Latin CEO / March-April 2002
By Larry Luxner
Seven months after the destruction of New York's World Trade Center, one might suspect that flashy, ostentatious office towers which dwarf everything else around them have become about as popular as all-inclusive vacation packages to Afghanistan.
Tell that to Arturo Aispuro, vice-president of development at REISO Services S.A. de C.V., the Mexican subsidiary of Reichmann International. The Canadian real-estate giant -- famous for glitzy projects ranging from Toronto's First Canadian Place to London's Canary Wharf -- is now racing to finish Latin America's tallest structure in the heart of Mexico City.
When completed in December, the 55-story Torre Mayor will poke 225 meters (738 feet) into the sky. That'll eclipse by only one meter the twin towers of Venezuela's Parque Central, which currently holds the record.
"The height of our building is certainly its most impressive characteristic, but for us it's not the most important," said Aispuro, who's managing the $250 million project for Reichmann. "We're trying to create a new symbol for Mexico City, and we truly believe that the city has made the right decision in trying to stop flight to the suburbs and bring business back to the center."
Aispuro, interviewed during a tour of the construction site, told LatinCEO that Torre Mayor began as a 50-50 venture between Reichmann and local construction conglomerate ICA.
"We made the decision to build Torre Mayor back in 1993, when the Mexican economy was doing well," he said, noting that the original investors paid $18 million for the parcel of land along Paseo de la Reforma -- one of Mexico City's leading boulevards. "We suspended the project after the peso crisis in December 1994, a delay that cost us $15-20 million. Then in 1997, when the economy was growing again, we decided to restart it."
In the interim, however, ICA ran into financial problems, and sold its interest in the project to Reichmann for an undisclosed amount -- leaving Torre Mayor as one of the very few 100% foreign-owned real-estate ventures in Mexico. Aispuro says it'll take 10 to 15 years for Reichmann to break even on its $210 million investment (that doesn't include a projected $40 million in tenant-financed improvements).
When it finishes Torre Mayor, Reichmann will devote its attention to two more projects: Centro Fiesta Alameda, a $300 million joint venture with the Mexico City government that will include a 250-room hotel as well as offices and shops, and an office complex in the city's up-and-coming Santa Fe district.
"We are absolutely confident that the economy is coming back again," said the executive. "Reforma is the most important corridor in Mexico City. This location in particular is the heart of the city. We're close to advanced transportation systems and two or three main subway stations."
At the moment, over 1,000 workers are engaged in the construction of Torre Mayor, where steel structure erection and welding has reached the 30th floor of the eventual 55-story tower. Metal floor decking is now being installed at level 24, and concrete slabs have been poured onto the metal decking at level 22.
Torre Mayor -- whose official website offers netsurfers a camera view of the construction site that refreshes itself every 60 seconds -- is slightly ahead of schedule, with progress now averaging about one floor a week.
So far, the project has two confirmed tenants: Deloitte Consulting, which will lease 10,000 square meters (107,600 square feet) on the first nine floors, and Marsh & McLennan Companies Inc., which is leasing 8,000 square meters (8,600 square feet). Together, those two multinationals represent 25% of the building's usable space.
"The financial market is doing quite well right now," said the 42-year-old Aispuro, who's an architect by profession. "We have leased a quarter of the building with just two companies. We expect to fill it up completely within two and a half to three years."
The Reichmann executive says he's negotiating with at least two more U.S. multinationals and three large Mexican companies to lease space in Torre Mayor.
"We are trying obviously to attract Mexican companies, but it's pretty difficult because their mentality is totally different. We need to convince them that this is a high-quality building," he says. "This is the first building in Mexico City that really offers world-class quality. But in Mexico, most developers build the building and then sell it, so they don't have to worry about maintenance. In Reichmann's case, we own the building, so we'll be responsible for maintenance. That makes a really big difference, and that's why we care about quality and safety issues. And the best quality has a cost."
That cost ranges between $25 and $34 per square meter, compared to around $40 per square meter in downtown Miami.
"Right now you can find a pretty good-quality building in Mexico City for $22-23 a square meter," says Aispuro. "We offer more quality, but fundamentally more productive space. We were talking a year ago with Citibank, and explained that with the same floor they would be saving 15-25% of their current expenses. The floors are almost free of columns. Space will be more efficient, and with more efficency they'd be more productive."
While Citibank has since decided to go elsewhere, other multinationals will undoubtedly opt to lease space in Torre Mayor. Aispuro predicts that 60-65% of the building's 25 or so expected tenants will be non-Mexican companies, and that 7,000 people will eventually be working in the building every day.
To be sure, not everybody is awestruck over the steel-and-glass skyscraper rising in their midst.
"The Reichmann tower is very nice, but it's just another office building," scoffs José Gamboa de Buen, general director of Grupo Dahnos, which is constructing a $300 million hotel-office-residential complex a few blocks away from Torre Mayor. "Our development is a mixed-use development like the ones you see in Chicago, New York and London. It will be a piece of the city."
Francisco Ruíz Herrera, director-general of strategy and tourism development at Setur, Mexico City's tourism secretariat, has his own concerns. "When you build towers so big, it has a positive impact, but it also puts demand on water, parking and traffic," he said. "The government has to resolve these problems. We will have to widen the streets around Torre Mayor and maybe build a few bridges."
Yet most people say Torre Mayor will only benefit Mexico City, which is Latin America's largest metropolis and ranks as the second-biggest metropolis on Earth after Tokyo.
"I think it's very good for Mexico City to have buildings like these," says Francisco Cordero, marketing director at Jones Lang LaSalle, a local real-estate firm that's developing its own office-mixed use project at Reforma 115. "Torre Mayor is going to fill up pretty quickly, and the best thing about it is that it's bringing Reforma back to life. It's going to be a landmark."
Once Torre Mayor is finished, it'll likely be Mexico City's tallest skyscraper for a long time. According to Aispuar, the city decided to reduce the maximum height of buildings along Reforma in 1997, but grandfathered the Torre Mayor project since it was already in the planning stages.
About the only things, other than a repeat of the 1994 peso crash, that could really derail the project at this point are the potential threats of earthquakes and terrorism. Aispuro says he's prepared to deal with the first.
"The structure of this building was designed to exceed the Mexican code and several international codes, like the ones in California," says Aispuro. "We've incorporated new shock absorbers that would be able to withstand a quake similar to the one that devastated Mexico City in 1985."
With regard to terrorism, Aispuro says he's not too worried -- even in the post 9/11 world.
"We have assured our potential clients that we are not on Osama bin Laden's list," he wisecracks, then gets serious. "One of the companies that suffered the most in the World Trade Center attack was Marsh, and they want to be at the top of Torre Mayor. My impression is they want to show the world they're not afraid."