Value of glittering trophies measured by tangible returns

Trophy assets must to justify their purchase by making some kind of financial return for their owners. Frank Kane looks at three case studies.

Sir Terence Conran, one of Britain's best-known entrepreneurs, did much to define United Kingdom 'style' in the 1980s. Carl Court / AFP

Arabian Gulf investors have always been keen on what the financial professionals describe as "trophy assets", but with mixed results.

By definition, a trophy is something you try hard to win, then lock away in a cabinet for years, perhaps taking it out now and again to polish it down and examine with pride.

A trophy asset is a bit like that, although it comes with the proviso that because it was bought for good hard cash, it will at some stage have to justify its place in the cabinet by making some kind of financial return for its owners.

And what some regard as a trophy, others may not think worth the trouble, or the money, to acquire.

Take three recent examples of trophy assets bought by regional investors. Two years ago, Qatar's foreign investment unit bought Harrods, the posh London department store, for US$1.5 billion (Dh5.51bn).

At the time, there was much speculation that the Qataris had paid a premium price for a premium asset, but Harrods has since been doing great business, and looks likely to break all records this coming Olympic summer in London.

So that's a trophy asset that ticks all the boxes: the new owners can take pride in ownership and happily count the returns.

QE2, the luxury liner owned by Dubai World, is a different example. Bought by the conglomerate at the height of the boom in 2007, it undoubtedly had all the trophy elements - glitz, glamour, a sophisticated history and associations. But even back then, the business case for buying the ship was more difficult to argue.

There were plans to transform it into a floating luxury hotel, but these foundered during the financial crisis, and the ship is still moored at Dubai's Port Rashid, awaiting a strategy to justify the reported $100 million price tag.

Manchester City Football Club is another trophy. Bought by Abu Dhabi's Sheikh Mansour bin Zayedin 2008, the club has absorbed an estimated $1bn, but came good last month when it won the English Premier League.

So City is a trophy asset with a valuable trophy, but only time will tell whether the financial return will justify the outlay.

These examples will be firmly in the minds of regional investors pondering the case of another trophy asset that has come on the market: the 30-strong chain of top-notch restaurants (and one hotel) currently being hawked around by the investment bank Rothschild.

The chain is the creation on Sir Terence Conran, one of Britain's best-known entrepreneurs, who did much to define United Kingdom "style" in the 1980s and later. Anyone who has had a long lunch at the Pont de la Tour, beneath the shadow of Tower Bridge in London, will testify to the allure of Sir Terence's establishments.

He is selling because, at 80 years old, he wants to ensure the future of the chain with new investors capable of taking it to a new level of development. It is currently owned by Sir Terence, some private equity interests, and its own management.

It has attracted strong interest from potential investors in Qatar (it would sit nicely in the cabinet alongside Harrods) as well as others from East Asia, where it already has some upper-crust restaurants. Trade investors, as well as trophy-seekers, are eyeing a possible deal.

The price tag is reportedly in the £70m (Dh397.8m) to £100m range, which at a potential £3m per eaterie looks expensive. But the accounts show turnover of more than £70m last year and profit of £7m plus, so perhaps that valuation can be justified on the financials alone, without taking into account future earnings from new openings (possibly in the UAE) and the potential of a string of "concept" hotels also on the drawing board.

Gulf investors considering the deal will no doubt be attracted by the prospect of jetting from New York to Tokyo, via London, Paris and Copenhagen, while enjoying fine dining on their own property all the way.

After all, if you cannot enjoy your trophy, what's the point?