In real estate development, complexity is a given, but it can take many forms. At the ULI Asia Pacific Summit in Shanghai in June, three leading developers from Asia and the United States, Vincent Lo, Thai-Ker Liu, and Larry Silverstein, discussed the impact of complexity on their own projects.
For Lo, chairman of Shui On Group, which is engaged in property development, construction, and construction materials with interests in Hong Kong and the Chinese mainland, complexity is derived from longer-term political, cultural, and financial factors.
“The first project that comes to mind when you talk about complexity is Xintiandi. Sixteen years ago when I tried to decide what to build on that site, it was not easy,” Lo said. Xintiandi is an affluent retail and entertainment destination in Shanghai.
The site was adjacent to the First Congress Hall of the Communist Party of China and featured a large number of dilapidated “stone gate” houses, known as shikumen, which the government wanted retained in order to maintain the area’s cultural heritage and ambience. The shikumen have an architectural style unique to Shanghai, but their layout and condition were not suitable for modern commercial or residential use.
Lo decided the best approach would be to preserve the exterior of the buildings and create completely new interiors. However, this approach was not without complications. “This was a very new concept for both Shanghai and China, and most people did not know what we were trying to achieve,” said Lo. “Once the decision was taken, preserving the exterior was easier said than done; the buildings were so dilapidated they could have fallen down at any time.”
Lo was also fearful of the ramifications of upsetting senior members of the Communist Party if they did not like the impact of the completed project. Shui On Group undertook a careful consultation and lobbying process to ensure the party’s cooperation, and the completed development included preservation of the First Congress Hall as the Museum of the First National Congress of the Chinese Communist Party.
To complicate the development process further, capital was scarce at the time due to the 1997 Asian currency crisis. “I went to the banks to ask for a loan. They did not say no to me—they were very kind to me—but they did not give me an answer either,” Lo said. However, Shui On Group did not have the luxury of being able to mothball the project. It needed to complete the renovation by the middle of 2001 to coincide with both the Asia-Pacific Economic Cooperation meeting in Shanghai and the 80th anniversary of the Communist Party in China.
Lo resorted to using his own money to finance the development. “I asked my financial director one question: ‘If the scheme falls apart will I go bankrupt?’ He said no, so I said, ‘Then go ahead.’”
Lo said he thinks the project benefited from the challenges. “We put in so much time and effort. Every small brick we put back on the buildings involved importing adhesive from Germany to ensure it stayed in place. In fact, 80 percent of the buildings you see in Xintiandi today are new-build, but they look genuine because we put so much effort into them.”
Whereas Lo had to deal with complexity at a large-scale development level, Thai-Ker challenges encompassed a much wider geographical area.
As chief architect for the Housing Development Board in Singapore from 1969 to 1989, he oversaw the completion of 500,000 housing units, creating new homes for 1.3 million people. As chief planner for Singapore’s Urban Redevelopment Authority from 1989 to 1992, he revised the Singapore Concept Plan, establishing the vision for future urban development.
For Thai-Ker, now chairman of the Centre for Liveable Cities, the challenges of master planning development in Singapore came from the need to house a large number of people in a relatively small geographical area. In 1969, when he began at the Housing Development Board, he wanted to plan Singapore’s housing around the “new towns” principle that was prevalent in the U.K. and other countries—self-contained new communities with access to a full range of amenities, including schools, health care, retail businesses, offices, and entertainment venues. “We were not just solving current housing supply issues; we were creating communities,” Thai-Ker said.
In the U.K., the largest new town had housed only 69,000 people, but Thai-Ker needed to plan for 250,000, so he turned to high-rise and high-density development to fulfill the city-state’s requirements. High-rise development was still a new concept in Singapore at that time. “We have become immune to the issue of large buildings in recent years,” Thai-Ker said. “When I was at school in Singapore in the 1940s and 1950s, a local developer built a seven-story hotel and it made the news as it was the tallest building in Singapore.”
Thai-Ker was aware of the challenges that high-rise development brings. “When you deal with high-rise buildings, you are dealing with elephants on a dance floor: you don’t let them dance rock ’n’ roll,” he said. When planning started in Singapore, the high-rise concept was unpopular in some countries, including the U.K., which was experiencing social problems associated with public housing towers.
Though the revision of the Singapore Concept Plan exposed Thai-Ker to even greater complexity, his vision of the role of the public sector remained clear. “The role of a city government is to create a perfectly functioning and beautiful stage in order to provide the opportunity for the citizens to act out the most exciting drama,” he said.
Planners need to “make the cities work before you put in the buildings,” with an emphasis on delivering the required infrastructure, Thai-Ker said. He also warned of the dangers of urban lock-in, noting that if a city’s infrastructure, such as its network of roads, is planned incorrectly, it is very hard to change later, even if the resources are available.
However Thai-Ker was clear that cities benefit from the complexities that their planners face. “There is a wide range of issues to consider in order to make people feel that they live in a city in a comfortable and livable way, with a good environment and functionality,” he said. “That makes the job of a planner very complex, but it makes a city’s life very simple.”
Other complexities go beyond the technical or political. Larry Silverstein, president and CEO of Silverstein Properties in New York City, which acquired the World Trade Center in New York only six weeks before the 9/11 attacks, explained both the emotional and practical complexities of redeveloping such a sensitive site.
“We suddenly found ourselves with 18 acres [7.2 ha] of prime real estate in lower Manhattan. It became obvious to me quickly that somehow the World Trade Center had to be replaced,” Silverstein said. “We could not just let the site sit there and lie fallow.” However, he was also acutely aware of the extremely sensitive nature of a site where more than 2,500 people had lost their lives. “Talking to the families, it became a question of how do you build on their sacred land,” Silverstein said. “It became an enormously complex emotional issue.”
Under the terms of the 99-year lease he had taken in July 2001, Silverstein Properties at the time was paying $100 million (76 million euros) a year in ground rent for a property that was generating no income. Complex discussions and negotiations with government and insurance companies would take years to resolve. “The only way we were going to get something going was by building 7 World Trade Center, which is a building I owned prior to the acquisition of the World Trade Center site,” he said. “When we had the 9/11 experience, it became obvious to me instantly that the building code of the city of New York was sadly lacking in a number of areas,” he said.
Construction of the new 7 World Trade Center began in 2002 and was completed in 2006. The building, financed for the next 40 years, is fully leased to companies such as ABN AMRO, Moody’s, the New York Academy of Sciences, and Silverstein Properties itself.