When you consider that Howard Hughes came from Houston, the eccentric and domineering Texas city starts to make sense. Extravagant with overdevelopment in the heady days of the oil boom, stricken by the bust of the 1980s, it has clawed its way back to growth and prosperity. Now the city that ranks number four in size in the US wants to be considered worldclass and sophisticated. And it is. Even with signs of past excesses still clinging to a downtown skyline towering over a city bustling with much more than just oil wells or cattle.
‘Houston is upbeat now – such a difference from a few years ago,’ says Ruth Flournoy, a Houstonian and 16-year Technimetrics veteran. ‘There’s a very positive attitude.’
‘Houston is the best example of how to recover from an economic decline,’ agrees Kim Feazle, managing director of Hill & Knowlton and a recently returned Houston native. ‘When the oil bust happened, the whole economy was much more energy related. But now it’s diversified, and it’s gotten leaner and meaner.’
Feazle points out there were more IPOs than ever in Texas last year, and Houston boasts the bulk of them. The city has become a high octane blend of energy, technology and biotech companies owing as much to the Texas Medical Center – the largest in the world and the city’s biggest employer – as it does to oil. Sure, Pennzoil and Enron are here, but so is Compaq. Houston also spawned the growing consolidators industry, with the likes of Service Corp International.
As for the pool of investment capital, it has been growing and diversifying apace: ‘There is definitely money here, looking to be invested,’ Feazle says. Indeed Houston’s equity asset holdings have more than doubled since 1992 to $126 bn, a healthy mix of sectors and styles that stretch beyond energy and health. Led by Aim Capital Management, the mutual fund giant acquired last year by the UK’s Invesco to manage a combined $155 bn, the city’s thriving investment community includes the unique Fayez Sarofim & Co and insurance giant American General.
But Houston is still a product of its roots. ‘As one of the world’s major energy centers, naturally we have a strong energy contingent,’ says Greg Rosenstein of Churchill Group, the largest local independent IR firm. He points to specialists like Torch Energy Advisors alongside well-rounded players like Van Kempen American Capital.
Ken Dennard, managing partner of Easterly Investor Relations, a fast-growing local agency founded last year, cites Houston’s similarly fast-growing raft of smaller growth and theme-oriented fund managers, such as Lighthouse Capital. ‘There are a lot of very smart money managers based here who have broken off from the big firms to set up their own niche operations,’ he says, adding that the city also boasts a large venture capital community, including the likes of Equus Capital: ‘Houston is rich with oil money and medical money, ready to step up and support mezzanine financing.’
Churchill’s Rosenstein knows many sides of Houston, after working on the buy-side at AIM then moving to the corporate side of the Houston investment equation, Houston-based oil service company American Oilfield Divers. He says that while Houston’s buy-side has become more diverse, the sell-side has a definite energy focus, with many regional and national brokerages like Jefferies & Co, Prudential Securities and Oppenheimer stationing their energy analysts here. Merrill Lynch’s Houston equity research head, John Olson, is the natural gas industry’s premier analyst, while Morgan Stanley and Credit Suisse First Boston also have top flight energy analysts here, and PaineWebber just moved its energy group to Houston.
There are also local sell-side powerhouses like Simmons & Co, led by oil services guru Matt Simmons, focused firmly on energy. But other local firms look outward. ‘We’re a unique group – nationally oriented in banking, with research more localized in the Southwest, and brokerage customers all over the US and Europe,’ says Michael Chadwick, senior VP and managing director in Sanders Morris Mundy’s corporate finance group.
Big energy event
Meanwhile, Houston is also the setting for energy industry highlights like Dallas-based Dain Rauscher’s annual energy conference, or Salomon Smith Barney’s big energy event. Then there are large trade shows, such as the annual offshore technology conference. And there’s no shortage of schmoozing space in this city of 38,000 hotel rooms, 6,000 restaurants and over 100 golf courses.
Visitors here may see more of the city in a short time than they expect from speeding around ‘the Loop’ – highway 610. Like Los Angeles, Houston covers a lot of ground, with businesses scattered around five main areas: downtown, where most businesses are clustered; the Post Oak vicinity with its ultramodern Galleria hyper-mall, where headquarters include Raymond James and Southcoast Capital; Greenway Plaza, where Aim subsists and the Rockets play at the Compaq Center; the Greenspoint airport area, where Continental Airlines is; and finally the Med Center area.
Distances notwithstanding, a roadshow visit to Houston can be very fast and efficient. Hill & Knowlton’s Feazle describes a typical visit by a mid-cap client for a secondary offering last fall: fly in at 10:15 am; make a presentation for eight fund managers at the investment banker’s local office at 10:45 am; lunch at noon with a dozen or so managers at Van Kempen American Capital; then back to the investment banker’s offices for another private meeting before flying out to Dallas. Some other companies opt to host their own meetings for investors and analysts at a hotel such as the Houstonian, just off the Loop, or a private club such as the Houston Club or Coronado Club.
For all the icy plate-glass towers reflecting classy sculptures (like the Miros outside the Texas Commerce Tower), nothing can disguise Houston’s characteristic southern hospitality. ‘Fund managers here tend to be more relationship-oriented and want to get to know management well,’ remarks Rosenstein. ‘It’s certainly more informal, with more opportunity for informal meetings over lunch or dinner.’
Easterly’s Dennard says Houston’s fund managers have a unique ‘freshness’. ‘They’re appreciative of managements that come to town and take time to come and see them. You can get in front of the right person on the right day easier than in Manhattan.’
‘It’s just easy to feel welcome here,’ concludes Feazle.
Tourist information
Where to present
Four Seasons
1300 Lamar Street
Tel: +1 713 650 1300
Fax: +1 713 650 1203
The Houstonian
111 N Post Oak Lane
Tel: +1 713 680 2626
Fax: +1 713 680 2992
Sheraton Luxury
1919 Birar Oaks Lane
Tel: +1 713 840 7600
Fax: +1 713 840 8036
Alley Theater
615 Texas Avenue
Tel: +1 713 228 9341
One of the oldest theaters in the US
Where to stay
Doubletree Post Oak
2001 Post Oak Boulevard
Tel: +1 713 961 9300
Fax: +1 713 623 6685
JW Marriott
5150 Westheimer Road
Tel: +1 713 961 1500
Fax: +1 713 961 5045
Where to eat
Brennan’s
3300 Smith Street
Tel: +1 713 522 9711
Cafe Annie
1728 Post Oak Blvd
Tel: +1 713 840 1111
‘Houston’ cuisine in the Galleria area
Damian’s
3011 Smith Street
Tel: +1 713 522 0439
Post Oak Grill
1415 S Post Oak Lane
Tel: +1 713 993 9966
Places to visit
de Menil Collection
1515 Sul Ross
One of the world’s finest private art collections
Museum of Natural Science
Minerals, gems and live butterflies
Nasa Space Center
Ten, nine, eight…
