Alex Catalano talks to the American developer fronting the Canary Wharf proposals — the first interview he has given in this country to a property journal.
G Ware Travelstead is the American developer whose plans for a financial megacentre at Canary Wharf have set the cat among the City pigeons.
His straight-talking style contrasts sharply with the low-key approach of most British developers, who must secretly envy his ability to call the shots as he sees them.
“The largest developers in the Square Mile have sat with me and said: ‘Publicly we are going to go against you because we think you’re going to hurt our property values. Privately, thank you very much because you’ve caused the City Corporation to panic,’” he says.
So far, the City institutions and developers have been publicly hedging their bets on Canary Wharf. No one has come forth to say they will be going to Docklands, and the only firm commitments are from two members of the consortium developing Canaray Wharf: Credit Suisse-First Boston and Morgan Stanley will each be taking about 350,000 sq ft.
But behind the scenes are 15 users taking 4m sq ft, Mr Travelstead declares. “I guess that we will be announcing that two of the four clearing banks are going to have front-office operations in Canary Wharf. Some of our users are very sensitive,” he says. “Some … couldn’t even talk to us officially until the Bank of England said in October it’s OK to go outside the City.”
The consortium will be putting up only about a third of the 10m sq ft proposed, which leaves plenty of scope for others. “Eleven UK developers have come to us with serious proposals,” states Mr Travelstead, “and that’s all happened within the last two months. Before that no one would talk to us.”
In his view, developers are being pushed into it by their clients. “Total occupancy costs will be less than £30 per sq ft — total”,
Mr Travelstead’s confidence in the future extends to naming his contractors. On Monday, he intends to announce the five UK firms which, along with the American construction giant Bechtel, will be building Canary Wharf.
The consortium will be spending £2bn in total; £400m on infrastructure, and the rest to develop its share of the floorspace. According to Mr Travelstead, the infrastructure will be financed internally, while the buildings will be funded in the usual manner through joint ventures or forward sales. “The big hurdle is getting the infrastructure,” he comments.
His next hurdle is “getting the Docklands Light Railway Bill through … I’m going to take on the City about their objections,” Mr Travelstead says. “They come out and say, ‘Oh, we’re not against Canary Wharf. We just don’t think it should come into Bank Station.’ Well, if Bank Station is in such bad shape, it’s been in bad shape for 10 years. Where’s the City Corporation been for the last 10 years in getting Bank Station improved?”
Mr Travelstead is not a big fan of the City Corporation, nor is he overly enamoured of the British planning system. “For all the bureaucracy that exists in the United States, there is no comparison. The ways that come about to keep projects from taking place in this country are myriad,” he declares.
Indeed, Canary Wharf was the solution to four years’ “frustrating” search for a new home for CS-FB, says Mr Travelstead. Bishopgate, the LEP site, Billingsgate — he looked at them all and they “didn’t work”.
The London Docklands Enterprise Zone, with its relaxed planning regime and capital allowances, provided the answer. “The most important to us was not that you knew you could get planning permission, but that you knew whether you had a project within four to five months,” he says.
However, Mr Travelstead cannot have envisaged the furore his scheme would generate, nor the chauvinistic tone of some of his critics. “I do find anti-Americanism exists,” he says. “I find it puzzling, because when UK developers came to New York starting eight or nine years ago, they were welcomed.
“I’ve never seen so many people so concerned to save us from ourselves.”
In the rough-and-tumble world of New York City real estate, G Ware Travelstead is not only a relative newcomer but something of a maverick. But with the financial clout of First Boston Corporation behind him, he is steering First Boston Real Estate into the big league.
Until he teamed up with First Boston, most of Mr Travelstead’s work was outside New York.
After taking a degree in architecture at Rensselaer Polytechnic, he went into the family’s general contracting business. It was a short stint. He and his father agreed to part after a year and a half. “He said, ‘I’d rather have a son than an employee’ and I said, ‘I’d rather have a father than an employer,’” Mr Travelstead recalls.
So Mr Travelstead went to work for McCormack, the US spice company which also had a property subsidiary. He left it in 1969 to set up his own interior design and space planning business, Total Concept, which he still heads.
Wall St one-off
The link-up with First Boston dates back to late 1977, when some of the company’s directors heard Mr Travelstead and his wife giving a presentation in Chicago and invited him back to New York to sort out their own accommodation problems. “One thing led to another and I have been associated with them ever since.”
His arrangement with First Boston is an unusual one. “I’m told it’s unique on Wall Street,” he says. Although he has been the chairman of First Boston Real Estate since it was formed in 1979, he is not an employee of the company.
“Back in the late 1970s they revealed that we would be doing partnership deals together and they could not do that if I were an employee. Nor would I ever have become an employee anyway … it’s just not my style.”
Thus he has a personal stake in all the projects with FBRE. “All of our equity holdings are on the basis that we are roughly 50-50 partners.” His is a direct interest in Canary Wharf: “There are four owners of the development, Credit Suisse-FB, Morgan Stanley, First Boston and myself.”
The first joint project was Tower 49, a 620,000-sq ft building at 48th and 49th Streets off Fifth Avenue, half of which is now occupied by First Boston.
This was followed by 575 Fifth Avenue, originally conceived as the headquarters for the nearby diamond trade. But then the diamond business collapsed and Travelstead and FBRE were faced with a tenantless 525,000-sq ft building. “It was a tough rental market when we brought that one on-stream,” he says. Last year, he pulled off a coup getting French cosmetics firm Cosmair to take 310,000 sq ft for $300m, and now says most of the remaining office space is let.
Tower 49 and 575 Fifth Avenue are the only two of FBRE’s projects that are up and running. A third, the $165m office extension and renovation to the Biltmore Hotel in Los Angeles, is under construction, and the fourth, a 450,000-sq ft scheme at the glamorous location of 56th and Fifth Avenue is about to get the final all-clear from the city, Mr Travelstead says.
Mr Travelstead and FBRE acquired the 56th and Fifth site last January, setting a new record land price for New York of $4,000 per sq ft. However, their plans for a hotel and office complex were soon bogged down in controversy over the demolition of two buildings on the site, and the “landmarking” of glass windows, reputedly by Lalique, in one of them.
Grand Central skyscraper
A satisfactory scheme has now been agreed with the City of New York, and Mr Travelstead says there are nine hotel operators bidding to come into the project.
In addition, Mr Travelstead has two other New York projects in the pipeline. At 383 Madison Avenue, he put together the former Manhattan Savings Bank and unused air rights over Grand Central Station to come up with a 1.6m-sq ft scheme. Here, the air rights which Mr Travelstead bought from the Penn Central Corporation are crucial, and currently Penn Central’s transfer of them is being questioned by the City of New York.
The other site is 222 Broadway, the 31-storey former headquarters of Western Electric, which Mr Travelstead and FBRE bought for a reported $110m about two years ago. This has 731,000 sq ft and plans will be announced in a couple of months, Mr Travelstead says.
But at the moment, it is Canary Wharf that is taking up Ware Travelstead’s time. This is the big one for him. “I won’t have another opportunity like this and I don’t want to go down as the person who blew it.”
