One of the most powerful property players in the world, Gerald Hines, is targeting the UK. Adam Coffer spoke to him and new UK chairman Philip Lewis about their plans
What do you call a mild-mannered 76-year-old American who tells you he owns a 35-storey lipstick in Manhattan? In the case of Gerald Hines, the answer is usually Sir.
Hines ranks among the top three property owners in the world and is regarded as one of the most aggressive players in the US. But, although Hines’s eponymous company has $10bn of assets worldwide and strong European businesses, it has failed to conquer the UK office market. Hines is determined to change that.
After securing a long lease on the Salvation Army’s headquarters in Queen Victoria Street, EC4, last month, he is keen to get things moving over here.
“The UK property market is very sophisticated and competitive,” says Hines, whose bid to buy Godfrey Bradman’s stake in Chelsfield’s 3m sq ft Paddington Basin scheme in 2000 had to be abandoned when another stakeholder took control of the interest.
“We started our initial activity in the UK over the past two years and we are looking forward to a bright future here.”
Much-needed salvation
Hines Air Property, which specialises in airport-related investments and developments in the UK, has two schemes at Heathrow, but the Queen Victoria Street deal represents Hines’s first city centre office development in the UK.
Hines plans to speculatively develop almost 100,000 sq ft, as well as a 35,000 sq ft new headquarters building for the Salvation Army on the site.
The deal was structured by Philip Lewis, and is one of Hines’s more impressive UK investments. In March, the company appointed the former Safestore chairman as executive chairman for its UK operations. And Lewis has vowed to make Hines a force in the UK property market.
“I am not worried about building out part of the Salvation Army site speculatively,” proclaims Lewis.
“People get too hung up about blips in the economy. The kind of occupiers that take the large buildings that we will be developing will always need space for their global business. Everybody needs a roof over their head.”
Lewis is symbolic of Hines’s strategy of constructing teams with local expertise in their regional HQs. It is a tried-and-tested strategy according to Neil Jones, Hines’s senior vice-president for Europe.
For Jones, who is among a rare breed of Americans working outside the US for Hines, “teams means Hines”.
He says: “Notwithstanding my funny accent, there are few people like me working for Hines. We have around 150 development specialists across Europe and only nine or 10 are American. Real estate is a local business and finding the right local teams that know their local markets is crucial.”
Lewis adds: “You need street credibility to get in to see the right people.”
Cast in a global hue
The duo also sing of the benefits of being a global company when attracting occupiers. It boasts more than 2,000 tenants around the world. Lewis says: “There is a loyalty that occupiers show if they are happy. For example, we are developing a major new head office for Goldman Sachs in New Jersey. We know that Goldman is comfortable to work with Hines.”
Jones interrupts with the mantra: “Satisfying the needs of our tenants is paramount in our minds.”
As would be expected of a developer that specialises in giant schemes of more than 500,000 sq ft, Lewis, Hines and Jones ooze confidence about their ability to dominate Europe.
Rivals claim that Hines is over-confident, but Hines is preparing to put its money where its mouth is. As first revealed in Estates Gazette (News, 4 May), the company has been trying to attract blue-chip institutions to invest in a Û500m Hines fund.
The fund will invest in the UK, Italy, Germany, France and Spain. But Lewis wants to talk about the opportunities the UK presents.
He cites the fact that Safestore had more or less become a retailer rather than a property company as the reason he left at the beginning of the year. But he admits that a service-led approach is essential to be able to confidently predict an occupier’s movements.
He says: “In my second week at the company, I went to Washington and had a look at some of the buildings that Hines put up 25 years ago. They are all about providing efficient space for occupiers.
“In the UK, where landlords can rely on leases for 20 years, most developers haven’t had to care too much about the tenant so haven’t been hugely proactive. We are hoping to bring that day-to-day management approach into the market.”
High above New York, in the luxurious boardroom of Hines’s Lipstick Building, Ken Hubbard, executive vice-president of Hines’s East Coast, told EG in December that Hines “knows what is cost efficient for the tenant”.
It might have been post 9/11 bravado, but it seems to be an attribute that Hines representatives around the world are keen to flaunt.
“Let’s not lose site of the fact that this is a profit-driven business,” says Lewis. “Tenants are occupiers of the building and pay the rent. They are not retail customers. But they do need their landlords to recognise their needs to be cost efficient.”
Sources suggest that, for Gerald Hines, who started the company in 1957 from a small one-man office in downtown Houston, Europe remains the last battleground to be conquered before he will be satisfied with the legacy he leaves behind for his son Jeffrey.
Hines himself concludes with unrelenting optimism: “We have been active in Europe for more than 10 years and we are very bullish for the long term.”
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Hines’s $10bn property empire |
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Hines is set to invest in the UK and elsewhere in Europe |
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The 569 projects completed Office Industrial Residential Hotel Retail and restaurant Development management Renovation/redevelopment Acquisitions Resort Other Total The 69 projects under development Office Renovation/redevelopment Residential Resort Industrial Other Total |
(sqft) 64,731,173 16,839,613 3,307,862 3,862,000 6,801,488 15,576,928 16,190,894 22,581,765 382,800 1,235,666 151,509,389 (sqft) 20,856,400 6,344,000 3,850,000 128,000 3,994,800 2,139,000 37,312,200 |
