Webcast transcript
Willy Walker: Thank you, Susan, and good morning everyone and welcome to another Walker Webcast. Today's discussion with leaders of one of the truly iconic development and commercial real estate ownership companies in the world. This is our 51st Walker Webcast and it was a year ago today that we started this series. I'm truly humbled by the quality of guests that have given an hour of their time to join me over the past year to discuss everything from commercial real estate to racial justice, to training for the Tokyo Olympics. CEOs, analysts, best-selling authors, professional athletes, university presidents: we've had them all. And I’m simply thrilled that the Walker Webcast has been watched live or on replay by over 300,000 people, and that it continues to attract a large audience every week. I’m sure everyone attending today's webcast remembers vividly what our world felt like a year ago. Similar to knowing exactly where we were or what you were doing on 9/11, this week last year was very scary. We were frantically buying toilet paper, figuring out how to use Zoom, and watching the stock market plummet. And yet, here we are only a year later with a safe and highly effective vaccine being rolled out across the country; states removing COVID protocols in hopes of returning to a more normal life; and the stock market at an all-time high.
American innovation, execution, and tenacity have likely not been seen like this since World War II. It is truly amazing where we are today, and with sustained discipline for the next few months, we should find ourselves back to a more normalized world this Summer. I would be remiss if I didn't make a quick comment about Walker & Dunlop this morning. When I joined the company in 2003, we were a very successful boutique mortgage bank with one office, 43 employees, and a loyal yet small client base predominantly in the mid-Atlantic. And over the past 17 years, thanks to adding incredible people, acquiring some amazing businesses, and setting bold, highly ambitious goals, we have grown and grown. We finished 2019 as the 5th largest lender in the Multifamily industry and set a goal last year to grow to being #1 over the next five years, which would require jumping over CBRE, Wells Fargo, and JP Morgan in the rankings. Well, yesterday the Mortgage Bankers Association released their annual rankings for 2020 and Walker & Dunlop was the largest provider of capital to the Multifamily industry. There goes that goal. It is truly astounding what the team at Walker & Dunlop has accomplished, and like my two guests today, we are now faced with what's next. And like my two guests today, I am blessed to have an incredible team with a powerful brand to lead our company and industry forward over the coming years and decades.
My final comment before introducing Jeff and Laura. Walker & Dunlop’s relationship with Hines is thanks to Gerald Hines and Larry Melody cementing their relationship with the financing of the Houston Galleria in 1970. That deal was a marquee deal for both Hines and the L.J. Melody company and formed a partnership and friendship between the Hines and Melody families that endures today. Tom Melody, his son John, and brother Mike, are all members of the W&D team today, and it is thanks to them that Jeff and Laura are joining me today and that our two firms are doing so much together. Today also happens to be Tom’s 60th birthday, so Happy Birthday, Tom, and thanks to you and your family for all you do to make Walker & Dunlop so great.
A quick background on Hines and then I’ll introduce Jeff and Laura. Hines is a global real estate development firm founded in 1957 by Gerald Hines. It has a presence in 225 cities, in 25 countries and $144 billion of assets under management. $75 billion of that AUM is where Hines is the investment manager, and $67 billion is where Hines provides third-party property level services. Jeff Hines is Owner, Chairman, and Chief Executive Officer. He became President in 1990 and has dramatically expanded Hines's products, services, and foreign market penetration. Jeff is a graduate of Williams College and Harvard Business School. Jeff’s vision for Hines is to, “be the best real estate investor, partner, and manager in the world.”
Laura Hines-Pierce is Senior Managing Director in the office of the CEO at Hines. She is a member of the firm's Executive Committee and focuses on firm-wide strategy, risk management, and development. She was part of the grassroots team that established the One Hines Women's Network, which led to the creation of Hines's Diversity and Inclusion Initiative. Laura went to Duke and also has an MBA from Harvard Business School.
So, first of all, Jeff and Laura, thank you very much for joining me today. Jeff, I mentioned in your bio that you have dramatically scaled the business. And we're going to go back and talk about the firm's history from when your dad started it to when you joined it. But as I ran through the amazing history, I noted that in 2005, Hines had $12 billion in assets under management and today, as I just mentioned, that number is $144 billion. That's an astounding 12X growth in AUM over the past 15 years. So, let's start with just how'd you do it?
Jeff Hines: First, Willy, thanks for having Laura and I on this series that you've created. It's pretty amazing what you've created in that year. But yeah, it's been pretty exciting growth. And I’d say the answer to that is multifold. I mean first of all, you know, its things set in -- that were set in place right from the beginning at Hines that my dad established. You know, the culture, the integrity, the fair dealing with people, the performance that was created early on. I mean, that's certainly part of it. It's sort of the flywheel effect. Once you get the right culture in place, the right footprint in place, the right people in place, and have that sort of track record, you know, it all builds on itself and the flywheel can be pretty powerful. And so that's a big reason.
I’d say two other, three other reasons, one of which is our broad push into the Investment Management business. And Willy, you called us a global real estate developer. I’m going to correct you and say we are a global real estate investment manager, of which development is one of the things we do and do very well. We are certainly very proud of our history, but that's one of the ways we're serving investors, in addition to some of the others. So, we've invested heavily in it both organizationally and dollar-wise, and so that's provided some of that growth too. I would say in the last decade another reason is that we've really pushed very hard into other product types. I mean we had this, with this great footprint, we had this great group of people running the firm in various spots around the globe, so it only made sense to sort of leverage that by adding other product types. So, this next year we're going to have more underway in the living sector than we do in the office sector. And industrial’s not that far behind. So, product diversification has been a major linchpin of the last decade and that's allowed us to grow pretty significantly. And then the last point, and this may be the most important point, is that we really have the wind at our back in terms of who we are and what the investment community, investor community thinks of real estate investment managers. Traditionally, a lot of real estate investment managers made money by great Beta. Timing the market well. Getting in and out of the right places. And that worked very well, and people were able to create great track records on that. But as information becomes more readily available, that edge is starting to go away. And what's really the scarce commodity now going forward, we think a lot of investors feel this way at least, is the Alpha-side of the equation. The ability to create returns at the property level itself. Doing something with the real estate. Getting your hands dirty with the real estate. Fixing operations. So that is something that we have a history of achieving. Adding over 200 basis points of Alpha to our investments over our history, which is yeah, I think probably one of our most remarkable stats. And so, because of our vertical integration, many investors really want to invest more with investment managers like us, that also is due to timing, but are adding value at the real estate level.
Willy Walker: So, Jeff, let me just follow up on that for a second because you, if you will corrected me on saying development firm into asset management firm. But you were an incredibly successful real estate development firm and still are. Yet in the mid-2000s you made the distinct decision to change the strategy and move much more rapidly into that asset management business, if you will, and not necessarily away from development, but to grow that. What was it at that time that -- I mean, you were such a successful development firm at that time I’m just curious as to what it was that led you to say: We need to add the people, the resources, the know-how to scale that side of our business over the next decade?
Jeff Hines: I would say, we started our journey to being a Global real estate investment manager really in the early ‘90s. That's when we sort of made the decision to start acquiring assets in addition to developing assets and it’s been more of an evolution rather than a revolution to where we are, I’d say. We started our first fund in the mid- ‘90s, really, because we were doing emerging markets, real estate development in emerging markets, and it was very difficult for one investor to plunk down a big bet in one project in China, it really became necessary to raise a fund so that investors could diversify their risk across many countries and many projects in order to get that done. Once we had raised the funds, we started to see the benefits of it, and what we could provide as a firm to that business, so we got into it more and more and it's just you know I’d say we are really leaned into the last decade, but a lot of that is because of the success and experience we had prior to that.
Willy Walker: Laura, I want to bring you in here because you've watched the evolution and growth of this company throughout your life. I was curious was there ever or is there a memory that you have from your childhood when your father or grandfather took you to some city to see an asset that was being built, and you got to go up to the top of it and look out over some city you've never seen before? Or your family was building a huge iconic building in a city where you got to meet someone special that was sort of a unique experience that you remember back to?
Laura Hines-Pierce: Sure! You know it's funny, our history is so much a part of our culture and it's absolutely woven into our DNA and just on the previous topic, a little bit of a funny story, I think it's taken time to evolve into who we are, but we are very good at evolving and I think there is a lot of debate of how do we acquire buildings and is that the right thing for us to do? Because frankly, there is a question of will other people's buildings be as good as ours? We know ours are good, so how can we trust we can acquire others and what does that mean? So, you know the history is so much a part of our firm, but growing up, you know, I think my Dad actually made a very purposeful decision to keep us a little bit arm's length from the business and I think that was a decision based on really wanting us to make our own decisions about our career path, about our journeys in life, and not feeling pressured to join the business. Certainly, if that was what we decided we wanted to do after exploring all the avenues, I think that he would be and was very excited to welcome us if that was the case but that's been translated to... I actually don't have a ton of memories of you know, really, being out in real estate and being on job sites. I know if you asked my Dad that question about his childhood, he has a very different answer because my grandfather used to bring him to construction sites as an eight-year-old before school and you know, probably in very dangerous situations walking through construction sites! Certainly, there were really incredible opportunities that I got growing up. I remember visiting China in the ‘90s because we joined my dad on a business trip. Hines was in the process of entering China as a business, and in the ‘90s China was a very different world. People were excited to see my curly hair! It was a very different world back then, and so I got incredible opportunities on that front and certainly was exposed to the business broadly. But it was a purposeful decision, I think, and I think that's important for me, knowing that I’ve explored other career paths and opportunities and I’ve found my way to Hines, and I think I was very purposeful about that because of the opportunity I had and lack of pressure that I had.
Jeff Hines: And Willy, that is the exact same formula that my dad used with me. You know Willy, coming from a family business, you’d probably feel the same if your Dad would have pressured you to come in the business, you might have run the other way. My Dad purposely didn't allow me to come to that and I think that's really important. You don't want to have someone be at a family firm because they feel they need to be or have felt pressured to be. That's one of the secrets.
Willy Walker: So, Jeff, Laura just talked about her own, but first of all, you know her education is both Economics, as well as Art History and she worked at Sotheby’s for a number of years, so who knows whether Laura today would be running Sotheby’s rather than helping you run Hines. But your father, as I read back in the history of Hines, your father as a child in Gary, Indiana went to Chicago and saw the Wrigley building and made a comment that someday he'd like to build that, but what he didn't include in that sentence, or at least it's not written down was, “I want to work with the very best architects in the world in building that building.” What was it about your Dad that allowed him to be so groundbreaking as it relates to architecture? Because Hines, really, of all the development firms in the world and asset management firms in the world, has the reputation of having gone and worked with the world's preeminent architects. What was it that made your father get to that if you will?
Jeff Hines: Well, he became an engineer, because his dad told him “Engineers are not laid off, Jerry. That's what you need to become,” so, he became an engineer. I think if you talk to anyone who knew him well or sat in on an architectural meeting where he was going over design or schematics with a great architect, they will tell you there was an architect trapped in that body somewhere. I mean, it was his passion, his absolute passion. Nothing got him more excited than talking about the new design and what you could do differently to make it better and, yeah, it truly was his passion.
Willy Walker: And on that, you met and still work with all of these incredible architects. I mean, back when your father started working with Philip Johnson, all the great architects in the world were designing university campuses and art museums. They weren't building office buildings, like the Lipstick building, which was your first development in New York, which Philip Johnson designed. How was it that your father, first of all, was able to get them to focus on building an office tower and then also make the numbers work? Because I would assume hiring some of these name-brand architects was not exactly an easy thing to fit into the P&L.
Jeff Hines: Yeah, that's something I think Dan and some others at the firm really do get credit for, and rightly so, and, as you say, before there may be a few exceptions. But really, before Hines, buildings were pretty boring, rectangular boxes and the prevailing wisdom was that it was too expensive to bring in a great architect and we really changed the formula, and that's not just by hiring the great architect and letting them do what they want to do, because then you would have gotten a building that was too expensive and a floor plan that may not have been commercially viable. The magic was working directly with the architect in a rather creative tension sort of way to work with their design and be able to get the great design but be able to tweak the materials, or tweak the curtain walls, so that you were building something at a reasonable cost premium and you're building a floor plate that works for tenants, and that was leasable. That was the real trick, and I think Dad and again some other folks really wrote the formulas been followed many times by other firms going forward, and, of course, you know you eventually you’re able to prove that you could get a rent premium that justified the higher cost, so it became a real selling point rather than just a cost increase.
Laura Hines-Pierce: And I’ll just say too, I think it's on that the economic equation, it wasn't only the rent premium and being able to attract the tenants but, certainly a high belief that better-designed buildings, retained tenants, through downturns, and, ultimately, that really increases the overall asset value of the building itself. So, for a firm that is thinking about the long term, you know, really thinking about owning these buildings for the long term and the value over that long period, investing in that design and really, really spending the time, the appropriate capital that made sense to really increase the quality of the building was important for us as a long-term investor. Then the last thing I’ll say too is, I think one thing that the firm did really well is institutionalize that knowledge, and so that's something when we go through that creative process with, the creative tension process with an architect we bring as much to the table, often, as they do, because we have a group internally, that is involved in essentially every asset that we do, and they bring all of that built up experience and knowledge to the table in. How do we get an efficient use of our capital and still really deliver the best design that's been a great value long term?
Willy Walker: But Laura expand on that for a second, for me, because not only beyond the design in the long-term outlook of what building a beautiful building would bring, but Hines was also extremely early as it relates to sustainable development. I read 13 of your buildings in 2000 got lead platinum status, at a time when in 2000 there were very few companies focused on lead and lead platinum. You got the first building ever in the State of Texas, to get the lead platinum certification. That plays into this whole sustainability long-term investment outlook. What was it, and I know you weren't in the company back then, but you know enough about the history and also how you're trying to take it forward, what was it that made you all so focused on that element of building not only beautiful buildings but environmentally friendly buildings sure?
Laura Hines-Pierce: Sure, I think a lot of it originally stems from my grandfather's background as a mechanical engineer. You know my dad mentioned it, but that was his background, you know by training and he absolutely brought that to the table and was very focused on how do we get to real efficiency out of these buildings? Because there's an economic value, right? Especially as you think about that long-term perspective. You know there's real value if you can engineer the building to be significantly more efficient. So, I think from that early perspective it really got built into our DNA, in the same way, that great design has, and it's something that's been infused in how we think about the long term. Now what I will say is the topic of ESG more broadly has gotten significantly more complicated than I think it was when we really set out to do what we do, and I think certainly the opportunity to create economic value, while also doing good for the world is something that we strive to do. We now need to think about ESG, not only in terms of how we design a building, design and build a building, but how we invest in real estate, how we operate real estate, and how we think about it relative to our corporate culture. So, I think we're in the process of really diving into how to more broadly infuse ESG across everything that we do. I think we have 16 different commitments and objectives that we're in the process of carrying forward and several others on the horizon, creating a livable future, carbon, our people, and I think that's something that is certainly more complicated than it was before, but absolutely something that we are focused on continuing to be the leader in.
Willy Walker: And it will need your leadership over the coming years and decades to achieve it. Jeff when you joined Hines back in the 1980s, there was not a major office tower in America that was not being built by Hines. And you built all these iconic buildings and just the volume that you all developed during that period of time is truly staggering. And then you get to the early 90s where you basically made the proposition that you'd go and buy somebody else's real estate, and Laura mentioned it previously. Talk for a moment about what it was that made you propose that you all ought to go into actually acquiring a building that wasn't designed and built by Hines? There was a tad of what Laura said of both pride and maybe a tad of arrogance that you all were building the very, very best buildings there were, so why would you buy anybody else's? It makes me think back to when we acquired our first company at Walker & Dunlop and my father and my other partners in the business looked at me and said well how do we know how the people were trained, and how do we know how they approach credit, and I said well that's what underwriting is for. Talk to us about that decision in the early 1990s and why you pushed so hard to broaden out?
Jeff Hines: Well, it was a pretty existential moment for the firm. As you say, you need to be careful not to trip up on your own hubris and that literally was the argument. Why would we buy a building that someone else built? By definition it was inferior. And I’d say again, the answer is probably several fold, and one big driver, and this is also sort of a driver for us making a big international push. If you go back to 1990, as you say what we were in the 80s, the business we were in was building large CBD [Central Business District] architecturally significant buildings in U.S. CBD’s. That was the business we were in. And I’m sure you remember back then that was a brutal time for real estate. The business we were in was majorly overbuilt, horrendously overbuilt. So, it looked like, looking at our business it might be 20 years before a new CBD office building might have been needed, that's certainly what we felt at the time. So, the question is, do we sort of close-up shop and wait for our business to return or do we take our skill sets and do other things with them? And one of them was to start looking internationally and expand geographically but the other was to take our experience as developers and as property managers and apply that to acquiring other people's projects. I mean our skill sets allowed us to evaluate a mechanical system in a building we were looking to acquire and seeing: Was it a good system? What investment would it need to it? Could we improve the operation of it to improve the bottom line? Was the location a location that was improving or getting worse with time? You know our development experience gave us insight into that and certainly our operational experience gave us a huge amount of comfort, skill set to apply to the acquisition business. As we got into it, we really found that those skills really were translatable. And you know we really did, we were able to create something, something pretty unique going forward. But it was a two-year process, probably to get approval to buy our first building. Hasty Johnson our current vice chairman and I, you know, I think dad just got tired of us and said sure go buy one, and you know, hopefully, luckily things went pretty well after that.
Willy Walker: He probably gave you and Hasty a little bit of a hard time about thinking that you were from both Harvard Business School and that some case study told you, you ought to go do something like that. On that….
Jeff Hines: We did bring in a consultant, you know, a typical consultant, strategic consultant to help us think through that, so that was part of the process too.
Willy Walker: You probably got McKinsey in; you probably got some former classmates from Mackenzie. Exactly I gotcha, it's great. So, on that, Jeff you know, at the same time as buying other people's properties, you also really made a push into Europe. You'd already been in Mexico and you've done a large industrial development in Mexico, but you really in the mid-90s started pushing the euro. Before I joined Walker & Dunlop, I spent my entire previous career outside of the United States in Latin America and in Europe and I have some pretty good sense of how difficult it is to get things done in a foreign country, with a foreign culture, in many instances with a foreign language, for entitlement, etc., etc. How was it that you took this domestic focused business and had the ability to go and not only enter other markets? If I took Walker & Dunlop to, to Warsaw tomorrow I’d have to go find some great, you know, local Polish bankers and hire him or her, and I’m kind of off to the races. You're talking about going to Warsaw and building a building. You're getting entitled, you're getting local construction talent, what was it that quite honestly, allowed you all to have the confidence that you could go to Europe and be as successful as you were?
Jeff Hines: Well, it's really, we were also expanding into some of the emerging markets at the time in a pretty big way also. And it’s really, really, difficult Willy. I mean you look at our footprint now and dots all over the map and you know long tenure people. But boy, it is tough, it's blocking and tackling. You know we did it by organic growth and there were a lot of lessons learned along the way. You know buying out a contract in Spain is very different than buying out a contract in Beijing, and you just have to learn those.
I would say a lot of our organizational growth was led by people who had been with Hines for a long period of time. So, they would spearhead the effort and help spread the culture and our goal and where we become now is, you go to Hines Spain and you don't see a U.S. company, you see a Spanish company run by Spaniards. Same for India, China, we are, we try to become local players and so you hire local people. And you do that very carefully and you get people that you think will fit your culture and then you imbue the culture with them over time. But you really do have to be local, and it takes time. We made a lot of mistakes along the way, and you know, a lot of lessons learned to get to where we are today. But to do that organically is, which we think is the right way, the only way you can sort of maintain that culture, which is really the glue that holds everything together. To do that organically just takes time and effort and that's why there are not a lot of people that have what we have. It's really hard, it's really tough to do. It takes a lot of money and a lot of patience. You really have to be thinking long term in being able to do that.
Willy Walker: Laura as you think about that, and about the size and scale of Hines today, with over 4,000 employees around the globe. What's The biggest challenge on a go forward basis as it relates to both maintaining the core culture at Hines? But at the same time, you are so international and multinational that the culture has to diffuse somewhat as you go around the globe, does it not?
Laura Hines-Pierce: Yes, and no. I’d say, I spent my first five years with Hines working in our Chicago office as a Project Manager. Really sort of heads down on a million square foot office development there, and my next move really was working with David Steinbach who's our Chief Investment Officer and we spent really our first nine months essentially traveling the globe. I think I went to 18 different countries in nine months, something like that. And one thing that really amazed me was, as I walked into an office in Gurgaon, India or in Paris, or in San Francisco, that Hines culture really was there, the office was still very Parisian or still was very local. But I think, and really this stems from my grandfather was such a cultural icon in our firm, and I think had really such a strong pole, and then in a way that he really structured the business to allow autonomy to really imbue trust in leaders to go out and own, you know, own their business in a way and be autonomous leaders, while still being responsible for carrying that Hines culture, carrying that Hines flag, and some of the deepest values that we have around integrity and quality, I think has really you know, I think lasted and stood the test of time. And those leaders have then infused the culture as they've organically built offices and local geographies.
And yes, you know, I think it is absolutely the thing that I think we need to protect most fiercely. And frankly through COVID, it's something that we've drawn down on. Our cultural capital I think has been, I think it’s what’s allowed us to over the last year be highly effective because we have such a strong cultural glue. But we're feeling, we're feeling the fact that we've drawn down on that capital and you know, we do a lot of work pulling people together globally, either for internal conferences, for trips, for learning opportunities across the firm and obviously we haven't been able to do that, not in the same way, and I think that's something we're going to need to push into heavily as we come out of COVID.
And then having our cultural centers in our offices, you know we've hired 600 new people since the start of COVID so being able to have a cultural center where these new hires can come in and learn, feel that culture in the office, you know from the leaders, from the people that have the long tenure that we have. We do have, it is part of our strategy to support our leaders and in staying for the long term, because that's how you continue to maintain that capital and infuse that capital. And so, I think we have to be extremely focused on it, but I do think it's part of our secret sauce and I think, I think people across the firm feel a really strong ownership in carrying it forward. It doesn't just come from us. If it just came from us, we'd never be able to do this. It comes from leaders across the firm really taking ownership and responsibility and carrying the culture forward.
Willy Walker: Jeff, Laura just commented that you've grown the firm by 15% during the pandemic. What's the biggest challenge now as we get out of it, as it relates to, sort of, sustain growth, culture, what have you? I mean we've all been locked down for a year, you haven't been able to get on a plane and go visit with the team and to use the two places that Laura just said, India or in France. What are you feeling right now as CEO as it relates to what kind of the most pressing issue is to kind of get back up and get going post pandemic?
Jeff Hines: I would totally concur with Laura, its culture related. It's working on redepositing the culture that we have had to withdraw. And so, it is, there is going to be a focus on getting together and you know actively working on that, so I can't say anything more than Laura already said.
Willy Walker: And as you look out, I think, right now, and I want to get to the asset management side of it because obviously it's so much more than development. But right now, you have about one hundred and fifty, one hundred and fifty-six developments going on around the globe, which is just a staggering number. As you look out to what the pandemic has done, to the way that we work, to the way that we live, to the way that we shop. What are you looking at in those hundred and fifty-six that says, man we are just loving having that building or that mall or that Community coming online in the next year or two because we see great opportunity there?
Jeff Hines: Well, I mean the obvious answer that is the industrial side. COVID has obviously boosted E-commerce which is creating just unprecedented demand on the industrial side so we're certainly benefiting from that. But the harder answer is going to be a complex answer. A lot of it is we don't quite know yet. We know a lot of things that are already happening have been accelerated by COVID big time. Real estate as a service. Different product types sort of merging and becoming you know, having the definition be a little fuzzier between them going forward. The technology side. All of that is just been really ramped up by COVID. I mean just talk about your office for a second, you know as Laura said. Office is going to be, it's unclear what the effect on office is going to be but you know my feeling is, it's going to be less of the sort of person sitting behind a screen doing spreadsheets which certainly can be done, you know from elsewhere, and it is going to be creating places that people want to go to, that people want to go and share and interrelate and work on training that next generation or you know, things that really do move the culture along. Diversity and Inclusion are something that every firm is really trying to make a big push into; how do you do that in the world that we've had for the last year. So that's an important factor that I think again, people are going to need to get back together and to be able to make real progress.
Willy Walker: So Laura your Dad just talked about technology, and I know you all, are an investor in Fifth Wall and I had Brendan Wallace on the Walker Webcast about a month ago, and he was fantastic with Casey Berman from Camber Creek just talking about where Fifth Wall is making investments. What do you think sticks? What are you seeing out there? I’ve heard you talk about WeWork and shared office space and the fact that you know Hines needs to adapt to client's needs and being flexible for their needs and desires as far as your tenant base is concerned. What are you seeing from a when we look forward, what do you think's really going to change the landscape from a kind of a prop tech standpoint?
Laura Hines-Pierce: It’s a great question and I think you know as Dad said, I think a lot of things have been accelerated and made clear and are coming to relief, if you will, through COVID. You know I continue to think flexibility is going to be something that our clients and tenants are going to be looking for, and you know the way I would frame it is less in the sense of you know having FLEX office as an option. To me it's more, how can a building owner, and building manager really be thinking proactively to solve problems for tenants and clients that they don't even know they have. And what that means, what that requires, at least from our perspective, you know our vertical integration allows the opportunity to be flexible, to meet the... As we think about, as an example FLEX office, it becomes part of the offering that one can give to clients and tenants to potentially solve problems or meet needs that they have. Now I think when it comes to technology, I think that technology that is making space solutions easier, that is integrating the use of space with the actual needs of the tenant in a much more seamless way, those to me are the ones that are going to rise to the top and become really important.
I think one thing that we are working through from a building owner and manager standpoint is, and this is really across all asset classes, is how do you start to integrate all the different technologies that exist out in the prop tech world, in a way that become functional and start to become seamless for both the end user and then also for us, as a manager and owner. To me, that is some of the next step of how you take technology that is the building access technology, and technology around security, and technology around all the different types of technology that are being created out there and start to weave them together in an actual useful way.
Jeff Hines: I would also add that, in terms of what Laura was saying about knowing what the tenants need before they know it one of. The big things that we're just scratching the surface on and again our vertical integration, allows us, I mean potentially incredible volume of data that we have available to us over time and that data will become more and more important in terms of how we provide service to the tenants.
Willy Walker: So, Jeff just talking about the scale and how big you are today, and you know you launched the Hines Global REIT in 2009 right after the GFC and that has become a fantastic vehicle for you all. You've raised, I can't remember how many distinct funds, but you seem to have a strategy that as I read through your website, it seemed like there was a Hines Global, Hines Emerging Markets. You've got funds for pretty much everything out there.
What's your take of the capital markets today because you all have such amazing investor relationships and you have those relationships around the globe, as you talk to that investor base what are they looking for as it relates to not only core returns, because we've all seen returns come down, but as it relates to... Are they saying we want to be in emerging markets? We want to be in the established markets. We want to be in multifamily versus office. I know everyone's got a different opinion but give me a kind of a summary of what your take of where we are today coming out of the pandemic.
Jeff Hines: Well, everyone wants to be in beds and sheds, and no one wants to be in retail and offices.
Willy Walker: Does that present an opportunity for a firm of your size?
Jeff Hines: For sure of course. Change is generally good for us yeah, we're generally able to profit at the margin when there is change, so you know that that is that is good for us. But as you said, there are a variety of opinions. I think the one thing that if we're talking about the institutional investor world, there may be a different answer for say the retail or high net worth group. The institutional investors are, I’d say the one common theme is they all want to have us make their life easier. They are trying to reduce the number of managers they deal with. They want managers that can handle as you were pointing out the broad array of you know, be able to offer multiple options that that they can pick and choose from, and having relationships takes time and organizational efforts so they're all looking to become more efficient over time and again we think that's sort of an opportunity for our type of firm even where we are.
Willy Walker: Laura I just heard your Dad use the phrase beds and sheds which I have not heard before and I’m going to use it from here on out, I just love it. But you guys are big on -- you're focusing a lot on beds and you're also focusing on beds in the single-family rental space. What's your take on multifamily versus Single-Family Rental in the housing industry most specifically here in the United States?
Laura Hines-Pierce: I think we've been pushing into the multifamily space for the last almost 15 years and I think it's something that we continue to be interested in, and I think continues to be a big opportunity. You know I think the Single-Family Rental is something that we are very excited about and I think something that, a skill set that I’d say we've been developing over the last 10 years, as well as we've been pushing into a land platform and then also building our multifamily for rent platform. It speaks to some of the trends in my mind where asset classes are continuing to converge in some ways. One thing that we've been doing over the last 15 years has really been diversifying across asset classes, across property types again organically building our skill sets, and we're now at a place where our living platform, our industrial and logistics platform, and retail platforms as well are huge businesses in and of themselves. We've really developed a lot of organic know how in those areas. Now we're able to start converging some of that experience, where the opportunity arises whether that's multi-level industrial or how retail and logistics potentially start to come together. I think, single family for rent is another opportunity for us and where we see coming out of this market moment, I think we're going to see a lot of opportunity for that in some of the mid-tier cities and some of those areas. And so, this has been part of our growth story, and then having this diverse skill set that we've really built over the last 10 years allows us to drive into you know potentially new opportunities.
Jeff Hines: Just to emphasize that. To have the skill set to be able to do the entitlement for the putting together a big piece of land, to be able to handle the construction of the infrastructure, to be able to handle the construction of the houses, to convert to lease the houses and then to operate the long term, those are skill sets we all have we have experience in each part of that. When you think of it that's pretty hard to put that those different skill sets together. There aren't many people will have all of those. The demand is certainly there we’re super excited about.
Willy Walker: And on that Jeff given the scale of Hines. Given not only that you're diversified across asset classes, but geographies, and countries, etc. Does that give you the luxury to be fully invested all the time?
Jeff Hines: Yeah, I mean I think that's if you're in lots of geographies and you're got lots of product types, acquisition versus development. Real estate is a cyclical business and things come up, in favor, out of favor, and to be able to pivot on a dime to emphasizing different geographies or different product types or acquiring when it's not a good time to develop that's hugely valuable to us in being able to keep the organization fully active all the time. As cyclical as real estate is our number of people employed by Hines is not cyclical. I mean it's continual growth path.
Laura Hines-Pierce: Yeah, and I’d say essentially being diversified globally across asset classes and across the risk spectrum allows us to really pull the right lever in the right geography at the right time. And I think the other piece of it is being a privately held family business allows us to really be thinking for the long term. And so, the notion of being invest fully invested all the time, I think, is aligned with that because we are constantly thinking about generational growth. We're not thinking about quarterly growth. We're not thinking about, we are investing for the long term, and so I think that's the other piece that that really allows us to do that.
Willy Walker: Jeff, Laura just said generational growth. You took over the company from one of the true pioneers in the commercial real estate business to ever have been in the world and, by the way, I am sorry for the passing of your Father and your Grandfather back in August of this past year. But you stepped into those big shoes and have taken this company to a whole different level and it's astounding what you have done in your leadership of Hines. You're now faced with transferring leadership and ownership of the firm to the next generation of Hines's. What did you learn during the transition from your dad to you that you'll either repeat or not repeat as it relates to your own children?
Jeff Hines: Well, we’ve talked a lot about us on this on this call, and the thing to really stress is the way we make decisions at Hines is maybe a little different than other firms. We're almost Japanese in decision-making style, everything is consensus driven. We have an executive committee, which is the top 17 people in our firm that it really acts as our board of directors, more than a board of directors. It's actively involved in the details in the sausage making etc., The vast majority of decisions that are made in the firm, are made by that committee or investment committee. Both of which Laura and I have we have votes on various issues and they're blind votes and Laura and I each have one vote. Literally decisions are made by a very strong institutional team that's been with Hines for a long period of time. As much as you are nice to hand credit off to us, the credit really goes to the whole firm and that was maybe not quite as true when Dad handed things off to me, but pretty darn true back then.
The true answer is, we could mess it up big time and the firm wouldn't miss a miss a beat. I can be hit by a bus and truly the firm would not miss a beat going forward. So, you know I think it's, look a lot of it is cultural and personality wise how you deal with these rock stars that are helping us run the company. And as Laura was saying earlier, allow them the freedom and to operate as they see fit, but all within the construct of big strategic efforts that the firm is undertaking. So, I think it is managing not from setting edicts on high, but how you how you work with the senior team, and I think Laura’s doing that extraordinarily well. And so, it’s touchier, feelier side that takes some time and building those relationships. Laura talked about traveling around the world. Those relationships are really important, and those bonds are really important, and again she's doing it very well. She has a couple of brothers who are you know not quite as long tenured at the firm but they're at various stages of doing that also.
Willy Walker: How fun, is it for you to have your three kids all working inside the company?
Jeff Hines: It’s a lot of fun except when they are telling me what to do, or to get back to the office from your trip.
Laura Hines-Pierce: It’s easier to give him grief.
Jeff Hines: Yeah, I mean it's more challenging. It makes my life more difficult. Obviously, it's hugely satisfying and it’s just a wonderful thing that this this firm that we consider a family legacy, how we can, seems well on its way successfully to the next generation. That’s pretty satisfying.
Willy Walker: Well, in in talking about Laura and her brothers asking you to get back to the to the office I’m going to let both of you get back to your day and I’m just going to thank both of you for taking the time. It's a real honor to have both of you on it is unbelievable to see what your family has created in the firm and the presence you have around the globe. And, as it relates to architecture in sustainability you all have been just true leaders that have benefited all of us, and so thank you, not only for coming on and sharing your time with us today, but for all that your family has done to enhancing the built environment that we all live in.
Jeff Hines: Thanks Willy. We appreciate the time.
Laura Hines-Pierce: Thank you for having us. It was really great conversation.
Willy Walker: We will be back next week with another Walker Webcast. I have analyst from JP Morgan and Morgan Stanley coming to talk about the commercial real estate REIT and services industry, so please join us next Wednesday at 12:30 Eastern time.
In the meantime, I wish everyone a happy St. Patrick’s Day a great day. Tom Melody Happy Birthday again and to Laura and Jeff thank you both again for joining me today. Have a great one.
