To win approval to redevelop the Hudson Yards, the Related Companies had to defeat a number of competing proposals from some of the city’s biggest development companies.
But the also-rans aren’t hurting for development opportunities. Compared to some projects these developers are working on in Asia, the Hudson Yards seems decidedly small-scale.
For instance, Tishman Speyer is pursuing Tellapur Integrated Township, a $2.6 billion project on 400 acres in Hyderabad, India, with over 20 million square feet of developed space. Another firm, Gale International, is undertaking a $35 billion, 100-million-square-foot mixed-use development in South Korea, 40 miles south of Seoul. Promotional materials call that project “the largest private development project ever undertaken anywhere in the world.”
Tishman and Gale are not the only New York-based developers working far from home. With development in New York City and across America slowing down because of the economy and the credit squeeze, many firms are turning their attention toward Asia.
“We’re looking at a lot of the emerging world. That happens to be where [the growth] is located right now,” said Donald Trump Jr., whose firm has been pursuing projects in South Korea and Dubai for several years. “When India’s saying, ‘We’re really disappointed this year. We’re only going to have 7 percent growth,’ I’m thinking, ‘Are you kidding me? What America would do for 7 percent growth right now.’ “
Presently, Trump is scouting and negotiating projects in Bangkok, Phuket (in southern Thailand), Vietnam, China and India.
Of course, doing business in Asia has its challenges. To finance their mega-projects, American firms are drawing on capital from foreign banks, in the process exposing themselves to currency fluctuations and local regulations. Development executives said they’ve had to borrow carefully.
For its Korean project, where Gale and its partners are essentially building a 1,500-acre city on reclaimed land where 75,000 people will live and 300,000 will work, Taylor Whitman, vice president of business development for Gale International, said his group has taken out four loans from a consortium of 12 Korean banks. The latest borrowing was $2.5 billion in December.
Elad Properties, on the other hand, used a lot of its existing equity along with “reasonable financing” for its two Singapore projects, which required investments of $2.2 billion and $450 million, respectively, said Miki Naftali, CEO and president of the company. He also said Elad has a trading room at its New York headquarters where a team of analysts work every day to hedge against currency fluctuations.
Working overseas also involves moving New York staff.
Trump believes the majority, perhaps as much as 75 percent, of his family firm’s new developments will be in the emerging world. “I see incredible growth there,” he said, adding that “there’s no question [we] will ultimately move very large numbers of people” to Asia, a number “definitely” measured in the hundreds.
Gale’s Whitman estimates that the vast majority of his firm’s full-time staff is already abroad. Gale has 40 people in Boston, 15 in New York and about 100 scattered between its two offices in South Korea, so that two-thirds of the firm’s staff is stationed halfway around the world. Some are Korean-Americans or other expatriates who relocated to Korea for this project; however, Whitman said most of Gale’s Korean staff members are local hires.
For his part, Naftali said about 20 percent of Elad’s manpower and assets are already deployed in Asia. He estimated that that figure might rise slightly.
“It’s not that we are moving our entire attention to Asia,” Naftali noted.
Besides Singapore, where Elad is building two luxury 38-story residential towers and a 1.6 million-square-foot mix of office space, high-end hotels, retail and residential apartments, the firm is building 3,500 residential units in the city of Jinan, north of Beijing. Unlike many developments by New York firms, which target high earners, that project is aimed at middle-class buyers.
Like most American developers in Asia, Elad is undertaking these developments through a joint venture with foreign partners. Teaming up with local development players isn’t just a savvy way of navigating local mores. In some countries (India and South Korea, for instance), the law essentially requires many types of foreign companies doing business here to have a local partner.
“The government has to be 100 percent behind it,” noted Whitman, referring to Gale’s project in Songdo, South Korea. “There’s so much red tape with a single building; imagine 120 buildings.”
Still, as large as these projects may be, many market watchers consider the
approach of American firms into Asia to be cautious. “We’ve been seeing U.S. developers come and scout the Indian market over the last 24 to 36 months,” said Manish Kashyap, managing director of transaction services for CB Richard Ellis India. “[But] we’ve seen only a couple of them commit themselves to actual projects in India.”
Still, Kashyap and others believe that
it’s only a matter of time before more North American developers break Indian ground.
“We do need them to come and improve the depth of the market and improve the quality of the product,” he said. “Everyone sees the American, the Singaporean, and the European international developers produce a product that is superior to most Indian developers. [They] will lift the rest of the market.”