Near the end of a meeting with the European team of Tishman Speyer, team leader Michael Spies nods in agreement as Eric Adler, head of acquisitions and asset strategy, says: “It is not eat-what-you-kill here.”
Adler, a former Morgan Stanley pro, was eager to draw a distinction between his new firm's culture and the reward structure often found at other Wall Street firms.
During an hour-and-a-half interview with most of the senior management of Tishman Speyer's pan-European team, the word “team” crops up a dozen times.
Spies and team have recently grown both by way of headcount and prominence in the European market. Several key professionals in the firm are new hires. In May, the firm closed its second European value added fund, Tishman Speyer European Real Estate Venture VI, on just over €1billion ($1.5 billion) in commitments. It has also progressed to its second core office fund and is investing an open-ended vehicle.
Though the firm has attracted considerable attention in the US for some mega-deals, some recent European transactions have got significant column inches too. One notable example of a recent large transaction was the £650 million (€905 million; $1.3 billion) sale of Citypoint tower in London's financial district, which, when it was completed in April, briefly became Britain's largest single-asset deal (it was quickly overtaken by the sale of the HSBC headquarters in Canary Wharf for £1.1 billion). Tishman Speyer had acquired the building with partners Schroders, SITQ, and UBS just over a year earlier for a reported £520 million.
The team hopes to see successes like this repeated across Europe, and are quick to stress the tight interaction they maintain across borders.
Spies and his team come across as a close, loyal bunch that prefer to play cards close to the chest rather than chest-beat. The low-profile culture may have begun with Tishman Speyer's co-founder, Jerry Speyer. In an industry filled with selfpromoters, it was notable when, for example, in an interview with the Financial Times newspaper in March, Speyer gave “no comment” to a number of innocuous questions, including which US markets he thought were due for rent rises in the coming months.
Press shyness aside, a recent fall day found the heads Tishman's UK, France, Spain and Italy offices gathered in London for one of their regular get-togethers. After swapping ideas on investment opportunities and occupiers' demands, the six headed to a restaurant in the City area of Spitalfields to catch up more informally, sans journalist.
The senior partners of Tishman Speyer's European operations include a mix of newcomers and older hands. Leading the pack is Michael Spies, a 20-year US veteran of the European real estate scene. This one-time executive vice president of the New York City Public Development Corporation joined Tishman Speyer in 1989 and spearheaded the firm's push into Europe, starting with a stint in Germany between 1990 and 1994. He then moved the firm into fresh markets – first the UK, followed by France, Spain and then Poland. Adler, who oversees strategy along with Spies, is a much more recent acquisition. He joined in 2005 having served Morgan Stanley Real Estate Funds as head of the firm's activities in Germany, France, Italy and Spain. Mark Kingston, head of the UK business, is one of the longest-serving real estate professionals at the firm. He joined in 1999 and worked for many years as European general legal counsel before becoming UK managing director in May 2005. Bernard Penaud, head of France, and Raimondo Amabile, head of southern and eastern Europe, were recruited within the past two years.
Penaud worked with Adler in the mid 1990s at French property group Unibail, while Amabile also shares a working past with Adler having worked with him at Morgan Stanley. “There is a feeling of familiarity between us,” says Adler.
The most recent recruit is Gilles Bonnier, managing director and chief financial officer, who joined in October from France's Foncière des Régions.
Of the team that has been assembled in Europe, Spies says: “There was no European property industry even 10 years ago. The reality is that the first evolution of the whole industry is represented in this room. The whole idea is that we all have specific knowledge of individual markets but also a lot of understanding of the dynamics across Europe, which is really what you want.”
Compared with Tishman Speyer's US operations, the firm's European business is clearly on a smaller scale. The majority of the company's 1,000-plus employees work in North America, where the biggest deals take place. For example, earlier this year Tishman Speyer and its partner Lehman Brothers made waves with the $22 billion acquisition of residential property company, Archstone-Smith. In Manhattan's far West Side, the firm has been competing for a huge development project. Tishman Speyer's blueprint for the site reportedly includes a new headquarters for Morgan Stanley. More recently still, the firm hit the headlines with an initiative to “green” the iconic Rockefeller Center in New York, which it repositioned in 1996 and now owns.
“There was no European property industry even 10 years ago. The reality is that the first evolution of the whole industry is represented in this room. The whole idea is that we all have specific knowledge of individual markets but also a lot of understanding of the dynamics across Europe, which is really what you want.”
Tishman Speyer's international presence doesn't yet match its footprint in the US, but the firm has longstanding ambitions beyond its home borders, and its non-US activities are accelerating. More than a quarter of the firm's activities have been outside North America, according to Spies. It is a little-known fact that Tishman Speyer has been active for 10 years in Brazil, where it employs 70 people. More recently, it has made inroads into India and China where it employs 40 and 30 respectively.
Europe is the firm's most mature international market and the site of more than €9 billion worth of Tishman Speyer property deals over the past 20 years. What's more, there are 170 people employed in Europe. “The whole move internationally is not something that is done overnight unless you do it through a franchise,” says Spies. “We are 20 years into a global platform that is integrated geographically.”
Tishman Speyer began investing in Europe through its global funds, but now the firm has evolved to manage a number of European-focused vehicles.
Tishman Speyer's European adventure started not in London, where most US firms launch the European platform, but in Frankfurt. In 1989, amid the general euphoria surrounding the fall of the Berlin Wall, Tishman Speyer announced its intention to develop Europe's tallest office building, the Messeturm (Trade Fair Tower). It was a project to be completed near to Frankfurt's central railway station and would rise 256.5 meters above ground. It took the crown as Europe's tallest office structure from Montparnasse Tower in Paris. The project was controversial because of the lack of involvement by German companies. By 1995, though, the building was completed and fully leased. Tishman Speyer next turned its attention to Berlin. In an article published by the Wall Street Journal at the time, Speyer, the son of a Jewish refugee from Germany, was blunt in describing his firm's pioneer status in the country: “The Germans don't even have a word for development. The idea of an investor also acting as the builder doesn't exist.”
Of Speyer's decision to enter Europe by way of Germany, Spies says: “The UK was already competitive and maybe too obvious. We saw more of an opportunity in Germany.”
The firm eventually came to the UK in 1994 when the market was in the middle of a major correction. Britain's disastrous membership of the Exchange Rate Mechanism had ended abruptly two years earlier and interest rates fell almost overnight from 15 percent to 6 percent. The British economy then started to gain in confidence, leading Tishman Speyer to make an attempt to buy London's new business office complex, Canary Wharf, in 1995. Canary Wharf had risen from the ashes after its developers, Paul Reichmann's Olympia and York Canary Wharf, went into administration in 1992. Tishman Speyer, however, was thwarted in its ambition to own a large part of the Docklands, throwing in the towel when Prince Al Waleed bin Talal bin Abdulaziz al Saud teamed with Reichmann to help him buy his company back.
Today Canary Wharf is London's highly successful new financial district. Spies says: “Looking back, life is full of regrets, but Paul Reichmann got it back. He was the only one who could truly understand it and he was the logical buyer.”
Since the successful Messeturm project of the late 1980s, Tishman Speyer Europe has been involved in a mixture of developments, primary acquisitions and re-positionings. Like many firms, it invests in these assets through multiple products, but the central strategy is the same – analysing a property and the market fundamentals affecting it. Adler says: “We are very asset-focused. Most of what we do is invest in assets with specific needs.”
UK head Kingston puts it another way. “Our tag line is ‘see it first’,” he says.
What Tishman saw when Citypoint in London came on the market in 2006 was an opportunity to buy a huge tower in a leading financial district where there were only seven towers in total. Moreoever, it saw an opportunity to grow rents. Part of its advantage was having relationships with some of the building's tenants.
Because of a perceived leasing risk, as well as the level of gearing used in the deal, Tishman Speyer led a consortium to acquire the multi-let Citypoint building in early 2006 on behalf of its value-added fund. The firm spent six months negotiating with the vendor in a complex transaction that involved a trio of sellers. It was at a time when London was beginning to see some heat in the market, but Tishman negotiated the £520 million purchase at a cap rate of close to 6 percent. “Clearly a good price,” says Kingston.
Tishman Speyer drew up a five-year business plan for the building that included a re-working of tenants. The firm was convinced that rents could be grown for the simple reason that there were not that many towers in London's financial city center. Spies and team were proved right, and they didn't have to wait five years to celebrate this. The building was sold in April this year for around £130 million more than the buyers paid for it, according to some reports. The fund had exited its investment little over a year after acquiring it. “The exit was ahead of the business plan and the price was probably ahead of the business plan too,” says Kingston.
The firm's strategy in London has generally been to go for larger buildings out of a belief that these properties are where international occupiers see their businesses growing into. Though Kingston says the company has bid in Birmingham, Manchester and Edinburgh, it has not bought in any market to date other than London.
Like so many private equity real estate firms, Tishman Speyer has been a net seller in many markets of late. It sold around £1 billion of property in the UK earlier this year, and the firm has also been actively selling in Paris. Penaud, Tishman's head of France, confirms the company was a net seller in the first six months of the year, but this may change given the new climate that the credit crunch has brought with it. As potentially more opportunities come to the surface, the firm may be a net buyer again, he says. “We feel that a new time has come to invest. This is because some very aggressive buyers have disappeared a little bit. But there is something else: The French market is less exposed to the financial market than London. That means that people consider Paris is not the worst bet you can make in a troubled situation around Europe.”
Expect news from Tishman Speyer in France if the economies of Europe take a hit any time soon.
Tishman Speyer snapshotTishman Speyer has invested on behalf of third parties – including institutions, high net worth individuals, and corporations -for close to 30 years through co-investments beginning in 1978 and through a series of privately held funds launched in 1997. Tishman Speyer co-invests its own capital alongside the investors in each of its funds. To date, the firm has raised $5.6 billion of equity and has made 235 investments worth in excess of €37 billion. A list of Tishman Speyer funds is below:
|Fund I||$850m||1997||closed||value added||Global|
|Fund III||$200m||1999||closed||value added||Global|
|Fund IV||$350m||2000||closed||value added||Global|
|U.S Fund V International Fund V||$300m $300m||2001 2001||closed closed||value added value added||USEurope, Latin America|
|US Fund VI||$1.1bn||2004||closed||value added||US|
|India Fund||INR 15.7bn||2006||closed||opportunistic||India|
|China||Targeting $1 bn||2006||closed||opportunistic||China|
|US Fund VII||Targeting $2bn||2007||closed||value added||US|