The US property company is gearing up its activities in Europe, with new financial backing
In two short decades, US real estate giant Tishman Speyer Properties has assembled an enviable international collection of trophy buildings: New York’s Rockefeller Center and Chrysler Building, Friedrichstadt Passagen and the Sony Centre in Potsdamer Platz in Berlin, and the Messeturm in Frankfurt.
Headed by 58-year-old Jerry Speyer and his former father-in-law, Robert Tishman, the private company was set up in 1978 after the Tishman family broke up its quoted Tishman Realty & Construction, one of the US’s leading developers. The company has established a track record in large-scale developments of under-utilised sites, and in taking on tired signature buildings and giving them a new lease of life. For example, it revamped 620 Avenue of the Americas – a long-vacant 60,000 m2 New York department store – into a successful retail complex.
Headquartered in New York, TSP now has 15 offices worldwide – nine in the US, plus bases in Frankfurt, Berlin, London, Paris, Warsaw and Sao Paolo – and a portfolio of over 3.4m m2. This represents some $12bn of international real estate, owned either outright by TSP or jointly with partners.
Moreover, TSP has a very big chequebook. Last year, it teamed up with the giant Travelers financial group to set up an $800m joint venture. This is now the vehicle for all TSP’s future acquisitions and developments. TSP will be responsible for day-to-day property management and leasing, and the wider asset management role will be shared with its partner. According to the partners, the venture could grow to $3bn in three years.
Travelers has put in 15 buildings worth $420m and $100m in cash while TSP’s contribution is $280m cash. Last month, Fleet Financial provided a $220m revolving credit facility for Tishman Speyer/Travelers Real Estate Venture; participants included five foreign banks, one US bank, and two insurance companies.
Originally conceived with a US focus, the joint venture now has an international brief as well. Indeed, it has already made an acquisition overseas, in London (see table).
This partnership is typical of TSP’s modus operandi. Early on, Speyer spotted the benefits of long-term relationships with wealthy financial partners, whose deep pockets could help fund big projects. In the 1980s, Speyer linked up with Equitable Life and the Crown Family of Chicago: ventures included Equitable’s headquarters in New York, and the Peachtree Sheraton Conference Centre in Atlanta.
Initially, TSP made its mark developing in the US, amassing significant holdings in New York and Chicago. In 1995, Speyer, who until then had kept a fairly low-profile, made the headlines when he bid for Rockefeller Center. Speyer’s consortium – which includes investment bank Goldman Sachs, and David Rockefeller – triumphed over a shortlist of bidders that included US property mogul Sam Zell. Last November, Speyer out-manoeuvered seven competitors to land the Chrysler Building for $220m. The Art Deco skyscraper will be completely renovated.
But it was when the New York property market hit the skids in the mid-1980s that Speyer turned his attention to Europe. TSP’s first overseas project was the Messeturm, at 70 storeys then Europe’s tallest tower. Invited in by Frankfurt Messe, after a consortium led by Deutsche Bank pulled out, Speyer teamed up with Citibank, which took equity in the project.
With the fall of the Berlin Wall in 1989 and subsequent reunification of Germany, TSP turned its attention to Berlin. It won the competition to redevelop the largest block of Friedrichstadt Passagen. The mixed office, residential and retail scheme was finished in 1996. TSP was also chosen by Sony as its partner in the development of its European headquarters in Potsdamer Platz. A massive project of 17 buildings, the first phase of five is due for completion in 2001/2.
TSP is also redeveloping the city’s central railway station, Lehrter Bahnhof. The 223,000 m2 complex will include a new state-of-the-art terminus and a new headquarters for the now-privatised rail company, Deutsche Bahn.
Despite taking some big risks – both the Messeturm and Friedrichstadt Passagen involved building large chunks speculatively – TSP has so far prospered abroad. This contrasts with the fate of the Canadian Olympia & York, which foundered building Canary Wharf in London. TSP’s risk-sharing formula helps: projects are financed with a combination of joint-venture partners, institutional equity and debt, private equity and bank borrowings. The formula varies, depending on the project.
TSP is now hoping to repeat its success in Poland. Like eastern Germany after reunification, the country combines a lack of first-class office and retail space with burgeoning demand. A Warsaw office was opened last year, and TSP’s project is already on the books, a big redevelopment in Krakow.
The UK is a more recent stamping ground. In February TSP paid £43m for 10-30 Eastbourne Terrace, opposite a major redevelopment proposed for Paddington railway station. The property is currently occupied, with an option to break the lease in 2001, and it is thought that TSP is working up plans for 18,500 m2 of commercial space on the site.
This was followed by a second purchase, the £120m leasehold of Millbank Tower. This 1960’s tower near the Tate Gallery on London’s Embankment, is probably on the cards for the TSP treatment for tired signature buildings; it has been acquired for the Travelers/TSP fund.
TSP’s latest European incursion has been a corporate one. With LBO France and the Italian finance group Carlo Acutis, it has bought a French developer, Cogedim. Formerly controlled by Paribas, Cogedim made heavy losses during the recent market crash, but has a first-class development portfolio.
According to Speyer, TSP hasn’t been specifically targeting overseas. Rather, it goes where it sees the opportunity, on a project -by- project basis. Although the bulk of its international work so far has been targeting Europe, TSP is also involved in South America. In Brazil, it teamed up with local contractor Metodo Engenharia to buy and redevelop a 36-storey office tower in Sao Paolo. Getting local expertise – through partners or hirings – is an essential element of TSP’s overseas equation.
The US company had researched the Brazilian market extensively, and felt that in 1996 Sao Paolo was positioned for growth. There had been very little quality space built during the 1980s and early 90s, but with the country’s economy stabilising, demand for space from international companies was growing. TSP found a local partner and identified a prime site that had planning approval. It had looked into funding sources, and formed a relationship with Brazilian pension group Funcef, which agreed to finance the North Tower of the project.
However, not all alliances have gone smoothly. In 1997, TSP formed a strategic partnership with The Mills Corporation, one of the US’ leading developers of super-regional “entertainment /value-oriented shopping malls”. The idea was to take Mills’ expertise in the retail and leisure markets, combined with Tishman’s overseas development savvy, and export the formula to Europe, South America and Asia. Projects in Germany, Brazil, and the UK were considered. But, a year later the link-up was quietly dropped. According to Speyer, the two companies had different conceptual approaches to international development activities and decided they would be more successful pursuing their own in this arena.
Tishman Speyer in Europe – prime investments
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Property |
Partners |
Size |
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Poland Krakow |
60,000 m2 |
offices retail hotel |
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France |
LBO France/Carlo Acutis |
40% stake in developer COGEDIM |
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Berlin Friedrichstadt Passagen |
51,580 m2 |
Offices retail and residential |
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Berlin Lehrter Bahnhof |
Deutsche Bahn |
243,860 m2 offices retail residential redevelopment |
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Berlin Sony Centre Potsdamer Platz |
Sony/Kajima |
109,140 m2 offices retail entertainment residential |
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Frankfurt Messeturm |
Citibank/Kajima |
61,700 m2 offices |
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London Millbank Tower |
Travelers |
40,000 m2 offices |
Tishman Speyer in New York – prime investments
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Property |
Partners |
Size |
Date of purchase/completion |
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Rockefeller Center |
Goldman Sachs/David Rockefeller |
574,860 m2 offices and retail in 12 buildings |
1996 |
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1301 Sixth Avenue |
Trammell Crow |
162,930 m2 offices and retail |
1989 |
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Chrysler Building Lexington Ave |
169,000 m2 offices |
1997 |
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Equitable Centre787 Seventh Ave |
Equitable Life |
142,664 m2 offices and retail |
1985 |
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620 Avenue of the Americas |
62,180 m2 offices and retail |
1996 |
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