PRINCE ALWALEED: THE PRINCE AND THE PORTFOLIO

Stock markets everywhere are falling. In Hong Kong, then in New York City, brokers are selling desperately. Deep in the desert night of Saudi Arabia, a reclusive investor, attired in a plain white robe and the red-checked headdress of a Bedouin, is buying. Brother, is he buying.

Nobody would think the worse of him if Prince Alwaleed bin Talal bin Abdul Aziz al Saud joined the selling stampede. The tumbling value of Citicorp alone has cost him, as the banking company’s largest shareholder, $640 million by the time the clock strikes noon on Wall Street. But to Alwaleed the only question is: At which precise moment should he strike? He and his advisers have spent six months studying 40 companies. Now prices are becoming more of a bargain by the second. So many stocks, so little time. Alwaleed sits elbows up at a cockpit-style desk, working a battery of phones. He glances back and forth at a panel of nine TV screens giving the latest news by satellite. At 10:40 p.m. Riyadh time, with trading temporarily suspended at the New York Stock Exchange, he dials Michael Jensen, his starched-collar financial adviser at Citicorp’s private banking office in Geneva, who in turn gets on another phone with Citi’s brokers in New York City. “At that point,” Jensen will later recall, “His Highness said, ‘Buy!'” First the prince supplies the names of four finalist companies. Then he supplies the figure: $1.2 billion. Jensen sucks his breath back out of the phone and places the order. “Everybody on Wall Street is crying, but I was prepared for this,” says Alwaleed, palpably confident and cool. Jokes his Saudi adviser Mustafa al Hejailan: “With the prince it is like playing Monopoly with real money.”

That buy order on Monday, Oct. 20, was undoubtedly one of the largest ever placed by an individual investor. “I know the economic fundamentals are strong, and the market will go back up,” he says. “Just like sheep, you have people going in the same direction [that is, panicking]. But I think the stock market is going to go up and up.” So far, he’s been right. He bought big, but he also bought big names. Alwaleed told TIME that he now owns about 5% of News Corp., the global media conglomerate run by Rupert Murdoch, making him the second largest individual holder, behind Murdoch. Alwaleed also bought some 5% of Web-browser maker Netscape Communications, and a chunk of chip and cell-phone maker Motorola. The fourth finalist, another well-known American company, according to the prince, is still being bought up.

Unlike his prior, mostly passive investments in Citi, Apple Computer and Disneyland Paris, this time Alwaleed is buying with an intent to take a more active hand with management. Murdoch might find that interesting. He also might find himself with a like-minded partner. Alwaleed is a global thinker, and in the media business, nobody is more global than Murdoch. The prince apparently hopes that entrenching himself in high-tech media-related outfits may help make him a king of communications in the Middle East–or, in due course, an emperor like Murdoch. Says Alwaleed: “I want to concentrate on communications, technology, entertainment and news. This is the future. News Corp. is the only truly global news and entertainment company. Netscape is strongly involved with the Internet. Motorola is very global in telephones and satellites. These companies are going to play a crucial role.”

Prince Alwaleed is not unknown to the investment world, but for the most part he is unseen. To find him you have to travel to the Arabian desert, where he often works from an outdoor office, linked via satellite to the money markets of New York and London. He is the chairman and sole shareholder of Kingdom Holding Co., which manages his investments and serves as the flagship of his privately owned companies. The prince has done well. As of last Friday, his net worth was $12 billion, a figure that has escalated in recent years.

Alwaleed does have a big advantage over most investors: a wad of cash higher than a sand dune–currently about $3 billion–which gives him the ability to move while others are scrambling for funds.

Yell “Hey, prince!” in a crowd of Saudis and chances are half a dozen heads will turn. This country has more royalty than a deck of cards, and lots of them are rich. They are rich first because they can dip a royal straw into that deep well of oil, and second because any foreign company wishing to do business in Saudi Arabia needs a local “partner.” The rent-a-prince business has been very lucrative.

As the nephew of King Fahd and grandson of Saudi Arabia’s founding father, Ibn Saud, Alwaleed, 40, initially availed himself of the leverage those connections provide. But he has become truly, singularly wealthy through a series of shrewd deals, most famously the headline-making rescue of Citicorp in 1991. The $590 million he pumped into Citi is now worth $5.1 billion. The prince also became a rich uncle for the floundering Disneyland Paris in 1994.

Perhaps a better name for him might be the Prince of Fallen Angels. Alwaleed has taken substantial stakes in companies that are out of favor. He took a bite of Apple because he loved the product. In Britain he bought Canary Wharf, an early ’90s real estate disaster that nearly wiped out the billionaire Reichmann family of Canada, after the bottom had fallen out of the market. It takes great courage to invest in the Korean conglomerate Daewoo, given that country’s economic troubles, but Alwaleed just bought 5.9% of it. Retailing was ailing in 1992 when he bought heavily into the holding company that owns Saks Fifth Avenue. Upscale retailing took off soon after. He recently bought 7% of Donna Karan International, a design house in disarray. He’s even the de facto manager of singer Michael Jackson, a dying supernova that Alwaleed just might reignite.

As much as any other investor today, Alwaleed seems to be exploiting the advantages of an age in which even a man in the desert can be instantly plugged in to the world’s information networks. “He is a very dynamic force. He brings tremendous energy to everything he gets involved in,” says Robert Earl, Ceo of Planet Hollywood International. “He is totally tuned in to everything.” Alwaleed is a master franchiser for Planet Hollywood’s concepts, as well as a holder of Planet Hollywood stock. He tracked down Earl on the beach in Barbados, a business-suited entourage in tow, to make the deal.

Although the Planet Hollywood business may look like just another indulgence of an eclectic entrepreneur, it ties into other businesses, including the News Corp. investment. In the Middle East, Alwaleed is the producer of top Arabic recording artists, including Najwa Karam and Kathem al Saher, and he has a major share in one of the most popular Arabic satellite TV networks, called Arab Radio and Television. Planet Hollywood is a great place to promote music and television stars.

One sector where synergy is working well for Alwaleed is hospitality. He has quietly become one of the largest private investors in, and owners of, hotels. And not coincidentally, hotel values and returns are soaring, as the recent battle for ITT Corp. (Sheraton) has demonstrated. His goal is to create, with international partners, a web of four- and five-star hotels around the world. He currently owns 50% of the Fairmont group, 30% of Movenpick, a Swiss chain, and 25% of the upmarket Four Seasons chain. He is the sole owner of the deluxe George V in Paris and owns half of the Inn on the Park in London and the Plaza in New York, plus 17 other luxury hotels. His blueprint calls for 42 new hotels in 15 countries, in addition to plans to develop 40 new franchises for Planet Hollywood in the Middle East and Europe. Says Alwaleed: “Three years ago, I started to get into the hospitality industry. It was really in the doldrums. The hotel industry had been hammered badly, especially the five-star hotels. Now everybody is talking about the hotel industry.”

Alwaleed’s success is partly explained by the blend of Saudi, Lebanese and American influences that have shaped his relatively short career. By his own reckoning, his investment savvy draws on a Bedouin’s instinct for caution, a Levantine’s flair for a bargain and a bean counter’s fondness for the bottom line. “He has an extremely agile mind,” says U.S. Ambassador to Saudi Arabia Wyche Fowler. “He is always two or three jumps ahead of you.” Alwaleed can negotiate in Arabic, English and French.

The Prince’s ultrarich uncles, the eldest sons of Ibn Saud, who rule Saudi Arabia today, have accumulated their wealth mainly by diverting huge sums, directly or indirectly, from the government’s extravagant oil revenues. As a Riyadh businessman puts it, Alwaleed’s branch of the Saud family tree has always been considered a little smoother and a little straighter than the rest. His father Talal, a former Ambassador to France, was one of the “free princes” who demanded democratization and went into temporary exile during the troubled 1953-64 reign of King Saud. Alwaleed’s mother, Princess Mona, is the daughter of Riad Solh, the first Prime Minister of independent Lebanon.

Alwaleed’s parents divorced when he was barely school age. Growing up with his mother’s family in swinging, pre-civil war Beirut made him into a wild and, at 189 lbs., seriously paunchy teenager. Talal yanked him back to Riyadh and reality and installed him at the King Abdul Aziz Military Academy. Alwaleed credits the experience for giving him his strong personal discipline. Later, business and social science degrees from Menlo College in California and Syracuse University gave Alwaleed the know-how to make his start.

He likes to tell the tale of how he made his first billion or so out of a $15,000 gift from his father. Talal had also given his son a house worth $1.5 million, which Alwaleed mortgaged to raise capital. Along the way, he used some of the money to play that favorite game of Saudi royalty, land speculation, and quickly turned a $150,000 investment into a $2 million profit.

Alwaleed demonstrated his grasp of American business tactics when he launched the first successful hostile takeover of a bank in Saudi Arabia, winning the United Saudi Commercial Bank. Alwaleed believes the takeover made his name in Saudi Arabia while simultaneously giving him a vantage point for branching out into other businesses.

By 1991 Alwaleed had the itch to diversify overseas. Sagging oil prices had produced a severe recession in the kingdom, creating a feeling of unease made worse by Saddam Hussein’s invasion of neighboring Kuwait. Alwaleed already owned 4.9% of Citicorp–a percentage that allowed his ownership to be anonymous. But with the bank wobbling and the stock falling, he soon made his name known by tripling his stake.

As of last week, his holding company was pursuing some 160 investment opportunities. Overseeing all this is an investment staff of 20 employees from Saudi Arabia and seven other countries. His payroll also includes a former White House communications expert–this is, after all, a man who spends $80,000 a month on phone bills–as well as a camel caretaker, a muezzin who calls the Muslim faithful to prayer from a minaret, and 18 soccer players whom Alwaleed pays to play games with his son, at his son’s private field.

To keep his operation lean yet opportunistic, he outsources his consultants–Citicorp for investment banking, Arthur Andersen for company advice, Saatchi & Saatchi for p.r. and Hogan & Hartson, a Washington law firm, for legal matters. (Alwaleed is the first to notice that the initials of these firms form the acronym CASH.)

Alwaleed does not have what you would call regular hours. He arrives at his bank and slides behind the chairman’s desk at 10 a.m. Three hours later, he heads across town to his office at Kingdom Holding. There he juggles scores of projects through meetings, phone calls and faxes until 3 a.m. the next day.

In between he takes a three-hour break, returning to his palace health club–an expansive aquamarine spa with an Olympic-size pool, tennis courts and a bowling alley–for a buffet lunch and light workout. When the job is finally finished, he takes a walk in the moonlight, has a light meal and sleeps five hours. On weekends he drives to a private desert encampment 45 miles from Riyadh, where he eats supper on a rug with Bedouin retainers called khawian, some armed with silver-handled Colt .38s.

Of course, the life of a desert billionaire does have its perks in addition to its quirks. Twice divorced (he has two children, Khalid, 18, and Reem, 14), Alwaleed is not currently linked with any woman. He laughs sheepishly when people tell him, as they frequently do, that he is the world’s most eligible bachelor. In contrast to the stereotype of the whoring petro-sheik, he calls himself a “calorie counter” who doesn’t drink or smoke and has an American’s obsession with fitness (he now weighs in at 136 lbs.). His only vice seems to be, hardly surprisingly, an appetite for luxury. He is very fond of his 282-ft. Kingdom 5-KR, the ostentatious yacht formerly owned by Saudi arms dealer Adnan Khashoggi and then by Donald Trump, who called it the Trump Princess before the banks took it back. Alwaleed keeps the boat moored in the southern French resort of Cannes. He takes about three long business trips a year and, depending on the distance, can choose from a private jet fleet that includes a Boeing 767, a Boeing 727 and a Challenger 601. He owns some 300 cars, including a blue Rolls-Royce for his daughter.

Then there is the new $100 million palace. Even in Saudi Arabia, they are not building houses like this one any longer. In February, Alwaleed and his children are scheduled to move into a sand-colored palace whose 317 rooms are adorned with 1,500 tons of Italian marble, silk Oriental carpets, gold-plated faucets and 250 TV sets. It will have four kitchens, for Lebanese, Arabic, Continental and Asian cuisines, and a fifth just for dishing up desserts, run by chefs who can feed 2,000 people on an hour’s notice. Their royal highnesses will be able to swim in a lagoon-shaped pool, or catch a film in the 45-seat basement cinema.

Perhaps the clearest sign of Alwaleed’s growing influence is that he is attracting serious enemies, including some of his powerful al Saud cousins. “There is jealousy, even hatred,” says a Saudi source. “It bothers people that he came from almost nowhere and–zoom!–now he’s way up here.” Rumors have circulated that he is a front man for others, especially in the Citibank deal. Alwaleed and Western diplomats in Riyadh dismiss them as unfounded. He seems determined to let his influence grow, no matter the consequences. “I have nothing to hide,” he says. “I’ve made $12 billion plus through hard work, and I am proud of it.”

One important new area to watch, however, will be Alwaleed’s political ambitions. Saudi Arabia is not a happy country. It is experiencing increasing economic and political strains–remember the 1996 bombing of the U.S. Air Force barracks near Dhahran–because of stagnation caused in part by an elderly and autocratic leadership. Although Alwaleed swears complete support for King Fahd and his other uncles, his immense wealth is beginning to give him rising influence on developments affecting the kingdom.

His business investments in the Middle East, for example, provide him with direct access to Arab heads of state, on whom he may have a moderating influence, since many of Alwaleed’s international partners are Jewish and support Israel. “Religion has never been a barrier between us,” says Four Seasons Hotels Inc. CEO Isadore Sharp. “He mentioned once that we have similar value systems and moral principles.”

Many of his investments within Saudi Arabia may have an important and intended social impact outside the immediate control of the government. For example, his plan for a 4,000-student private school, Kingdom Academy, which will put emphasis on English and technical subjects, will give Saudi students a welcome alternative to government institutions that are strong on religious education. Another project will further cement Alwaleed’s stature: the 30-story Kingdom Center, the tallest skyscraper in the Middle East, scheduled to open in downtown Riyadh in 2000. Associates say he is too busy making money to try jumping the queue of royal succession, but he hasn’t ruled out becoming a political force.

Like a politician, Alwaleed does all the right things. In accordance with zakat, the Islamic call to charity, he operates an elaborate aid program that dispenses $200 million a year to needy families in Saudi Arabia and other Islamic countries.

Where does this Arabian Warren Buffett think of investing next? East, it seems. His investment in News Corp. is based on a hunch that Murdoch’s empire can grow by leaps and bounds in Asia. Says the prince: “Liberalization of media and entertainment in China and India will have a tremendous boost on News Corp. shares.” Motorola is already in China. Earlier this year, Alwaleed made a 15-nation scouting trip through Asia and placed his first direct investment, taking a piece of the Shanghai Trade Center, which will be the tallest skyscraper in the world when it is finished.

Alwaleed believes the Far East can be hot for at least two decades, but he’ll also turn his attention to Africa, which “needs everything.” But he says he will not stray from the formula that turned $15,000 into $12 billion. “I would like to be viewed as this investor from the middle of the desert, who comes and adds value to companies,” he says. “I get a kick out of finding industries that have spectacular potential. I look for companies that have solid brand names and sound management but are dirt cheap.” As the prince can tell you, those bargains can really add up.