Kenneth C. Crowe
Kenneth Crowe

Fellowship Title:

Filling The American Gap

Kenneth Crowe
June 16, 1976

Fellowship Year

The views expressed by the author in this newsletter are not necessarily the views of the Foundation.

(THE CONTEXT: Foreign investment in the United States is burgeoning, while public consciousness of this perennial phenomenon has been raised by the prospect of Middle Eastern oil money buying large pieces of American corporations and real estate. The traditional investors in the U.S. have been the Europeans, but in recent years, nouveau investors…the Japanese, the Arabs, the Iranians…have appeared on the American horizon. An understanding of the impact of foreign money and foreign ownership is obscured by a lack of knowledge. The following article outlines the entry of a Dutch holding company into the U.S.)

"Tis the part of a wise man
to keep himself today for tomorrow,
and not venture all his eggs in one basket."

ROTTERDAM — A colloquial American version of Cervantes words would be: “Don’t put your eggs all in one basket.” I began to feel this must be the corporate motto of Pakhoed Holding N.V., the Dutch multi-national holding company, as I spoke to executives of the firm’s separate divisions about their plans for expansion into the United States.

    • Pakhoed’s Paktank B.V., the largest independent petroleum and chemical storage tank company in the world, has established itself on all three U.S. coasts in strategic positions to exploit what it sees as a rich opportunity to fill a gap in the American distribution system’s infrastructure by building oil storage facilities.

    • Pakhoed’s Blauwhoed B.V., a real estate holding company, has focused on the American Southeast through two distinct lines of investment: through Hexalon, a closed-end investment company, for conservative, minimum-risk investments in commercial properties; and through Ackerman & Co. of Atlanta, Ga., a real estate development, brokerage and management company, for riskier development projects.


Paktank, descended from the firm (Pakhuismeesteren Company, or “warehouse masters”) which built Europe’s first storage tank at Rotterdam in 1887, had spread its storage facilities through the Netherlands, Sweden, Britain, West Germany and France before turning to the United States.

The move across the Atlantic was provoked by a combination of an aggressive corporate management and a desire to really diversify. The parent Pakhoed corporation realized by 1972-73 that investments centered in Europe alone left the company vulnerable to the rise and fall of a single economic structure — which Europe has become. “The concept in Paktank of diversifying geographically started four or five years ago,” said Arthur Penny, general manager of Paktank’s Development Group, when interviewed at the corporate headquarters in Rotterdam in February. “There was an awareness growing you shouldn’t have all your eggs in one basket. It started with initial visits of people (from the States) here in 1972. In ‘73, a decision was taken to set up a development office on the basis of one man and a secretary whose job it was to investigate investment opportunities. In October, 1973 this division was created, the development department.”

Penny arrived at Paktank in January, 1974, just three months after the creation of the development office. “I had spent time in BP (British Petroleum) with the job of structuring joint ventures,” he said. Paktank had the idea of getting into the States in joint ventures.”

“To get on each U.S. coast, that was our strategic plan when we started,” Penny said. “The idea was to get into each of those three areas (East Coast, West Coast and Gulf Coast) which could be then further developed. In each case, we feel we have bought excellent local partners — expertise.”

The first U.S. joint venture for the Dutch firm came that same year with the creation of Thoroughfare Petroleum Inc. in a partnership with William Packer of Philadelphia. This joint venture has built a 1,500,000 barrel storage facility at Paulsboro, N.J., just outside of Philadelphia, which is leased to the Philadelphia Electric Company.

In February, 1974, Paktank began negotiations with Harold Bernstein, head of Northville Industries of Long Island, N.Y., a large, privately-held fuel distributor, to build an 8.3-million barrel transshipment terminal at Bonaire in the Netherland Antilles. The concept was simple: supertankers carrying oil from North Africa and the Middle East would deposit their cargos at Bonaire for transfer to smaller ships to carry the oil to the U.S. mainland. There are no docking facilities large enough to handle supertankers on the American East Coast. The Bonaire complex went into operation this past January when the Tanker Al Bilad discharged a cargo of Nigerian crude oil into the new plant’s storage tanks.

In June, 1975, Paktank signed a joint venture agreement with the West Coast’s Pacific Lighting Corporation to develop a 9-million barrel storage terminal in Los Angeles Harbor. “The basis for this investment,” Penny said, “is what we consider to be an absolute change from natural gas to oil for industrial use. In that area, you see a tremendous decline in natural gas.” He noted that the construction of the Alaskan Pipeline will make millions of barrels of oil available with few places to store it on the West Coast. That was another factor in the decision to make that investment. Paktank and Pacific Lighting will just be the landlords of the terminal — the storage tanks will be leased to oil companies or other industries in the area.

The Gulf Coast Acquisition

Paralleling the move into the West Coast was Paktank’s negotiations to acquire Robertson Distribution Systems of Houston, a company with two deep-water storage terminals on the Houston Ship Channel. Robertson has tanks, capable of holding 4.5-million barrels of chemicals and oil products, along with more than 500 tractor-trailer rigs and ten railroad tank cars. Penny said that Paktank had first looked at Robertson in 1973, but the price was too high. “In early ‘75, we decided to have another go. We started to have serious discussions in August, 1975, and finalized it on Jan. 30, 1976.” Paktank, working with Morgan Guaranty Trust Co. as advisors, paid Robertson’s stockholders $26-million for the company.

“There aren’t really any parallel American companies (to Paktank),” said Penny, who is British. “There is GATX (formerly General American Transportation) which is a long-term oil and chemical storage company. We supply a mixture of long term and short term traders. This is common in Europe. It isn’t in the U.S.” The traders in Europe are speculators — a professional calling which is frowned upon in the U.S., where Congress and the public look with distaste on those who make windfall profits on oil. The National Petroleum Council said that a survey taken in September, 1973 showed the U.S. had a total storage capacity of 386,713,000 barrels. Virtually all of this capacity is believed to be owned by oil companies, utilities or other industries — and the amount in independent hands is unknown.

Penny noted another difference between GATX and Paktank: “GATX is very solid, very traditional. We take a little more risk. We built our Philadelphia terminal with only a three year contract. You can’t capitalize it in three years. That’s the sort of thing you have to have confidence” to do.


Blauwhoed B.V., Pakhoed’s real estate division, traces its origins back to five porters working together on the Amsterdam docks in 1616. The five wore distinctive blue hats — hence the name Blauwhoed. Pakhoed’s corporate symbol is still the blue hat, signifying the durability and flexibility of company which has spanned 350 years — and has remained youthfully aggressive. Blauwhoed remained in the business of moving goods until the close of World War II when it got into the real estate field by converting old waterfront warehouses into new office buildings.

Blauwhoed and Pakhuismeesteren (founded in 1818) merged in 1967 to form the parent holding company: Pakhoed.

The Dutch were the first big time land speculators in the United States. Most of upstate New York and Western sections of Pennsylvania were settled on lands purchased from the Holland Land Company, which was formed by Dutch bankers, shortly after America won its independence.

But that was another company, and another age. Blauwhoed’s present-day investments are on a more modest scale. “We’re not talking about any investment of any consequence,” said Eric Christiansen, president of Blauwhoed. “We are just scratching the surface. The amount of money Hexalon has got is $50-million. If we’re really clever, we can buy property worth $100-million to $150-million. That’s three buildings in Manhattan.” Hexalon’s investment pattern is a familiar one in the real estate business: 30 percent cash and 70 percent borrowed or mortgaged.

Christiansen is a man with a crew cut and a rugged face you would expect to see on a professional soldier, not a real estate executive. A Dane, he served in the Danish Air Force as a pilot. The multi-national character of the Pakhoed organization comes through as one realizes that a British executive, Arthur Penny, put together the key Paktank investments in the U.S., and a Dane heads the real estate division and also sits on the parent holding company’s executive board.

Explaining the move to the U.S., Christiansen said: “We had decided to internationalize our activities. We felt Holland is such a small country and our company was becoming of a size that we decided it was not responsible to have our eggs in one basket. We went into Belgium and to Germany. One day we asked: ‘Are we really international?’…. In Europe we are all in the same boat.”

After looking over the available choices, Christiansen said: “One has to decide to go to the U.S. Blauwhoed decided in October, 1972 that the U.S. was the place.” An executive in Holland who watches Blauwhoed’s operations carefully said that Christiansen probably would have preferred to make his investments in Eastern Europe, where he had been involved in hotel investments before coming to Blauwhoed. The barrier to putting his experience of a capitalist making money behind the Iron Gurtain to work for Blauwhoed, the executive said, was the politics of the situation. Many Dutch tourists spend their holidays in Rumania at specially-built resort hotels.

Christiansen explained the logic of his U.S. investment policy: “We feel the American economy is a very good, strong, solid economy. We think you will have inflation for many years to come. We can borrow long-term money not indexed (against inflation) in the U.S. If you can borrow long term money and you believe in inflation, you are all set.” He added: “The dollar is undervalued, and when we went in, no one in the U.S. had confidence in real estate.” That confidence, of course, was shattered among Americans by the disasterous performance of real estate trust companies which edged many banks towards the red.

After analyzing the U.S. from the perspective of Rotterdam, Christiansen hired the consulting firm, Booze, Allen & Hamilton, to make a formal study in three areas: what kind of investments should be made?; where?; and which firm would be an appropriate American partner for Blauwhoed? “I do not believe we could go to the U.S. without an American partner,” Christiansen said. “That would be inconceivable.”

“We got a study from Booze, Hamilton that was fairly close to our own ideas,” Christiansen said, “to invest in the South or Southeast; not in residential or hotels…. The Northeast has had it, has had the growth. The growth is now in the Southeast.” Ackerman & Co., which is located in the Southeast, was at the top of the list of 140 firms recommended in the Booze, Hamilton study. Blauwhoed and Ackerman agreed on a 50-50 joint venture late in 1974.

Christiansen delineated the scope of his firm’s two investments: Describing Hexalon, he said: “It’s a low risk, pension plan investment attitude.” On Ackerman: “This is the entrepreneurial investment. We are developing in Baltimore. We have just started to build a large ($22-million) office building there, pre-let before we started to build to the Chesapeake Power & Light Co.”

Christiansen also brought up another synergistic investment which could contribute towards the success of his organization’s thrust into the U.S. real estate market in the future: “We just bought 50 percent of the largest (real estate) brokerage firm in Holland. We think there are a lot of people in Europe who would like to invest in the U.S., but don’t know how. There are a lot of people who want to be held by the hand and by a company (Blauwhoed) which can’t afford to lose its good name.”

Blauwhoed owns 32 percent of Hexalon; the British insurance company, Commercial Union Assurance Co., about 20 percent; UBAF Ltd., 2.5 percent; and the balance is split among Dutch pension and investment funds.

Titillating UBAF’s Interest

While Commercial Union brought UBAF Ltd. into the deal, Christiansen described how he titillated the Arab consortium bank’s interest in Hexalon. “When we came to talk, they were very cool and were not extremely interested to do it,” Christiansen said, “Everybody comes to them.” But those everybodies offer the Arabs large pieces of action for large chunks of cash. Christiansen, on the contrary, told UBAF that it could take a maximum of 3 percent in Hexalon. At that point, he said, UBAF got interested.

The Danish executive of this Dutch company said he was willing to extend the investment invitation to UBAF “to get the dialogue started. Sooner or later, they’re (the Arabs) going to become a strong financial community.” He said in future deals, when additional closed-end investment companies like Hexalon are formed, he doubted if UBAF would be restricted to 3 percent. “I wouldn’t be suprised if they would come in with more (in future deals),” he said. “If I had started with 20 percent, I think we might have had hesitation on the part of the other partners. I don’t think that’s true today.”

Thomas L. Rhodes, an American, who is Commercial Union Assurance’s chief financial officer in London, provided an explanation for the link between the Arab-controlled bank and the Dutch real estate company. When Christiansen approached Commercial Union with the offer to participate in Hexalon, Rhodes and Peter Readman, another Commercial Union executive, were working on Middle Eastern projects. “We had determined to establish a relationship with UBAF. It’s the largest of the Arab banks, and it’s operative, and it’s here. We proposed joining (in the Hexalon deal) to UBAF and they agreed.”

The quadrupling of oil prices in the fall of 1973 had swollen the treasuries and economies of the Arab oil producing nations — the reason why Commercial Union, and the rest of the business world, were anxious to develop Arab contacts. Rhodes said his company decided “it would be wrong for one of the largest financial institutions to ignore this pool of capital no matter where it moves.”

Rhodes said after conducting a study “we realized that the funds were not going to leave the Arab World. If you look at the five year plans plus the Arab risk curve (he doesn’t want to take any)…we decided the need was to develop property in the Middle East…. The Arab has got his land — with development expertise he can turn that property into cash.”

Rhodes said that Commercial Union had already begun buliding villas in a joint venture with the Lincoln Property Co., an American organization, in Dubai. To facilitate the building ventures, Rhodes said: “We put together the first non-recourse to the Arab financing In the Middle East. This was done by CU providing a 30 percent guarantee through Banque Arabe et Internationale d’Investissement.”

Getting in Bed

UBAF Ltd. is a French-Arab-British consortium bank whose headquarters happen to be on the sixth floor of the huge Commercial Union Building in the City of London. Walter Cronk, general manager of UBAF Ltd. in an interview in London, said: “We were approached by these people here (CU)…I don’t know what prompted them except to get into a long term relationship with an Arab group. They only had to come down to the sixth floor.”

Cronk found the Hexalon concept appealing because of the organization behind it: “Their aims and investment strategy was good, and there might be the possibility in the distant future of providing real estate opportunities to the Arabs…. We’re dealing with people who are not going in for an immediate profit, but to build a good portfolio. You’ve got real hard, cold experts (making the investment decisions).”

While Commercial Union and Pakhoed were interested in making an Arab connection, Cronk saw some advantages for his own bank. “It enabled us to get into bed with very powerful people like Commercial Union and Pakhoed,” he said.

Abdalla Saudi, chairman of the Libyan Arab Foreign Bank, is executive director of UBAF Ltd. in London and a director of the new UBAF Arab American Bank in New York. Saudi also sits on Hexalon’s supervisory board.

Hexalon, whose U.S. advisor is Ackerman & Co., has acquired warehouses, shopping centers and office buildings in such diverse locations as Atlanta; West Birmingham, Ala., Houston, Tex.; Toledo, Ohio; and Wayne, N.J. Christiansen expects the entire $50-million to have been invested by the end of this year.

Some Conclusions:

The dual investments of Pakhoed in storage facilities and real estate are positive forms of foreign investment at this point in American history.

The Paktank entry into the independent oil storage field is helping to fill a gap in the nation’s distribution system, particularly on the West Coast where natural gas supplies are disappearing and the Alaskan oil will soon be arriving.

Blauwhoed’s appearance to buy and build in a real estate market still suffering from the 1975-76 depression is a gesture of confidence in the stability and viability of the American economic scene.

Received in New York on June 16, 1976

©1976 Kenneth C. Crowe

Kenneth C. Crowe is an Alicia Patterson Foundation award winner on leave from Newsday. He is studying the investment and movement of foreign funds into the United States with emphasis on the OPEC nations’ oil monies. This article may be published with credit to Newsday and Mr. Crowe as a Fellow of the Alicia Patterson Foundation.