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
PROMOTED VIDEO
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea
News
people

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Sport
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
football
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
News
i100
News
ebooksNow available in paperback
Travel
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Life and Style
tech
Sport
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Carlton Senior Appointments: Sr Wealth Manager - San Francisco - Inv AdvisoryFirm

$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager – In...

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum