Copyright: David Lawson - Property Week 1997Home page
Exactly a decade ago, O&Y sparked suggestions of a wave of trans-Atlantic investment by starting Canary Wharf. Trizec has finally taken the second step. Until last week, the giant Toronto-based company, which racked up 25m dollar profits last year on 6bn dollars of assets, had little interest outside North America except in 'emerging markets' in central Europe. Now the UK is firmly in its sights.
'This is undoubtedly a major change of strategy,' says Philip Jones, Trizec Hahn Europe managing director. He pointed out that the company was sitting on more than a billion dollars of cash which could gear up to four times that amount ploughed back into development. 'No deal is too big,' he says.
Bock is contributing not just a share of No 1 Poultry, the controversial City office block so hated by Prince Charles, but an established development team and an intimate knowledge of the UK through his company, Advanta. Retail rather than offices appear the likely target. 'But it is too early to say where this will go, but the partnership shows a major commitment to property outside North America,' says Jones, a Brit who joined the company from Broadwell land to run its Brandenburg Park development in Berlin.
The move is rich in irony for both the UK and Reichmann. Trizec is a prodigal making a spectacular return. It can even claim to be responsible for Canary Wharf. Twenty years ago the company, set up by legendary US developer William Zeckendorf, was rescued by British investors Eagle Star and Second Covent Garden. It was later run as a partnership between English Property Company and the Bronfmans, a rival to the Reichmanns as North America's premier property family.
Reichmann had a 10% stake,a connection which reversed the takeover trail and saw him cross the Atlantic to acquire EPC. The company was later sold on to MEPC - producing landmark London sites like Alban Gate and Petershill - but the UK connection had been established. From this came the decision to develop Canary Wharf. It was even run by former EPC executive Gerald Rothman.
While O&Y crashed, Trizec survived. Last November another Canadian company, Horsham, run by Hungarian emigre Peter Munk bought out the Bronfmans, and merged interests, renaming the group Trizec Hahn. This linked the vast cashflow of Munk's Barrick gold mines with what he called a 'well-managed real estate company with no cash'. This sparked a 750m dollar frenzy of office-buying in the US but also created the European connection through Horsham's 600-acre Brandenburg Business Park. It has also linked with Budapest developer Polus to create the first shopping centre in Hungary, anchored by a Tesco store.
This kind of joint venture has been the preferred pattern in Europe because Trizec sees itself as providing financial muscle to match local entrepreneurial flair. It has also set standards of 20% return on capital. Bock may have different ideas for a more mature economy like the UK, where those returns would be difficult.
His initial role is likely to involve sorting out schemes like the 600-acre Berlin business park. The German operation have been through a series of executives and taken five years to get off the ground. McDonalds and Ford are in place but Coca-Cola is only now building on the site. Bock has the grit - shown by ousting Tiny Rowland from Lonrho before selling out last year. But he also has a track record with Advanta which includes developments like the Aldon Hotel, Berlin, rebuilding the Taschenbergpalais[CORRECT] in Dresden and Hungary's first post-war luxury hotel, the Kempinski, in Budapest.
Jones says Europe is appealing because investment values are higher than development costs. 'You can start with the prospect of a profit, unlike much of the US, where the reverse is true,' he says. The UK has additional attractions because of the 'surprising self-confidence in spite of re-election uncertainty.'