Larkspur Looks to Grow

A guetroom at the Larkspur Hotel Mill Valley

What about continuing the acquisition strategy with all the distressed assets out there?
Weíre looking at lots of opportunities and some portfolios, but nothing ready for announcement yet. Itís frustrating, there are a lot of distressed hotels out there, but things really arenít happening. The transaction market is still dislocated. We do have capital available with a long-term partner and are ready for the next cycle.

I want to ask about whether this current cycle is almost over, but first tell me about how you got into this industry?
I was in investment banking and did financing for hotel companies. So I got into hotels and gained knowledge of the business and got an understanding of how to raise money for a hotel company. But I was more interested in my clientsí business than financing for them. The culture that I touched on in investment banking was more win-lose, more opportunistic and exploiting opportunities and people. I wasnít as comfortable with that. I wanted to do something I felt better about, put people first and the hospitality business definitely does that. Bill Kimpton was a client of mine and I got close to him and he was my real role model; he had been an investment banker, too.

Did you ever tell him that?
I never got to go back and thank him and tell him what we created was inspired by him. I regret that, but we did keep in touch.

You sold a big chunk of your portfolio in 2007, at what amounted to be the exact right time. With your background, did you see this coming?
Itís easy to say in hindsight, but I think I saw it coming. Although I think it was more luck and maybe some sense. As a fundamental investor and a financial analyst, I knew what was happening wasnít sustainable, but these bubbles sometimes last a long time. Knowing itís a bubble is one thing, guessing when it will end is another.

What were the causes of this collapse?
Greed and excess. There was capital flowing into really risky assets, with no appreciation for how risky they were.

Is the worst behind us, and are you poised to take advantage of the climb back up?
Itís still early. Weíre still in midair. Itís either going to be a really calamitous landing with a lot of train wrecks yet to come, or an engineered soft landing and probably some sense of both. We want to be ready and the one thing we do know is at some point what isnít sustainable today is the lack of transactions. They will be attractive in our niche, weíll go for broken and independent assets, ones with no capital, no flag and no access to institutional capital. We can create a lot of value in that space. Development may be the next area of opportunity. We may start a development program now and look to be opening hotels in 2012, because this cycle still has a downlink to go and more time in the trough.

Your hotels have many eco-friendly features. How important is that to you?
Like everything we do, it helps if you have alignment of your values and your leadership. On a personal level, my wife and I are really into sustainability. We collect rainwater, have solar power and we brought that to our business. Weíve always done things and had a view toward sustainability, from bamboo flooring in the 1990s, all fluorescent lighting, low-flow fixtures, solar installations. Our company sustainability program is a pretty big umbrella; we look at having a positive impact on the community and the environment. Itís not just green; we also do community engagement and charities. Toys for Tots and Habitat for Humanity are part of our sustainable efforts. We also have a health and wellness program for our team members. Itís not just the traditional stuff. Itís all about making a positive impact for the future.

But none of your properties are Leadership in Energy and Environmental Design (LEED) certified?
My take on LEED is itís the last thing I have any interest in doing. The money to become LEED certified, for paperwork, administration and testing, can be a few hundred grand for any decent-sized project. Iíd rather spend money on actually impactful, sustainable features or installations, rather than a four-letter acronym. My approach at the end of the day is whatís authentic and making an impact, not doing LEED and checking a bunch of boxes.

Itís a good thing overall, just not for us because weíre different. Weíre independent, nimble and really look to make connections. Our guests figure out what weíre about, experience it and like it.

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