Peso stalls Reichmann comeback

THE reclusive Canadian property developer, Paul Reichmann, must be feeling a strong sense of dj vu. A vast project in a foreign capital, complete with a landmark skyscraper and acres of prime office and retail space has come under threat from an economic crash. Only this time it is not Canary Wharf that is at stake but his family's comeback attempt in Mexico City.

The project, by Reichmann International (Mexico), is typically grand. Backed by the American financier George Soros, Mr Reichmann and his brothers Albert and Ralph plan to invest $1.5bn (£1bn) in three sites. The phased project would create about 6 million square feet of expensive office, retail, hotel and residential space in more than 30 buildings covering 28 acres. It would be Latin America's biggest property development, in a city that has the hemisphere's highest rents - up to $60 a square foot.

Chapultepec Tower, at one end of the Avenida Paseo de la Reforma, Mexico City's elegant, palm-lined central boulevard, was to rise to 42 storeys, competing with the nearby colonial fortress. Santa Fe, on a reclaimed gravel strip-mine, would be the terraced commercial and retail centre of the booming western outskirts. Alameda, near the city's historic but dilapidated heart, was to breathe new life into an area devastated by the 1985 earthquake.

For Mr Soros, it was a chance to cash in on the North American Free Trade Agreement. For the Reichmanns it was an opportunity to regain the development crown they lost when most of Olympia & York was forced into receivership by the financial collapse of Canary Wharf in 1992. From there they hoped to expand to Panama and possibly Asia.

But the bulldozers that began work clearing the Santa Fe site two months ago came to a rumbling halt when a bungled devaluation on 19 December sent the economy into free fall. The peso fell 36 per cent against the dollar in six weeks. Foreign capital dried up and domestic interest rates soared from 14 per cent to 45 per cent.

Potential tenants and purchasers pulled out of the property market, slashing rents by as much as 30 per cent. Work on Chapultepec Tower, which was scheduled to begin this month, has now been put off indefinitely.

Mr Reichmann visited the city two weeks ago to consult business and government leaders and apparently came away reassured. Company officials insist publicly that the project has only been delayed. But sources close to the company's New York office reportedly said the Reichmanns were actively considering abandoning it. "It's the story of how lightning can strike twice," said the Mexico expert at a London-based emerging markets fund. "For the Reichmanns it's Canary Wharf all over again."

Vinay Kapoor, the Mexico-based executive vice-president of Reichmann International, disagrees. Although Canary Wharf was nearly complete when London's property market crashed, the Mexico projects have barely begun, so the company is carrying little debt. The investment to date has been substantial, but is only a tiny fraction of the amount sunk into the London Docklands project. The Alameda location, much of it occupied by abandoned buildings and rubble, is to be paid for over several years.

"There will be very little growth in the economy at least in 1995," Mr Kapoor admitted. "But the first phases of our projects won't be complete for two or three years, and by then the likelihood of an economic turnaround is quite high. It's true that demand will be reduced, but so will supply."

Reichmann International is not taking any chances, however. Chapultepec Tower is being redesigned with more Mexican materials, particularly steel, and fewer imports from the US and Canada. The schedule for the Santa Fe site will probably be rejigged to bring commercial space, customised for agreed tenants, forward and push speculative retail projects back.

The government is expected to take at least half of the office space at Santa Fe. Among possible tenants mooted in the press are motor manufacturer Mercedes Benz de Mexico, Hewlett-Packard, the US computer manufacturer; and the local media giant, Grupo Televisa. None of these has been signed up yet.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions