Gerry Hines Keeps It Simple
Developer Shares His Company's Secrets for Phenomenal Success
By Jim H. Smith
Posted October 26, 2010
Gerald D. Hines, the luncheon speaker for the Real Estate Re-Engineered conference, is recognized worldwide as a leading developer of buildings that are architecturally distinctive, financially successful, and sustainable. It's a trifecta that has enabled him to grow his firm, founded in 1957, into a giant with more than 100 offices in 17 countries on four continents.
So, considering the many challenges he must have encountered in building a company with controlled assets valued at nearly $26 billion, his message about the lessons he has learned during more than a half century in business was remarkably succinct.
Hines used examples of prominent buildings from his company's portfolio – including The Galleria, Dallas; Pennzoil Place, Houston; The Williams Tower (formerly the Transco Tower), Houston; Diagonal Mar, Barcelona; 21st Century Tower, Shanghai; Porto Nuova, Milan and many others – he told the audience that five principles account for his company's success.
1. Create Quality Architecture. Hines love affair with great architecture is the stuff of legend. Long ago he made a commitment to collaborate with great architects, and it's no secret that prominent architects such as I. M. Pei, Philip Johnson, Cesar Pelli, Frank Gehry, and Robert A. M. Stern have all worked with Hines. He urged the audience to build "something that endures, something that meets the needs of the marketplace and gives you continued good occupancy, and mechanical systems that provide good service and low cost and that are environmentally compatible."
2. Commit to Sustainability. In the Hines lexicon, sustainability means two things. First, it refers to the durability of his buildings, and the flexibility built into the design and construction of buildings that enables them to evolve and adapt with the passage of time. To illustrate this point, Hines described the lessons he learned from One Shell Plaza, the downtown Houston headquarters of the Shell Oil Company that he built in 1967. The building incorporated many design innovations that enabled it to adapt to changes that could not be entirely anticipated when it was built.
At the same time, sustainability is a pointed reference to Hines' leadership in "green" design and building. The company is a leader in the EPA's Energy Star program. More than 130 Hines properties have earned Energy Star status. It is more than mere coincidence that Hines buildings also enjoy an enviable occupancy rate.
3. Opportunities Exist in Acquiring Buildings – But Make Sure You Can Add Value. "You have to know when the cycle is at the top," he said. "When you can borrow all the equity, it's time to sell."
4. Mixed Use Developments Promote Better Communities and Also Lower Risk. Hines showcased prominent developments including Porta Nuova, Diagonal Mar, and The Galleria, with its distinctive ice-skating rink that exemplify the advantages of mixed use, all of which incorporate a range of uses, including offices, retail, hotels and condominiums.
5. Human Talents Are Hidden Assets. Hines' management structure is decidedly lean. Below a handful of very senior executives, other company leaders are compensated through 50 percent equity in the projects they are working on, not in the company as a whole. This arrangement reduces company risk while empowering the leaders and inspiring them to do their best work. "We want a partner when we go into a project," said Hines. "This way people have something to lose." And if Hines' success is a measure, even more to gain.