Listen and subscribe to Counting Capital for free on the following platforms:
Apple Podcasts | Spotify | Google | Amazon | Stitcher
Robert Brunswick:
Hello, I’m Robert Brunswick, chairman of Buchanan Street Partners, and I’d like to welcome you to our Counting Capital Podcast, which we created for our customers, their families, registered investment advisors, and lifelong learners at large, to really educate them about what’s going on in real estate investing, investing more broadly, and then with some specific businesses that we talked to you about. It’s my great pleasure to welcome a good friend and excellent businessman, Doug Holte, who I’ve known for years. So, Doug, this is a treat to have you here, and we’re going to have some fun kind of going through a little bit of your history, what you’ve been doing, thoughts on the industry, and more particularly what you’re doing today. So thank you for your time.
Doug Holte:
Terrific. Look forward to it, Robert. We’ve known each other for half a life now.
Robert Brunswick:
Half a life, that’s right.
Doug Holte:
30 years ago. Yeah.
Robert Brunswick:
Speaking about half a life, you’ve been in this business for 30 years now, plus. And it might be, I think just a good start for us to have you kind of share with everybody a little bit about your background in these 30 years. Where’d go to school? How’d you end up in real estate? What type of firms did you work for? Help us out getting to know you.
Doug Holte:
Yeah. Well, let me be concise here. So, I went to Southern Cal undergrad, intended to be a lawyer and thought I would work out of the country, and instead stumbled into real estate through a co-founder at Buchanan Street, Tim Hawthorne, who found me my first job in real estate, running numbers for Southern California developers who were looking for financings in the ’80s. And I found that the industry was intriguing to me in a way I didn’t really have any familiarity with because of the way it knitted together, at least the development side, it knitted together a sense of building communities and matching capital with opportunity and creating the built environment in ways that would be good for those same communities. And so, then I went to grad school at Harvard for generalist, a generalist business degree, an MBA, and found my way back to real estate, even after exploring other industries.
And then, I’ve had basically two and a half jobs since grad school. I spent over 20 years with Hines, a global real estate firm, It was national at the time, in working in development and investment projects, primarily in the office category, product category. And then, was recruited to join the Irvine Company here where I’d grown up in Southern California, in Orange County, and spent a decade there working for Don Bren and the Irvine Company as they were retooling their growth and innovation platform, and had a great experience there for a decade. And then left a couple of years ago because I had a sense that the marketplace for real estate was going to go through some dramatic changes, harnessing technology and cultural changes for good, I thought. And so, I began invest personally and privately in technology companies affecting real estate, which led me back to Hines. I was recruited about seven months ago to return to Hines, where I started my real estate career and helped them stand up a new business activity that’s based on venture-based innovation and sustainability.
Robert Brunswick:
Great. Well, we’re going to talk more about that. But I’m curious, what was it about the real estate profession specifically that kind of got you excited coming out of your graduate school experience and getting back to Southern California with your first job that you referenced? What was going on within real estate that appealed to you?
Doug Holte:
Well, to some extent I would articulate it now more effectively than I could have then. So, what I would describe now, that was, I think true-
Robert Brunswick:
In looking back.
Doug Holte:
In looking back, what I would say to my younger self is that I found it very fulfilling to be involved in building strong communities through real estate, engaging with a wide variety of participants in the business marketplace, from finance to government to design and planning and engineering, to construction, to winning customers through sales and marketing. So, the breadth of the required skillset, the breadth of the involved participants and stakeholders was intriguing to me. And again, this sense that you could also be of a place and contribute to making that place better.
Robert Brunswick:
That is not what you’re younger Doug Holte framed it as.
Doug Holte:
No, I would’ve said cool projects, that you get to learn a lot and have a diverse set of activities through the week. I understood that it was great to for me to be in a place where you were bringing teams together to deliver projects that had physicality and community impact. That much I did know.
Robert Brunswick:
With that frame of today and yesteryear, what really has changed in the real estate business from then to today, or from today till back then as you kind of reflect? What do you see the biggest changes?
Doug Holte:
Well, a couple of threads I would put in for discussion with you today would include, I think the real estate industry has become more consumer oriented than it was 30 years ago, thinking about the end occupier, the individual or the enterprise that actually pays rent to enjoy a product and a service in real estate. I think when many of us got involved back in the day, it was more organized around financial capital and placing financial capital into real estate assets and producing value from that, and splitting up the value from it. And I think over time, partly by culture and partly by technology, it’s become a product category that has these consumer-oriented attributes that’s interesting.
And the other thing is just the fractionalizing and the carving up of the capital stack has become more interesting, probably presents both obstacles and opportunities, and we can talk more about that as we think through today. The capital structures that were re-created from the ’90s forward offered more flexibility and specificity to real estate ventures, more interesting than maybe existed before the early ’90s downturn. But it’s also probably created some challenges for real estate owners and operators that want to imagine new business models that modify the income streams and change the financial outcomes, maybe for the better, but that don’t yet match up with the expectations of capital providers.
Robert Brunswick:
Yeah. I think today it’s a real business. It’s a real operating business. I know from when I started in the business similar to yourself, it was just very transactionally oriented, and it was a byproduct of just a need to office your business or whatever your particular real estate transactional needs might be.
Doug Holte:
Well said.
Robert Brunswick:
So, before we dive into the particulars, which I really look forward to getting into, I’d like to… If you kind of reflect on yourself and the skill sets that you have. The pedigreed resume. My gosh, the firms you’ve worked with, the mentors you’ve had, where you are today. So, what skill sets in particular would you bring out to our audience, our listeners that you have that has enabled you to excel in this space?
Doug Holte:
Yeah. I think it’s healthy for each of us at any stage in our career to be self-aware, not self-obsessed, but self-aware. So, appreciate the question, I’ll try to be balanced about it. I think that natural attributes that were helpful for this particular career included a certain element of enthusiasm, I think, to be an advocate and a promoter for real estate outcomes projects and teams. I guess I have the attribute of being enthusiastic and a team builder naturally, and have acquired certain skills to complement that over time, watching and learning from other leaders. I think that the willingness and the ability to think in a future-forward manner, but deliver results today is something that has to be channeled into real estate because it’s important to deliver meaningful value to imagined future states that don’t exist, whether it’s for a market or a product.
And then, just to be relentlessly curious. I guess I’m a very curious person about what happens next? What are the unmet needs in a marketplace, not just for a real estate product, but sort of deeper themes that drive what people want out of their community and their real estate? I guess those are things that are common threads for how I’m wired that have been beneficial. In some cases in the real estate business, back to your comment about the transactional nature of it, sometimes imagination about a future state can be a challenge if you’re dealing with individuals or stakeholders that are still just looking to close a deal. They want to know what can happen today, not how do we make things better tomorrow, but that’s kind of who I am and how I’ve invested myself in the industry.
Robert Brunswick:
Sure. So, good transition to the next set of questions I want to get into, your evolution of your career, and you were at… In many people’s eyes, the pinnacle of your career at the Irvine Company, prestigious job, prestigious organization. And you decided to leave there and to kind of move forward onto something new. So, what was really transpiring in your mind at that time in our industry and in your own career? We’ve had other guests who’ve talked about, they just reached a stage of burnout and they needed to take a break and try something new. So, I’m not so sure that’s what happened to you. But how much do you frame what happened in your transition from Irvine Company to going back to Hines in essence, but I know there was a transition in between there.
Doug Holte:
Yeah, that last piece of it was quite unintentional and unanticipated. The reconnect with Hines.
Robert Brunswick:
Sure. The reconnect with Hines, right?
Doug Holte:
Yeah. But when I had the privilege of being recruited to go to the Irvine Company, I had a friend that joked, a fellow we both know, Rick Gilchrist, who teased me for a couple of years in advance of that. He was at Irvine and he said, “Listen, why don’t you just come over here because you’re going to come here at some point? You grew up in Orange County. This is the nation’s greatest land developer and community builder, certainly from the 20th century and even into the 21st century. You’re from here, you’re going to come here. Why don’t you do it now?” And so in the end, I was recruited from Hines, where I was perfectly happy, even during the great financial crisis, as we at Hines were working our way through that challenge. But I was recruited to come over in 2010 to the Irvine Company with an exciting opportunity to be part of what Bren was doing, which he has episodically done from time to time, which is really retool his leadership team to consider growth and innovation opportunities.
And so, it was a great decade and it fulfilled opportunities that I both knew and didn’t know that it might, which included to not only come and work for an iconic leader and risk-taker, somebody who cared a lot about community building and community design, but also be part of, again, an era that was going to lean toward some new approaches to customer-based innovation, and feedback loops, and designing for the future market. So, it was a great decade. And at the end of that period, it really wasn’t that I was burned out in any way. It was that I felt… And I think it’s important for younger generations to realize, it’s okay sometimes to consider that you may have done your best work at a particular platform, and that it would be best for all parties to go consider other platforms, where you can recycle yourself.
And so my perspective, which I shared with my fellow leaders at Irvine and with Bren himself, was it was a great decade. I was grateful for the chance to be part of the long story, the long narrative of the Irvine Company. But I felt personally and professionally there was unfinished business to try to be part of some more significant redesign of the industry, and how it presents itself to the consumer marketplace.
Robert Brunswick:
So, We might call it the Doug Holte reset.
Doug Holte:
Yeah.
Robert Brunswick:
The let’s look for a new challenge and a new contribution to society and your life.
Doug Holte:
The Irvine Company was, at that stage, entering into a period that I think is very healthy and appropriate, a more stable state format of a portfolio management, asset management. And for me, as a professional and individual, I had an unspent energy and a set of unfinished opportunities in my own mind to be part of some maybe more bold expressions of modern contemporary real estate. So, I had to leave to go express that. And I spent a couple of years independently investing in real estate ventures, technology ventures, and exploring, sort of zooming myself silly with thought leaders, yourself and many others, who were comfortable being uncomfortable about what might happen next in real estate.
Robert Brunswick:
So, before we go there and to where you are today, I want to just take you back. You mentioned GFC So, the global financial crisis, which many of us lived through, what was that experience like for Doug when you were… because you Were at Hines at that moment.
Doug Holte:
I was, yeah.
Robert Brunswick:
How tough was that?
Doug Holte:
Well, very. It was unsettling for a couple of reasons. One, I don’t think anybody imagined that the entire financial system was that fragile. So, I think we had led ourselves to believe that with new financial products and platforms from the early ’90s nineties challenging period, I think we led ourselves to believe that the system by the late 2000s was stronger and could flex through disruption. But again, we all know what had happened. The world had gone crazy and gone long on a particular category of real estate product investment, and had imagined it could never whipsaw back with mortgage-related products. And-
Robert Brunswick:
Probably a great training ground of experience given-
Doug Holte:
It was. I think the interesting thing I would note, and maybe this is taking your question a little differently, is the lesson that many of us may not have recognized is how to stay on offense for possible inflection points coming through and out of a cycle. So, how to read the green shoots, if you will, when a market is beginning to show some stability that you can place new bets at new basis quickly. And so, it’s difficult in the middle of that kind of a storm to imagine doing anything other than playing defense, trying to restore some stability and liquidity to your existing portfolio. And I think a lot of us at Hines and elsewhere probably didn’t prepare to be quick enough on the draw by 2010, ’11 rather than ’12, ’13 to start placing new bets.
Robert Brunswick:
Great observation. So, let’s jump now forward to, we’ve been out of Irvine Company for a couple of years. You were exploring personal investment opportunities. You looked at things. You got involved in some advisory boards and some boards within prop-tech.
Doug Holte:
There were some interesting real estate investment opportunities that I thought… We’re being candid here on your Counting Capital Podcast. And it’s good for young professionals, I think, to know that it’s good to run down a route of something that may be a hypothesis and to be comfortable that the hypothesis may turn out to be wrong. So, in 2021, I spent a lot of time focusing on two categories that I imagined would be great opportunities for someone like myself and a couple of young partners that I was speaking to about doing together, that I thought could be really fruitful.
And they’re both effectively, I’ll call them recycling real estate, to use kind of an environmentally-sustainable term. We thought that we might raise capital around the de-malling of America, to replace abandoned or wounded shopping malls that really had outlived their idea, their usefulness, and recycle those into new product types, real estate products, housing, senior housing, student housing.
Robert Brunswick:
Doug, I think what you’re really describing is an adaptive reuse, if you will, of these malls.
Doug Holte:
Exactly. Exactly. To recycle a failed or an overbuilt product into something more constructive and useful for communities. So, who wouldn’t have thought that dozens or even hundreds of malls would not be ripe for redevelopment into, again, living products or other kinds of real estate? We had a sense of what we discovered is that it’s a fascinating thing when a marketplace category invents itself with constraints that it doesn’t know are going to prevent it from being recycled later. And in the mall world, that meant reciprocal easement agreements, which is the nature of the financing of malls in the ’50s, ’60s, and ’70s, was to attract department store anchors to come, and as the word suggests, anchor a new shopping mall in a new community, and then add other kinds of retail stores and food and beverage within.
But those initial department stores had rights to approve or disapprove any future redevelopment or replacement of the other department stores at any point in time, often indefinitely. So, for those of us who went into that marketplace anywhere from 2018 to 2021, we discovered individually and collectively that it’s incredibly difficult to redevelop a mall because you’re blocked by department stores that are looking for-
Robert Brunswick:
Encumbrances everywhere. Sure.
Doug Holte:
Yeah. So, unfortunate encumbrances. The second idea that was fruitful, I think, or will be fruitful that we spent some time on was recycling excess college real estate. I think the country has an opportunity to utilize well-located, but really wrongly utilized, I’ll call it, campus-related real estate. There’s 5,000 private and public colleges in the US, and probably half of them don’t need to exist in their current format because the nature of how adults are going to learn in the future based, based on technology and certificates and what have you. The whole industry is changing as to delivery of lifelong education and probably needs a lot less geo-based physical residential colleges, so there’s a lot of real estate that can be recycled. Those are the two things I was thinking about before I shifted my attention to prop-tech.
Robert Brunswick:
So, both of those investment thesises make all the sense in the world. There is parts of them that are continuing to evolve. It just probably, from a timing standpoint and a capital needs standpoint, didn’t make the most sense for you.
Doug Holte:
Or I could have spent a decade working on it, which would’ve been fine, but I got this call from Hines.
Robert Brunswick:
But before we talk about Hines, let’s talk a little bit about prop-tech during these two years, where you were looking at these new models, you were exploring prop-tech and how it was going to revolutionize certain aspects of our real estate trade.
Doug Holte:
Yes.
Robert Brunswick:
So, share a little bit about what is prop-tech and what were you doing within the space?
Doug Holte:
Yeah, so very brief backstory. So, from 2015 on at Irvine Company, we spent time and talent focusing on reinventing certain aspects of the work week. And so, we started to talk about workplaces, not offices, the work week, not just the work. And the intention was at Irvine, which led into the prop-tech work on my own-
Robert Brunswick:
And this is pre-COVID?
Doug Holte:
That’s right. So, we had a sense that what employers wanted, at least many employers and their workforce, were flexible options, physical and financial options for their workday and their work week, so that they could get work done in the place and time and with the team they wanted to get work done with. And that not everyone wanted a long-term lease. Even at Irvine, we started to explore shorter-term leases, flexible service platforms. And then when I left, my sense was that there was a lot of unfinished business, turbocharged by COVID, the pandemic interruption, there was a lot of unfinished business to create a more, what I call an agile work week. So, I set up a small company called Agile Workweek Investments.
The intention was to signal that we wanted to invest and advise in technology and real estate that was thinking about creating an agile work week, not just flex office, but actually using technology partnerships, new contract models for shorter-term flexibility, fully-furnished, move-in ready workspace that businesses could use and conduct their business. I mean, most people really wish there wasn’t as much friction and complexity and capital upfront, capital required to just get going in business in a workplace. So, that was the journey at Irvine that transferred over into the new private company, the freelance company I had, Agile Workweek, was organized around that premise that was speaking into the future of work.
COVID interrupted workplace patterns and workforce patterns, and showed people that they could get a lot of work done in a digital format, virtual digital format. It showed that they would like to have options to work closer to their homes with shorter commutes, and if they could utilize digital technology, they could organize their work week in a way that’s more intelligent and more healthy. That led me to invest in six or seven different technology companies. I moved away personally, and some of the rest of us did, from the word prop-tech into real estate tech or workweek tech, because it really was about looking for a new business model or a new OS, if you will, a new operating system for how, especially small to medium-sized employers would like to house their workforce and give them the technology that they need.
Robert Brunswick:
But great, what I’ll call it your second graduate degree for these two years because it really sets you up quite efficiently and instructionally to land your next spot, if you will, which really you weren’t planning to do. But Hines, your old alumni came along and said, “Doug, what are you doing? Maybe there’s an opportunity.” So, share with us how that came about and what is it today?
Doug Holte:
Yeah. I mean, you never know when a prior set of partners or a platform is going to reinvent itself. And in the case of Hines, what happened is I had stayed in touch with them informally about prop-tech companies I was investing in, projects I was having the privilege of advising on like Five Point and ocV!BE with some of my former colleagues at Irvine Company, who were inventing some really cool community-based contemporary real estate projects. And so, I was chatting with the Hines folks about that, and they came back to me and said, “Our third-generation leadership,” which is the grandchildren of Jerry Hines, the founder who are now business leaders in their own right, and three of the four grandchildren are now working full-time within the Hines business.
Robert Brunswick:
Let me stop you for a second.
Doug Holte:
Yeah.
Robert Brunswick:
Hines, because you and I know them-
Doug Holte:
Yeah. We should not presume that people know it’s not ketchup.
Robert Brunswick:
What is it exactly? What is Hines, just a quick overview?
Doug Holte:
Yeah. Hines is a three generation old real estate platform that started in Texas, building office buildings. It expanded nationally and then internationally, and now has $100 billion of assets under management in 30 countries for industrial apartments, office and mixed use. And so, that was a firm I was with for over 20 years. It’s a development investment and management platform, privately owned by a family that is now, as I was alluding to, is now moving into its third generation of leadership, which is quite remarkable for our industry. The third generation, Laura Hines-Pierce is the co-CEO and her two brothers, Matthew and Adam, are working with their father, Jeff Hines, who I worked with for years, the son of the founder. They were working toward standing up a platform for venture-based innovation and sustainability initiatives. And so, we entered into a conversation a year ago, and it led to some really great opportunities that we designed together, that led me to return to the firm and start up a new business unit for Hines called EXP, which we can elaborate on a little bit.
Robert Brunswick:
So Doug, you are the CEO today of Hines’ new company, which you helped start called EXP?
Doug Holte:
Yep.
Robert Brunswick:
So, what is EXP, and what is their goals, and how do you see this kind of playing out for you?
Doug Holte:
Yeah, it’s a really exciting stage for Hines and for the industry, frankly. EXP By Hines is a… I call it in simple terms, it’s a startup for startups. It’s a new business unit that will complement the existing geographic real estate business units within Hines by providing investment in venture-based innovation, so startups that are innovating to affect real estate in positive ways. And it will be investing in sustainability initiatives and technologies. So, the EXP term, we invented it, it’s a little cute, but it’s intended to signal that this is the business unit at Hines that will be exploring unmet market needs and market deficiencies in real estate, experimenting with potential solutions. So, exploring, experimenting, and then expediting sustainable outcomes.
So, the idea is that EXP is that we’re the business unit that is looking around the corner, if you will, at disruptive trends coming at the real estate industry, that can be converted into value and opportunity. And so, examples being the digitization of real estate that’s going to affect how people build things, how they operate, how they transact. We’re not even remotely done with digitizing and simplifying the conduct and transaction of real estate. So, we’re investing in innovative ventures, early-stage ventures that we think are going to be part of that trend toward more digitization, more virtualization, where real estate can be imagined, viewed and experienced in virtual formats as well as physical formats. And then, there’s lots of work to do to simplify the delivery of real estate products, meaning simplify construction and design and engineering and government approvals, and also reduce energy footprints and deliver cleaner energy. So, all of those are opportunity areas for EXP to invest in or incubate ventures to deliver solutions.
Robert Brunswick:
So, I’m hearing venture investing. Is this just the Hines family money or is this for third-party investors? And then, are you trying to take these ideas and put them on the footprint of the existing Hines portfolio? Or is that not a requirement in your investment consideration?
Doug Holte:
Yeah, great questions, Robert. So, the great news for EXP is that the family has allowed us to present ourselves as mission-based to deliver profitable outcomes for Hines and for our real estate portfolio. So, to deliver enhanced performance, alpha as they call it, during our ownership period through venture-based innovation that helps drive results for our rent-paying customers and our capital-providing investors. So, EXP will build and buy ventures that improve the performance and the growth of the Hines real estate portfolio itself. But the mission also includes taking the best of those ventures that are scalable and valuable to other real estate companies and extending and licensing those inventions or ventures to the full marketplace.
So, we’re very hopeful that over time, especially the initiatives on climate tech and energy tech, that we’re going to need to partner, actually. It’s very interesting because in venture innovation different than real estate, most every new venture has a syndicated collection of investors that are sharing in risk with them and helping them scale and get access to markets and customers. So, we’re playing into that with EXP to be a good partner with, in some cases, other real estate venture investors. JLL has a real estate investment arm. Brookfield has one. We may end up partnering with other real estate players that have venture arms.
Robert Brunswick:
Doug, so much has been talked about with the transformation of office. What’s going on with office? Is it going to evolve? Obviously, was it pandemic-driven? Was it an evolution that was already underway that the pandemic just expedited? So, as you think about this investment arm of Hines, how much of it is really oriented towards office because of the predominant foundational office tenants that Hines has had versus just greater real estate?
Doug Holte:
Well, for Hines, for context, only about half the portfolio globally is now in office real estate. It used to be 90% when I was there when I started over 30 years ago. The technology-related innovations and new business models that we’re looking to invent or invest in because some of them are not techie, they’re just new ways of arranging a business model. I mean think about it, is Uber a technology company or did they use technology to modify the way that people got from A to B in a car? So, we’re looking to create new business models and use technology to drive innovation, but it will affect the office business, and I’ll come back to that in a moment. It’ll also affect the way people live. So, we’re intrigued with the connection between sort of a work life balance, the way people live, where and how they live, where and how they work, and how those connect through technology and culture.
So, I think you’ll see EXP invest in ventures that cut across at least lifestyle products, let’s call it hotels and apartments, as well as office products, offices, labs, sound stages, places that people work. So, I think you’ll see a cut across. Whether the technologies intervene in a bold way in the movement of goods, like through warehouse and logistics properties, not sure, not so much. But we think that EXP can introduce, again, venture-based innovation and sustainability, commercially-minded sustainability into mixed-use office and apartments.
Robert Brunswick:
So, I know you have an opinion on this and a very well-founded perspective. So in the ’90s, crime, commute and communication, the three Cs were the catalyst to the demise of the CBD office. So, we know that didn’t take place and it was a cycle and it was-
Doug Holte:
It was a bad bet.
Robert Brunswick:
So, as we think about today’s views, broadly today’s views of office, I’m curious just your perspective on the evolution of office, its survivability or its ultimate transformation?
Doug Holte:
If we could create a new operating system and get sufficient agreement from providers of capital, the end users who rent and utilize physical space, and those who create and deliver the physical space, the real estate products, if we could get a consensus among them, I think there is a new operating model that would be quite valuable. And that is to have shorter-term contracts, unbundled and rebundle both services that people can select from a la carte during their work week, and have landlords play a bigger business role in the efficient conduct of work and life. That’s a big statement. What I mean by that is we think landlords have generally looked to match up capital with long contracts and create financial value. And it hasn’t been generally thought of as an operating system that’s agile and iterative, where you’re listening to customers, what they wish they had in their daily or weekly life, what you can attach them to that maybe you don’t own as a service, but you can curate for them.
So, we think what’s going to… At Hines and at EXP by Hines, we think what’s going to happen is a few companies need to lead out, both occupiers and landlords, and then convince capital to join in on resetting the capital table to be prepared to some extent, residential-ize or hotel-ize the-
Robert Brunswick:
To allow for?
Doug Holte:
To allow for flexible stack of short, medium, and long leases, low to high service bundles, connections into health and wellness and other sort of services that you need to have a functioning life and a functioning employment group, a functioning workforce. So, we think there’s just a lot of connectivity that’s going to press developers and landlords to become better. It may lead to some new organizational models within real estate of what services we promise. It’s going to be really disruptive. It’s far from over. So, the future of office to us, broadly speaking, and I don’t speak on behalf of Hines, but in this instance I will because all you got is me here in the room.
I would say probably half of office is functionally obsolete. And the question is of that half, how much can be retooled into something useful in the same box or it needs to be replaced by a different box. So, buildings that were built to house people that pass paper or send emails to each other within the same space and have no other service model are going to be at risk of being financially obsolete, functionally obsolete. We’ll see who steps up. The challenge right now is the investment of capital into consumer-based services and experiences, climate-based improvements to cleaner energy and less energy. The capital requirements are going to be significant to sort of reinvent office as a product category, at the same time that rents are under pressure for most of them because of insufficient demand.
Robert Brunswick:
So, this vision of yours, if you will, this thesis that you’ve laid out, it seems like Hines is the optimal steward given their influences over debt and equity and capital. Their stakeholder position of controlling so much office. So, as you set this business model up with them, was it envisioned that they would bring that influence to bear as they started to talk to capital?
Doug Holte:
Well, I guess that was maybe a gift with purchase. I think they were asking me to come back to stand up this venture-based innovation and sustainability platform. And in the course of that, we’ve been talking, it’s only been seven months together, about how Hines can express that medium to long-term innovative spirit and attitude toward new business models, how can we express that into the future of a portfolio for a future-proofed office? I think it’s going to take time. There’ll probably be local and regional players that are inventive in how to reproduce office space and services that addresses the preferences of the workforce.
Frankly, in my opinion, employers also are going to have to stand up and step up to new technologies and new business models themselves. I think a lot of employers have been lazy in saying, “You either all have to come back to work every day,” or, “No one has to come back to work.” And most employers, from my perspective, have not taken the time and exercised leadership to look for technology that allows their workforce to come together in ways and with tools that drive that business, that company’s business objectives, and then organize their space around that and their work week.
A lot of businesses have just asked the workforce to decide what they want to do without giving them really guidance and choices. So, hopefully, landlords, a few, Hines won’t be the only one, but hopefully there’ll be a few landlords that really step forward on retooling office. But it will require more capital, new ways of thinking about contracts, potentially new ways of bundling services that are not familiar in your traditional property management business model. So, it’s going to be disruptive probably for another decade, I would say, of sorting out what’s the right answer or answers.
Robert Brunswick:
You got into the real estate business. I heard words like enjoy the people interaction, the leadership, the community influence, the learning, the entrepreneurship. So, as you think about fast-forward to today and your favorite aspect of your job and what you’re doing now at this, where you have all that knowledge base that you’ve taken on over the years. What is the most favorite thing about your job today that you enjoy?
Doug Holte:
Oh, I think it’s definitely being able to engage with remarkable inventors who imagine a future that is healthier and more logical, and less full of friction and stupidity. And so those younger, not always young and age, but young at heart, those inventors that ask questions like, “Why does the real estate industry do X that way?” Or, “Why doesn’t the real estate industry do Y that other industries are capitalizing on?” Those inventors, I think are remarkable. They provide remarkable energy to people like me. They’re not looking to just wash, rinse, repeat. The way that our industry has largely historically done it is if you do something well, let’s do it 50 more times. And these inventors are look…
And the entrepreneurial early-stage inventors, startup leaders, I mean they’re definitely interested in something that’s scalable and repeatable, but they’re looking for breakthrough solutions to radically eliminate friction and unhealthy stages of your daily life. And they’re great at transferring lessons from not… The other thing I’d encourage young people to always think about is spend some time intentionally learning about industries outside of your own. A lot of times we’ll talk in our younger careers about networking and staying knowledgeable about what’s happening in your industry. I think that over time produces insular behavior. And so the favorite part about my job now is hearing from entrepreneurs and inventors who are injecting ideas and disruption from outside real estate for the good of real estate.
Robert Brunswick:
So, you’ve touched upon it briefly, but if you were to message as we wrap here today, to your family, to your friends, to young people getting into business in general, forget real estate, what might be some tips of the road that you would share with them? I mean, you just shared one. It’s have a broader sense of industry and experiences?
Doug Holte:
Yeah. It’s kind of like a going to the library with a library card where you get to borrow the book, not buy it. Borrow best practices from great leaders who are different than you, borrow from other industries that are unfamiliar to you, but might have gone through disruption and new business models. Stay aware of and alert and curious to other industries, and borrow from them. Try things that might fail and realize that, we say it, but you have to live it and embrace that when something fails, it almost always brings information with that supposed failure that leads you to a new solution or a new positive outcome. So, failure is rarely just a complete dead end. Certainly, the entrepreneurial world is used to that. Real estate, not so much. We don’t tend to celebrate failure of projects as leading to something else or learning something, but I’d say that it’s good to keep that in mind.
There’s no question that personal integrity remains critical, that you message well, but that includes sort of, I’ll call it, smart transparency. You don’t need to be transparent about everything to everyone and every audience. Be wise about what you’re sharing and thinking about. And I would also say that even at this stage and age, I’ve learned the importance of being comfortable in being uncomfortable, in being positions where you don’t feel enough that you have enough credibility. None of us want to overestimate or represent something that we’re not prepared to do or know. But I think it’s really great to try to move into areas that are pressing your own personal boundary and treat that as an opportunity to demonstrate to your partners and other leaders that you’re a lifelong learner. And so, I think I just can’t emphasize that enough that the real estate industry is at a point in its maturity, I’ll call it, where we collectively can challenge each other to be uncomfortable, that the future is going to be different. And then to try to, as we say at EXP by Hines, we’re trying to run toward the future, not away from it.
Robert Brunswick:
Beautiful. Thank you for your thought leadership.
Doug Holte:
Thank you, Robert.
Robert Brunswick:
Excellent. No doubt we had good learning today. The takeaways that Doug has provided us with, the learning that we’ve done together has been wonderful. I know I’ve enjoyed it. I’ll look forward to seeing you all at our next podcast as we join in for another learning experience together. Thank you.