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Despite the economic hailstorm of recent months, office development giant Hines has emerged relatively unscathed. And for good reason. Since the early 1990s, Hines' firmly established offensive and defensive corporate policies have stood the Houston-based company in good stead through difficult market conditions. With 33.6 million sq. ft. of office space developed in 2001, Hines finished first in NREI's 2002 ranking of the Top 25 Office Developers.

"Most of the policies that we've implemented were started back in the early 1990s when development stopped," says Hasty Johnson, executive vice president and CFO. "That time period had a big effect on what we're doing today. So even since Sept. 11, we really haven't changed very much."

Johnson attributes much of the firm's economic stability to its commitment to geographic diversification, especially international expansion. Founded in 1957 by Gerald D. Hines, the company originally concentrated on local real estate in Houston, but began diversifying across the U.S. in the mid-1980s. When the real estate downturn hit in the early 1990s, Hines began looking for global investment opportunities.

Now, in the past year alone, Johnson estimates that nearly 50% of the firm's growth has been outside of the United States -- primarily in Europe. And Hines isn't working on simple projects, either. "I call it the masochistic approach to real estate," Johnson jokes. "The more complicated and difficult the project is, the better we do."

Case in point: Hines' largest project currently under development is not in the U.S. The firm has partnered with two French companies to build the 8.75 million sq. ft., mixed-use Renault Project in central Paris over the next nine years. The site, just southwest of the city's center, will incorporate offices, residential complexes, retail facilities and museums. Groundbreaking on the $300 million project is scheduled for fall 2003.

Along with international expansion, Hines also increased its third-party development business beginning in the mid-1990s. Currently, the firm's largest third-party development in the U.S. is the $500 million redevelopment of the 5.5 million sq. ft. Renaissance Center, the world headquarters for General Motors, in Detroit. In addition, Hines recently completed the headquarters building for Morgan Stanley in midtown Manhattan, and worked with Lehman Brothers to renovate the new building when Lehman bought it from Morgan Stanley.

Third-party development has proved to be a sizeable portion of Hines' portfolio. While the company has taken on several high-profile third-party projects, including the Renaissance Center, it significantly curtailed new development over the past year.

In 1999, Hines started the development of 7 million sq. ft. of space, compared with 1.7 million sq. ft. in 2001. The drop in third-party development was slightly less dramatic. Hines started 6.1 million sq. ft. of third-party development in 1999, and 2 million sq. ft. in 2001.

Hines also has learned a few lessons on cutting its losses over the past year. "Clearly, Sept. 11 confirmed that we went into recession in the United States," says Johnson. "One of the things we've learned is if we are about to start a development but don't have a tremendous amount of money in it, we will cancel it and go ahead and take our loss. And we cancelled several developments after Sept. 11," including properties in San Francisco, Denver and Washington, D.C.

As 2002 unfolds, Hines is taking a wait-and-see approach to the economy and the accompanying development decisions. "We're just being very careful in the United States right now," Johnson says. "To me, it's a very confusing market."