Think globally, build locally

The Prague Post

After a strong start in office development, Hochtief looks to expand into other markets

PROFILE

Reinforced concrete changed the fortunes of many construction companies, but none more than Hochtief. The German company adopted it early and is now one of the world’s leading providers of construction-related services.

From its humble beginnings in 1873 by two brothers in Frankfurt, Hochtief grew rapidly in the early 1900s due to advances in construction materials. That growth continued through the lead-up to World War II and the rebuilding afterward. In the 1950s, the company started international operations, and from the late ’60s through the ’80s diversified worldwide.

Today, Hochtief Development, a division of Hochtief, has nearly 200 employees in 15 locations around the world working on almost 60 projects worth about 2 billion euros ($2.5 billion/56.5 billion Kc). Hochtief Development opened its Prague office in 1995.

“The company wanted to see what could be done in Central/Eastern Europe,” says Peter Noack, managing director of Hochtief Development in the Czech Republic. “We found a project first. It was successful, and showed that the timing was right.”

That project was Office-Park Hadovka in Prague 6. Completed in 1999, it won a Best of Real Estate award in 2000 in the new office building category. Hochtief Development planned, designed, financed, let and marketed the complex, which had a contract volume of about 40 million euros. The nearly 25,000-square-meter (269,100-square-foot) building was recently sold to Heitman European Property Partners III by DIFA Deutsche Immobilien Fonds AG. It’s been fully occupied since opening; current tenants include Siemens, Sun Microsystems Czech and British Airways.

Global reach

Worldwide, Hochtief is structured into five corporate divisions: Hochtief Development; Hochtief Airport, which handles operations and privatizations of airports around the world, including Athens and Sydney; Hochtief Americas, which manages three construction companies: Turner Corporation in the United States, Aecon Group in Canada and Hochtief do Brasil in Brazil; Hochtief Asia Pacific, a major stakeholder in Leighton Holdings of Australia, which has services ranging from construction to telecommunications infrastructure and mining; and Hochtief Europe, which is primarily focused in the construction field.

Hochtief has two branches of operations here: Hochtief Development, a one-stop shop for project development that encompasses site location, planning, construction and facility management; and Hochtief Construction VSB, a division of Hochtief Europe, which concentrates on construction projects.

Combined, the company’s five main divisions produced a worldwide sales volume of more than 13 billion euros in 2005.

“It’s an interesting range of businesses,” says Noack. “Each part is independent. We [Hochtief Development] focus on all services related to real estate, starting from the plot, continuing to development and on to facility management.”

Office projects have been the core of Hochtief’s business in Prague. After Hadovka, the company built the 8,600-square-meter Technopark in Prague 5 in 2003. Its newest project is Trianon, a multi-use office space in Prague 4 near Budejovická. The ground floor will hold commercial outlets, a restaurant and offices, while the upper 10 floors will be devoted exclusively to office space. Hochtief is waiting for building permits, and hopes to begin construction this summer. Completion is expected the first quarter of 2008.

Noack is enthused about the new project. “The location is perfect for an office building,” he says. “Prague 4 is to become one of the most developed parts of Prague. Smíchov developed great, and now it’s happening in Prague 4.”

New ventures

While not abandoning its office interests, Hochtief is looking to expand the scope of its operations here. “Our next step is preparing the company for logistics [parks] and apartments,” says Noack. “Offices will always be our big focus, but we want a broader base.”

Noack says his company considered other sectors for expansion. “We looked at Prague and what we could do,” he explains. “There’s a retail market, but it’s not the right time for us to start a new product. We did see a need for logistics.”

That was influenced in part by the company’s international client base. “In talks with investors, we learned they were looking for a company to rely on [to provide logistic services in Prague],” Noack says. “Hochtief as a brand is known, especially with German firms.”

That reputation is expected to bolster the company’s move into residential. “A lot of good companies are doing good [residential] projects in Prague, but there is still a need for something better,” he says. “We feel we can offer a high-quality product.”

One of the advantages Hochtief brings to the market, according to Noack, is a fluid decision-making process. “Once we make the decision, everything happens fast,” he says. “We have our own team to begin the work and then need to get internal approval from our German board of directors.”

That’s usually not a problem. “It works quite well, even though they are in a different country,” Noack says. “The German partners bring a different perspective, and we can get a broader view on projects based on what the company has done in other parts of the world.”

Another factor is the company’s size. With just 14 people in Prague, Hochtief has the luxury of being versatile and small, but with big backing. “We have a team of good people and we can be fast,” says Noack proudly. “If someone brings in an idea or new project, we can make a decision in a few days. And once we decide, we do it.”

There should be plenty more of it, as Noack likes both the experience his company has had in Prague and the future potential here.

“With Technopark, the tenants loved it so much, it was a puzzle to fit them all in,” he says. “I feel this environment still exists and there is still a lot of work to be done.”