Gerald Hines has built up a $10bn empire in the US. Now he is moving into Europe. Alex Catalano finds out why.
Gerald Hines is Mr Real Estate in America. He builds skyscrapers to swoon for – steel-and-glass statements from Houston, Detroit and Minneapolis to Atlanta, New York and Washington DC.
But now, at 71, Hines is moving to London. He’s bought the statutory Kensington house, found schools for his children and is getting a car with the steering wheel on the right. His 11-year-old daughter and nine-year-old son are excited about the move: “It’s an adventure for me, too.”
Hines clearly looks forward to the challenge. But then, this is a man whose off-duty relaxation includes four or five weekly games of early-morning tennis, winter skiing in Aspen, and some serious roller-blading. “It keeps me in shape for skiing,” he says.
Still, why leave the sunshine of Houston and a five-minute drive to work for drizzly, congested London? “Three-quarters of our development work is now in Europe,” says Hines, as though that explains it all. And perhaps it does. “His first love is buildings,” says Denis Kavanagh, Jones Lang Wootton’s international head of corporate real estate who ran the firm’s Houston office. Hines has walked every site he’s developed, picked the architects and, by all accounts, the taps in the bathrooms as well.
A cultured approach
People rhapsodise about the quality of his structures. “He’s the standard-setter throughout the industry,” says Kavanagh. Or, as Hines explains, the “culture” of his firm is one of “wanting to produce buildings that are outstanding and make a contribution to the built environment of the communities they’re in – that’s number one.”
But this engineer-turned-developer also makes sure the buildings work . They’re designed to be efficient, problem-free. “We build at reasonable prices, offer value to tenants.” In a market where occupiers will commit for only three years, people talk of Hines’ tremendous tenant retention. “They manage the buildings well – they’re not petty people,” says Kavanagh. “The customer is always right – but mind you, that doesn’t mean they roll over.”
Long-term relationships are also part of the Hines culture. This applies to its financial dealings as well. Most of the buildings are developed in partnership, and Hines has an enviable stable of blue-chip institutional backers, including international players like Deutsche Bank and the Shell pension fund. “We try to make a fair return, in an ethical manner,” says Hines. “What we say is our bond – if a commitment is made by an officer, we stand behind it.”
It sounds like good, old-fashioned business sense. But then, Hines is no JR. This courteous Texan millionaire is togged out in the standard-issue American lightweight summer suit and lugs papers around in a zipper bag that has seen better days. “He’s one of the few people I know who still uses a slide rule,” confides an agent who worked with him in Houston.
In fact, Hines isn’t a native Texan. A Midwesterner, his ancestors were “loyalists” who sided with the British and moved from North Carolina to Nova Scotia after the War of Independence. Hines studied engineering in the Midwest, then moved to Houston. His first development was a 465m2 (5,000 sq ft) office warehouse; his next project leapt in size to 3,716m2 (40,000 sq ft).
Today, Hines has a $10bn empire with over 11m m2 (120m sq ft) and 45 offices scattered across the US. It is still a partnership, owned by Hines himself and his eldest son Jeffrey. A Harvard MBA, Jeffrey will be minding the shop in Houston. Observers detect his influence in Hines’ move into investment: the group has bought over 836,100m2 (9m sq ft) of US real estate and recently acquired, from Sears Roebuck, its first major portfolio of offices. Other new businesses include advisory services .
European ambitions
International expansion is a major plank of the corporate strategy. Hines has projects in Berlin, Frankfurt, Paris, Prague and Moscow; there’s also an office in Beijing and an emerging markets fund. London will probably be getting a Hines building before too long. Hines considered investing here a decade ago, in Canary Wharf, “four or five months before the Reichmanns bought the project. But,” he went on to explain, “we didn’t do it because of the transport – the risk was too great. There were other opportunities, and in Docklands there was a lot of land, a lot of product. We are not in the commodity business. When real estate becomes a commodity is when you get in trouble.”
Hines has seen this happen in the US. The partnership overstretched itself in the 1980s, but survived the crash. “We sold a few buildings – I wish we’d sold more,” he says. His financing philosophy – learnt on the job – is conservative. He brings prelets, prefers to work in partnerships, with a smaller equity stake, than gear up on risk.
The Hines approach is now being exported to Europe. The man is far too polite to say it, but he is coming to show us how it should be done.
Gerald Hines
1948:
Graduated Purdue University in mechanical engineering
1957:
Founded Gerald D Hines Investments in Houston
1974:
Enters international market with scheme in Mexico
1991:
Opens Berlin office
1995:
Opens London office
