Means and Ends 

Hill's climb symbolizes a decade of deals

Hill's climb symbolizes a decade of deals

What’s the deal with H.G. Hill’s? It’s the question nobody was asking 10 years ago and everyone was asking by 1994. We know the answer now, and it makes for a tidy parable about what has become of Nashville business since 1989.

This town has always been 10 years behind. We became Eisenhower Republicans in the ’60s. We got hippies in the ’70s. We did the whole Studio 54 thing in the ’80s. And we have played our Trump card, practicing the Art of the Deal, in the ’90s.

Nashville went from doldrums to deal-making after the recession bottomed out in the early ’90s. For an entrepreneur, the deal might be—to take the Scene as an example—a buyout and restructuring of a lackluster business, done with Other People’s Money.

Things still work that way, but now another variety of deal overshadows the landscape. It’s the deal that takes you out of the picture, leaving you much better off but leaving Other People from Other Places in control of your business—and in charge of more and more of the local economy.

Which brings us to Horace Greeley Hill Jr., who had been running the H.G. Hill Co. for 47 years in 1989. He was as old as the century, and the company his father had started was five years older. Hill was the Boo Radley of corporate Nashville—not exactly a recluse, but a retiring character who rarely sought public attention. Many who shopped at the 14 H.G. Hill supermarkets around the city had no idea that he was still alive.

At the company’s offices on Sidco Drive, though, nobody underestimated the Old Man. He ruled the company personally, by Old-Nashville rules. No beer was sold in his stores, and the stores were closed on Sunday. In the company’s commercial real estate business, handshake leases remained in effect. A nephew, Wentworth Caldwell, who had spent more than 20 years becoming the heir-apparent to the childless Hill, had the nerve to redecorate a store once as an experiment. Hill took one look, and ordered the place restored to its prior decor, which had not changed in decades.

Hill had done deals in the distant past, as when he created the Hillwood neighborhood out of a pasture in the 1940s and ’50s. But by 1989, it had been six years since a new store had opened and much longer since the company had bought, sold, or developed any significant amount of real estate.

In their stolid stance, Hill and his company were emblems of the dominant culture of Nashville business at the time. Granted, there was an element of caricature in that image, but the local “bizpigs” (as this paper called them) were living through a time of quiet desperation in 1989, and many were in a position to make deals only with sullen creditors.

It was workout time. The bank you had done business with for 20 years, or perhaps the bank that had recently bought that bank, would send a stranger to your office. He or she would inform you that you were now a workout customer—that the bank considered its loans to you in trouble. Even if you had always paid on schedule, the bank might decide you were a bad risk because of the business you were in, especially if that business happened to be real estate. The workout guy or gal would sit across the desk, calmly discussing the relative merits of bankruptcy or foreclosure, exploring what steps you and your loved ones might take to scrape up enough assets to avoid ruin and disgrace.

“Those were the days of the ‘stay alive till ’95’ syndrome,’ ” remembers John Hardcastle, president of H.G. Hill Realty Co.—which, of course, never had a visit from the workout ghoul because it hadn’t borrowed money to build anything. The bad news kept blaring from the business pages: Bad loans sent First American stock to below $5 a share; Metropolitan Federal Savings & Loan was taken over by regulators; Dollar General faced possible bankruptcy due to competition from Wal-Mart; Nashville was cited as the nation’s second-worst real estate market by the Federal Deposit Insurance Corp.; and on and on.

While the establishment looked inward, outsiders came calling. In November 1991, Fortune placed Nashville at No. 5 in its “Best Cities for Business” rankings, calling it “the sleeper on the list, a newcomer to the top 10 and a city likely to take off in years to come.” Our great virtue was not so much who we were but where we were: at an interstate hub, and (for the moment) a hub of American Airlines’ routes. Businesses took heed, and ordinary folks noticed too. Early in 1992, Ryder Truck Rental ranked Nashville third nationwide in popularity among relocating movers.

The signs that business was on an upward curve grew more evident well before ’95. Music Row celebrated as Garth Brooks reached megastardom, and country music’s share of the nation’s record sales more than doubled from 1989 to 1993. Hospital Corporation of America went public for the second time in 1992, in a deal that minted millionaires right and left. Banks found their feet once more, and real estate stabilized as well. It certainly didn’t hurt matters that the business community had helped propel one of its own, HMO mogul Phil Bredesen, into the tainted office of mayor in 1991.

New rules, new rulers

On Sept. 5, 1993, H.G. Hill Jr. died at the age of 92. It would be a poetic conceit to claim that a new era in Nashville business began that day, but it’s not so far from the truth. Gone was the last Brahmin to run a local business in the old style. Soon to come were deals upon deals. A month after Hill’s death, HCA announced a $5.7 billion merger with Louisville-based Columbia Healthcare Corp.

Deal-making had been part of the city’s health-care subculture for nearly three decades, but now it went into overdrive. Columbia/HCA recombined with former spin-off HealthTrust Inc. Surgical Care Affiliates Inc. sold to Birmingham’s Healthsouth for $1.2 billion. OrNda Health Corp. sold to Tenet Healthcare of Santa Barbara for $3.1 billion.

Grocers didn’t deal in such numbers, but they did deal. As Kroger and a host of new entrants spent tens of millions on marketing and new construction in the Nashville area, Wentworth Caldwell took the helm of the Hill stores. In the summer of 1994, he and Hardcastle started by reversing the store’s longtime policy regarding beer sales and business on Sundays.

Then the grocery chain became the first in town to accept credit cards. It unveiled a snappy ad campaign. It added delis. Caldwell finally modernized the decor. The realty wing leased land to Blockbuster Video, which the departed leader had banned as a tenant because it offered R-rated films, and to Ruby Tuesday, which had always been unwelcome because it served liquor. The realty company even announced plans to subdivide the Old Man’s 129-acre estate into a posh development called Hill Place.

The Hill heirs were acting in the spirit of the times, finding new ways to make money in a booming economy—and making themselves known in a community whose ruling oligarchy was rapidly morphing into a quasi-democracy of landed gentry. Hardcastle would later marvel at the number of young millionaires able to put down $300,000 or more in the one-day land rush that sold nearly all the Hill Place lots in April 1995.

The market for initial public offerings of Nashville companies heated up, reaching a fever pitch by the time Monroe Carell’s Central Parking Corp. went public in October 1995. Carell, whose fortune would reach more than $400 million after the IPO, was part of a new breed of elite Nashvillians—a native, but completely self-made and a breed apart from the genteel country-clubbers who had controlled the city in which he grew up.

Other businessmen had been on the scene for a long time but found opportunities in the ’90s to raise their profiles. Case in point: The Cal and Steve Turner families of Dollar General Corp., which not only recovered from its near-death experience but became a Wall Street favorite. The Turners’ holdings in Dollar General, valued at $172 million in August 1991, were worth $618 million by May 1997.

Bredesen had his own deals afoot, and the bizpigs bellied up to support his vision of pro sports in downtown Nashville. Local powers like First American, now in fine health, and Columbia/HCA’s Tommy Frist, whose net worth was swelling by the day, committed millions toward efforts that had been pipe dreams in 1989. In fits and starts, over plentiful citizen opposition, the old and new powers-that-be brought professional hockey and football to town.

Deal, ante, fold

Prosperity was not universal—think Shoney’s, think Service Merchandise—and it did not necessarily last. A couple of years ago, a friend dubbed the Burton Hills office park “High-P/E Plaza” in honor of the absurd market valuations of the public companies located there: CCA, Phycor, American Healthcorp, and Clintrials Research. After Phycor swooned from $41 a share to $6, and Clintrials fell from $50 to $3, with the others also way down, the collective price/earnings ratio at Burton Hills reached a more reasonable level.

But the deals just kept coming. The Ingram family, whose distribution megalith had grown tremendously under the rule of E. Bronson Ingram, broke up Ingram Industries after Bronson’s death and took Ingram Micro public. When Micro’s stock was flying high, the family fortune reached $4.4 billion. In a more baffling deal, Gaylord Entertainment sold off its crown jewels, cable networks TNN and CMT, and then shut down the Opryland USA theme park, leaving the city’s tourism industry in tatters.

By the time it became clear that deal-making was depriving Nashville of much of what made the city feel like home, it was too late. Out went Purity Dairies, a family-run institution in Nashville since 1925, sold to an Illinois conglomerate in late 1997. Out went Equitable Securities, sold to Atlanta’s SunTrust, which had already bought Third National Bank in 1985. Out went First American, the last large, locally owned bank in town, sold to AmSouth of Alabama.

And out went the local control of the H.G. Hill grocery chain, which had for so long been a frumpy constant of modern life. Oklahoma’s Fleming Co. took over operations in a deal that the Hill company’s family shareholders did not enter into until after the death last January of H.G. Hill’s widow.

What remains of the Hill empire are real estate holdings worth well over $100 million. At a recent campaign event, mayoral candidate Bill Purcell praised the development of one Hill parcel, set to open in Hillsboro Village later this summer, as an example of how business ought to get done in this town. Hardcastle and his colleagues have communicated with the people affected by the project, designed a building in harmony with its surroundings, and considered the community a stakeholder in their business plans, Purcell noted.

In a decade, the Hill company has gone from torpor to turbulence and beyond, ending the ’90s as a paradigm for the future after casting off its long adherence to the past. It remains to be seen whether the Hill way of doing business remains emblematic of the Nashville way in another 10 years.

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