January 9 2008: 5:51 AM EST
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Building Shanghai's tower of power

Asia's boldest developer reaches for the sky with a 101-story Shanghai tower.

By Clay Chandler, Asia Editor

On top of the world: Minoru Mori had a vision for a 101-story tower that would turn Pudong into the heart of Shanghai's financial center.
No stranger to transformation: Mori developed Roppongi Hills in Tokyo, a $4 billion urban development that featured commercial space, a Japanese garden and the Mori Art Museum (above).
Opened in 2003, Roppongi Hills was Mori's calling card. The commercial space - with a 54-story office tower, luxury residences and nine cinemas - was unlike anything Japan had ever seen.

(Fortune Magazine) -- Before following his father into the property business, Minoru Mori dreamed of becoming a novelist. So when he returned from an October 1993 visit to Shanghai talking excitedly of a plan to construct the world's tallest building on the impoverished east side of the city's Huangpu River, rivals in Tokyo snickered that Mori had rekindled his interest in fiction.

A Shanghai skyscraper seemed pure folly. Barely four years had passed since the crackdown in Tiananmen Square. Japan's economy was mired in recession. And yet Mori proposed teaming with Communist planners to raise a modern, international financial center in a nation where the currency did not trade freely, investment by foreign banks was tightly restricted, and stock markets were barely two years old. Worst of all: The tower would be situated in Pudong, a desolate new development zone far removed from the heart of traditional Shanghai.

Dozens of other foreign investors had rebuffed Shanghai's efforts to lure them to Pudong. Only Mori embraced the vision. Zhao Qizheng, then deputy mayor and the man charged with overseeing Pudong development, says Mori declared his enthusiasm for the undertaking straightaway. "We talked for about two hours," Zhao recalls. "I told him we wanted to build three large commercial towers in the center of the new area. We would build the first one, but the other two were undecided. Mr. Mori replied immediately, 'Let me build the second one.'"

Fifteen years later, Mori's China bet is paying off. This spring he will open the Shanghai World Financial Center, a 1,614-foot, 101-story colossus that soars above Pudong's now crowded skyline. As promised, it will enable Shanghai to claim ownership of the world's tallest building - at least for a while, until completion of an even higher structure in Dubai.

Designed by Kohn Pedersen Fox, a New York firm, Mori's Shanghai tower will include an underground shopping complex, a three-story conference center, 70 floors of commercial office space, and a 180-room Park Hyatt Hotel - all topped by a vertigo-inducing observation deck built into a trapezoidal opening.

In all, the building will dump 2.4 million square feet of commercial office space onto the Shanghai property market, about half the office space added in the entire city last year. Mori is asking rents 40 percent higher than Shanghai's next most expensive locations. Property analysts say he'll get his price.

Subsidiaries of Japanese banking giants Mizuho Financial Group and Sumitomo Mitsui Financial Group have already signed up for space. Morgan Stanley, which holds a 10 percent stake in the development, is another likely tenant. Mori says the tower, built for $1.1 billion, will have a 40 percent occupancy rate the day it opens and will be 90 percent full after one year.

Spreading sketches of the Shanghai project across a marble conference table at his Tokyo headquarters in Roppongi Hills, his best-known development to date, the 73-year-old builder says he never doubted the project's success. "I have been very aggressive," he acknowledges. "Shanghai's potential was always clear."

Mori's skyscraper has its critics. Ben Wood, the American architect who designed the acclaimed low-rise Xintiandi complex on Shanghai's opposite shore, decries its gargantuan scale as "a regurgitation of everything wrong with 20th-century urban planning." Detractors have dismissed Mori's tower as a giant portable vacuum cleaner or the world's largest church key. Many compare it unfavorably to the building in its shadow, the elegant 88-story Jinmao Tower designed by Skidmore Owings & Merrill in the image of a Chinese pagoda.

Creating a skyline

But such indictments misunderstand the nature of Mori's mandate. To satisfy China's planners, the building had to be resolutely modern - and make a statement equal to the soaring ambitions of Shanghai's planners. Christopher Choa, urban design principal of London architecture firm EDAW, hails Mori's tower as "an extraordinary success" whose reputation is sure to endure.

"From the beginning," Choa says, "the intent was to create a skyline. Authorities in Shanghai had a very specific story they wanted to tell, and they found exactly the right partner to help them tell it."

At the very least, the Shanghai World Financial Center secures Mori's reputation as Asia's boldest developer. In a region besotted with real estate and urban megaprojects - after completion of the Shanghai World Financial Center, Asia will be home to eight of the world's ten tallest buildings - Mori has set out to show that big can also be beautiful and enhance the quality of urban life rather than overwhelm it.

Over the past five decades, that proposition has helped Mori parlay a cluster of small plots near Tokyo's government district into one of the world's most valuable property portfolios. Mori hails from a long line of rice merchants. His grandfather made the clan's first investment in real estate, acquiring a number of properties in Tokyo's Minato ward before World War II.

Mori's father, Taikichiro, a professor at Yokohama City University, assumed control of the family business in the early 1950s and was soon earning far more from property than from rice. By the time he died in 1993, Taikichiro had amassed a $13 billion fortune, making him the planet's richest man.

But he couldn't have done it without Minoru, his second son, who charted strategy, haggled with tenants, and ran the company day to day. In the 1950s and 1960s, Minoru labored tirelessly to persuade neighbors to pool individual plots to make way for large-scale development.

Taikichiro was unsentimental about his properties; the family's first 45 buildings had no names, just numbers - Mori Building No. 1, Mori Building No. 2, and so on. Minoru, who had studied Sartre and Camus at Japan's elite Tokyo University, had a more philosophical bent.

'Vertical garden city'

As the number of buildings multiplied, he developed a fascination with the art and ideas of Swiss architect Le Corbusier. He championed Le Corbusier's notion of the "vertical garden city" - that taller buildings and higher population density reduced commuting time and freed space for parks and civic amenities - as an antidote to Tokyo's chaotic sprawl. And he plowed profits into increasingly ambitious efforts to redevelop whole neighborhoods and build "cities within cities."

The first complete statement of Mori's urban vision was Ark Hills, a lavish complex opened in 1986 that joined office towers, luxury apartments and a television network to upscale restaurants, a hotel, elaborate landscaping and a concert hall. Atop the central tower: a members-only club showcasing Mori's personal collection of 300 Le Corbusier paintings and drawings.

As Japan's go-go era reached its zenith, blue-chip tenants flocked to the complex, and Mori pressed forward with similar projects, even as Japan tumbled into its long recession. His $4 billion Roppongi Hills complex, opened in 2003, signaled the end of Japan's "lost decade."

With a 54-story office tower, luxury residences designed by Terence Conran, nine cinemas, a meticulous Japanese garden, and a world-class art museum, Roppongi Hills was unlike anything Japan had ever seen. It now attracts 40 million visitors a year - far more than Tokyo Disneyland. In 2006, Mori followed with Omotesando Hills, an even swankier shopping complex designed by Tadao Ando for Japan's equivalent of the Champs lyses.

On the strength of those projects, Mori is venturing beyond Japan. He is talking with officials in Singapore about a development comparable to the Shanghai World Financial Center, and he has been approached by potential partners in Thailand and Vietnam.

"It was a smooth transition," says Mori of his career path. "I started with an interest in writing novels about people's lives as they were and moved to an interest in writing prescriptions for how their lives should be."

But in Tokyo, with its myriad small landowners, antiquated building codes and legion of earthquake-shy planning officials, the process of winning support for that prescription was anything but smooth. To aggregate the 28-acre parcel needed to develop Roppongi Hills required more than 800 meetings with 500 individual landowners and dragged on for 14 years. At the opening ceremony the normally imperturbable Mori broke into tears.

Small wonder, then, that while others looked at Pudong and saw the pitfalls, Mori saw the opportunity of a lifetime. In Shanghai, city officials were promising to work with Mori, not against him, and they offered something he knew that in Tokyo he could never attain: a vast, blank urban canvas.

But keeping hold of that canvas brought other challenges. Two years after sealing the deal in Shanghai, Mori fell out with his younger brother Akira, a rift that eventually split the family fortune. At the core of their dispute: Akira's discomfort with Minoru's willingness to take on debt to finance high-risk ventures.

Since the separation Akira has focused on conventional, low-risk properties and this year was ranked Japan's richest man. Minoru didn't rate; his company owns more than 100 highly profitable buildings in the heart of downtown Tokyo, but it also carries $7.2 billion of debt - about five times projected sales.

Foot on the accelerator

In an interview with Japan's Nikkei Sangyo Shimbun, Akira put his differences with his brother this way: "Minoru is a positive thinker, who wants to be one step ahead of everyone else. He likes big projects; he pushes the accelerator to the floor. I try to keep a half-step behind. I try to assess the risks involved."

Akira's caution seemed vindicated in 1997 when, months after construction crews drove the pilings in Pudong, a financial crisis engulfed the region, forcing the elder Mori to halt construction. The terrorist attack on New York's World Trade Center in 2001 dealt a further blow to his ambitions, undermining the confidence of investors and potential tenants in giant high-rises.

The site lay dormant for six years. As members of the investment consortium that Mori had assembled to finance the project lost their nerve, Mori's stake in the venture, initially just 30 percent, rose to 80 percent.

Were Mori Building publicly listed, such a string of calamities might have forced him to resign - a point Mori himself delights in making. Instead he went back to the drafting table, ordering architects to reinforce the building against the possibility of a terrorist attack and to add more floors.

The latter change was prompted by the rise of a rival skyscraper - in Taiwan, of all places - that had been completed while Mori's tower remained on hold.

Mori's original plan had called for 94 floors and a height of about 1,500 feet. But Taipei 101, completed in 2004, boasted 101 floors and a height of 1,670 feet. The revised design leaves the Shanghai World Financial Center a shade taller than the Taiwanese upstart - but only if you subtract the Taipei tower's needle-like spire.

There was more trouble after construction resumed. In 2005 the project was buffeted by turmoil in Japan-China relations brought on by Japanese Prime Minister Junichiro Koizumi's visits to Yasukuni Shrine. Kohn Pedersen Fox's original design for the building had included a circular hole in the top to be occupied by a giant Ferris wheel.

A Japanese plot?

Suddenly critics in China charged the design was part of a plot to plant the hinomaru symbol of the Japanese flag on Shanghai's skyline. Mori insists he never dreamed the circle would be interpreted that way. He argues that it was intended as a reference to the traditional Chinese moon gate. To quell the controversy, circle and Ferris wheel were scrapped.

While Chinese nationalists have decried Mori's Shanghai building as too Japanese, back home in Tokyo his projects have been criticized for not being Japanese enough. In the Japanese press Roppongi Hills is often contrasted with Tokyo Midtown, another high-end development that opened last March a few blocks away.

Midtown, designed by Japanese architects for Japan's giant Mitsui group and dominated by Japanese tenants, has been celebrated as a pure manifestation of Japan's traditional ethos. Mori's project - home to American investment banks such as Goldman Sachs, European luxury boutiques and tech ventures from the bubbly new Japan - gets cast as the evil twin.

But perhaps the greater paradox is that in Pudong, Mori has switched from battling for more space to working to construct the civic institutions and social networks needed to create a sense of neighborhood and community.

In a visit to Pudong in 1996, the year before Mori laid the tower's foundation, FORTUNE found the new development zone to be "a Potemkin village reminiscent of the grandiose false fronts once slapped up to impress Russia's Catherine the Great." Despite inexpensive leases and generous tax incentives for companies locating there, vacancy rates topped 50 percent. The underlying problem, FORTUNE concluded, was that China's communist rulers weren't ready to surrender to the forces of free-market capitalism.

They wanted to control the local currency, keep foreign banks from accepting deposits in renminbi and limit the stock market to money-losing state-owned enterprises. In large part, those problems remain, though Pudong today is no longer a Potemkin village: Its office buildings are full, and new hotels and convention centers are planned.

Making the area friendly

But for now the area has few charms for those who work or live there. Even moving from building to building can be traumatizing. Mori's structure is separated from the Jinmao Tower by Century Avenue, a multilane highway 330 feet wide.

"Pudong," says architect Wood, "was conceived at a moment when oil was $30 a barrel and Chinese planners were infatuated with the car. All the assumptions that went into the original design are obsolete."

Pudong's glitzy "superbrands" mall, opened to much fanfare in the 1990s, has been forced to move downmarket and reinvent itself as a family entertainment center. Another mall, planned for the lot next to Jinmao, has yet to materialize. Next door, the Hong Kong developer who built 220 luxury apartments - some priced at more than $20 million - struggled for months to sell them after opening in October 2005.

"There's something exquisitely ironic about Mori's predicament," says Choa, the EDAW architect. "He was drawn to Pudong out of the frustration that he experienced trying to assemble large parcels in Tokyo. Now he finds that to make this project work, he must recreate the delicate tissue of community that makes urban life desirable."

Remy Chan, Asia Pacific director for realtor Jones Lang LaSalle, argues that Pudong will straighten out its problems eventually. City planners, he says, are reviewing proposals for a network of walkways and observation decks to connect the towers that "will make this area quite exciting."

They also plan two new subway lines to connect Pudong to the Huangpu River's western shore. If city planners don't fix the problem, Chan argues, private developers like Mori will.

Mori, for his part, says he is working with the government on a plan to build a retail courtyard similar to Omotesando Hills at the base of the tower and has signed off on a proposal to construct a pedestrian deck connecting the towers, complete with restaurants, shops, parks and even a monorail. Watch this space, says Mori. "Things are moving very fast."

Reporter Associates Cindy Kano, Joan L. Levinstein and Zhang Dan contributed to this article. To top of page

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