereign wealth funds from the Middle East — a relatively tiny area of the world — represent about $5 trillion, or more than 40 percent of the money in government-owned accounts, according to Global SWF, which tracks these funds.
Qatar’s fund alone, with a combined total of nearly $800 billion in assets under management. has been on a buying spree in Manhattan, pouring an estimated $1 billion into real estate in New York City last year, according to The Real Deal, a real estate trade magazine.
The Middle East-based funds have become vital players not just in the real estate industry, but also in venture capital and private equity firms across the United States, although the sovereign wealth firms often do not publish details on where they are putting their money.
“Massive involvement, just massive,” said Salar Ghahramani, a Pennsylvania State University law professor who studies the industry’s involvement in the United States. “They have grown exponentially in terms of assets.”
The Gulf state sovereign wealth firms, Mr. Ghahramani added, have in many cases become increasingly political, as well, using their wealth to help promote their own foreign policy goals. He pointed to, as an example, Saudi Arabia’s Public Investment Fund, which financed the upstart professional league LIV Golf and then sponsored a series of golf tournaments at courses owned by the Trump family. The government there, in an effort to diversify its economy and burnish its reputation, has spent billions in recent years on professional sports teams and events.
Mr. Kushner has already demonstrated how profitable serving as an adviser to Mr. Trump on Middle East matters can be. Like Mr. Witkoff, Mr. Kushner had no real experience in Middle East diplomacy, and a résumé as an executive at a family real estate company, when he entered the first Trump administration.
Senator Ron Wyden, Democrat of Oregon and the chairman of the Senate Finance Committee, said he would be watching Mr. Witkoff’s situation closely, even though Democrats will be in the minority in the next session of Congress.
“One of the things we learned from the last Trump administration is that the top prize for his loyal financial advisers is a chance to get rich off Middle East oil money,” Mr. Wyden said in a statement to The Times. “Given the history of these folks, it’s awfully hard to give appointees like this the benefit of the doubt that they’ll represent American interests ahead of their own.”
The post Trump’s Middle East Envoy Has Prior Ties to Oil-Rich Nations There appeared first on New York Times.
