Tishman International’s Levy

Los Angeles-based Tishman International Cos. has built, developed and managed more than 40 million square feet of assets, including real estate projects throughout the United States. The group is now active in Europe, and in the past six years has formed a concentration in the Eastern and Central regions, with a concentration in Bulgaria.

After establishing a European headquarters in London in 1986, the firm has developed and managed more than six million square feet of office and commercial space in the United Kingdom, and has provided acquisition and management expertise for millions of square feet of real estate assets in Europe.

As the rest of the world looks to China and India as growth engines, company Chairman Alan Levy tells GlobeSt.com that companies looking for deals and long-term stability should focus instead on emerging markets such as Bulgaria, Poland, the Czech Republic and Hungary.

GlobeSt.com: How did you get your start in Europe?

Levy: We had an office in Europe since the early 1980s, with a headquarters in London. We did some development work in the United Kingdom. Then, after the Velvet Revolution in the Czech Republic, we were approached by a supermarket chain building new shopping centers there – this was our first foray into Eastern Europe.

Then six years or so ago we got a call from some bankers who had been contacted by the deputy minister of finance for Bulgaria, looking for developers to come in and re-gentrify the country. We went over there and saw the market was just starting to really mature, with a lot of residential in the Black Sea resort area – though it may have too much too soon.

GlobeSt.com: Did you see demand in the Eastern and Central European markets?

Levy: The need for office and retail space in Bulgaria, following the fall of Communism, was that there were no offices at all. Western companies that were coming in were renting hotel rooms and using them as offices, a lot of international companies were doing that.

With a German company called Lindner, we formed a joint venture for residential housing and other development. We started an office and industrial project adjacent to Sofia Airport. We’ve done airport development before, building a lot around the Los Angeles International Airport, and we understand that multinationals like to have offices around an airport.

We bought a parcel with two-million-square-foot buildable square feet and started focusing on that development. In doing so, we split with Linder and the residential portion. Later, GE Real Estate wanted a joint venture, and they took 50%, and that became the Sofia Airport Center project.

GlobeSt.com: What is the status of the project? 

Levy: So far, we’ve got a 350,000-square-foot logistics center that’s fully leased. We’re under construction on a 300,000-square-foot office building that should be finished by early summer. There’s several tenants involved in negotiation, a lot of tenants want to kick the bricks. It would be fair to say that if not for the financial crisis, we would be definitely be further along. There’s definitely been a slowdown, and some overbuilding of commercial space. But we have, we think, the best project, built by Western standards.

GlobeSt.com: Are there any pitfalls in dealing with these emerging countries?

Levy: Corruption is still around in dealing with Eastern Europe. They’re trying to curb it in Bulgaria and Romania, but it’s still present at various government levels and businesses. There’s not a lot of transparency in a lot of Bulgarian developments, but we continue to be transparent. We also try to focus on quality, there’s some buildings here that are just slapped together.

GlobeSt.com: How did the economic downturn affect Eastern Europe?

Levy: Well, rents decreased 15% to 20% on average, and investment yields were also affected. Unemployment is in the double digits, and the local currencies are tied to the Euro. It’s starting to improve, institutional buyers are looking to pounce. There’s new developments in Romania and Bulgaria. Poland, the Czech Republic and Hungary are recovering – “green shoots are coming up,” as they say.

GlobeSt.com: Where’s the value in dealing in these new markets?

Levy: The labor market is good – in Bulgaria, a lot of the young people are educated outside the country and come back here to help with translation for multinational companies. In Sofia, there’s about a million and a half square feet available, but that will get burned off, and a middle class is rising.

We think 2011 will be a recovery year, looking beyond it should firm up considerably with the rebuilding of the marketplace. Values have decreased, but it’s what opportunistic buyers are looking for, well-developed, well-located product.