Earlier this week I wrote about the greening of the hotel industry, based on a Washington Post article on the makeover of The Bethesda Doubletree, the hotel owned by my company, Thayer Lodging Group.

That blog post earned a nice mention by Anne Schroeder of the Politico, who writes their Shenanigans column. Here’s what Anne wrote yesterday:

Fred Malek Blogs?

The man who has done everything under the sun in Washington — though possibly best known for his philanthropy, his leading role in returning baseball to D.C. and his advising top Republican officials and presidents — has gotten all Gen X-y on us, admitting Al Gore got to his staunch Republicanism.

And his views on air, too.

“Did Al Gore get to me? Sure — it proves even Democrats can get it right sometimes; and in my view, Mr. Gore earned his Nobel for drawing attention not only to global warming but to the environment overall,” Fred Malek writes about his new goal of hopefully becoming the leader of going green within the hotel industry.

“Ever get sleepy in the afternoons? Wonder why? Maybe it’s more than the big lunch. Maybe it has something to do with the air you breathe. We are convinced that we can differentiate our product and improve preference for our hotels through these measures. Green means more than improving the environment — it can also create more green on the bottom line,” he writes.

Agrees a D.C insider: “Fresh air is something this town sorely needs.”

It was a gracious and fun item in Anne’s column. But more important than my blogging, I hope it sparks greater discussion about how going green can help consumers and businesses alike.

Today’s Washington Post carries an article on the makeover of The Bethesda Doubletree, the hotel owned by my company, Thayer Lodging Group. Here’s an excerpt from the article:

Mood lighting is the latest fancy touch added to the Doubletree by its owners, Thayer Lodging Group, the Annapolis hotel company co-founded by longtime Washington investor Frederic V. Malek. Over the summer, Thayer installed a purification system in the hotel’s meeting rooms to help keep air fresher and cleaner with an eye toward drawing more business customers.

The Post piece discusses our focus on providing a healthier and relaxing alternative to typical hotels. That it is, but there’s more. Our goal is to become the leader in the “greening” of the hotel industry. Surprising for this conservative Republican? Yes. Did Al Gore get to me? Sure – it proves even Democrats can get it right sometimes, and in my view Mr. Gore earned his Nobel for drawing attention not only to global warming, but to the environment overall.Perhaps the most important part of our efforts at Thayer Lodging is the impact not only the environment but also health. Not only are we providing healthy menu alternatives but we’re also purifying the air in meeting rooms and guest rooms. Typical hotels re-circulate the air throughout the day leading to a depletion of oxygen. Ever get sleepy in the afternoons? Wonder why? Maybe it’s more than the big lunch. Maybe it has something to do with the air you breathe. We are convinced that we can differentiate our product and improve preference for our hotels through these measures. Green means more than improving the environment – it can also create more green on the bottom line.

(Originally posted at the Republican Party of Virginia’s blog)

What a tumultuous month it has been for Republican U.S. Senators. Almost overnight the climate has changed dramatically with the planned retirement of Senators Warner and Hagel, and the resignation of Larry Craig. As Republicans, we can view this as “Woe is us,” or “Hooray for us.” I view it as the latter because we can and should hold all three seats, and we have some excellent candidates. I wanted to share with the readers of the Republican Party of Virginia’s blog my thoughts on the style of the departures and the prospects for the future, especially here in Virginia.

Let me start with Larry Craig. Of course there is no comparison whatsoever between Craig and the Warner/Hagel departures. While all of us have erred at times, in my view Larry Craig acted disgracefully in his behavior and in his expeditious guilty plea. Of course he was subjected to a sting operation, and it is unlikely he would have been convicted if he had fought the charge. At my alma mater, West Point, we were taught in the cadet motto to “have the courage to choose the harder right instead of the easier wrong,” a phrase so ingrained in me that it adorns the plaque in my honor at the Malek Tennis Center at West Point. Larry Craig chose the easier wrong, and he has put his party and the Senate through a humiliating spectacle. He should resign as he originally announced.

The polar opposite of Craig is John Warner who not only has served with the greatest honor and distinction in his 29 years in the Senate, but came to the most difficult of decisions for any leader: Depart at the top of his game and create the opportunity for a new generation. He is a Senator’s Senator, and a consensus builder, and a great champion of U.S. military forces and national security. He announced his ‘08 retirement as he should, with the greatest of honor and class. He placed country ahead of politics or personal in the best spirit of the Party of Lincoln.

Chuck Hagel has also served two terms with strength and independence. As Ambassador to the Economic Summit of Major Industrialized Nations in 1990, I had the good fortune of selecting fellow Vietnam veteran Chuck as my deputy. He proved to be an effective manager with a unique blend of toughness, charisma, and judgment. He was even able to make me look good – a tall order. In recent years Chuck’s reservations about a U.S. policy in Iraq grew to the point of disaffection. I believed he was also fed up with the inability to get much done in the Senate. While I disagree with him on the conduct of the war against terror, and in particular Iraq, I deeply respect his independence and conviction. He is making the right decision for his family and himself, and his future will continue to be bright. I hope he will join John Warner in supporting John McCain’s candidacy.

I believe we will readily hold the Senate seats in Idaho and Nebraska and also believe we can and will hold Virginia. As the State Finance Chairman for the Republican Party of Virginia, it is of course my job to believe and say this. However, the efforts are there. We have two likely contenders for the Republican nomination, and both are dynamic, hugely qualified candidates. Tom Davis has been one of the most effective leaders in the U.S. Congress for a decade, and his leadership helped keep a Republican majority when he chaired the National Republican Congressional Committee. Jim Gilmore was an effective Governor who reduced taxes, including the car tax. They will likely engage in a spirited primary which will raise their profiles and put the victor in a strong position to defeat Mark Warner in 2008.

Call me a pollyanna if you will. But I believe that led by a strong Presidential candidate in 2008, our Senate prospects are strong, and Republicans will hold all the seats with the election of vigorous newcomers.

The Republican Party of Virginia has posted on its blog my thoughts on Republicans and the U.S. Senate, including the John Warner retirement news and the Larry Craig development. I suggest there are still reasons to be optimistic. You can see the Fred Malek guest post here: Republican Party of Virginia blog.

One of the credit crunch’s victims is the huge Sallie Mae proposed buyout.

The Washington Post covers it extensively today – and includes my thoughts on what’s happening.

“One of the largest private takeovers in history — the $25.3 billion buyout for college loan giant Sallie Mae — unraveled yesterday after its buyers balked at the price, citing turmoil in the credit markets and federal legislation to cut subsidies to student lenders.

The buyers, headed by fund manager J.C. Flowers, left open the possibility of acquiring Sallie Mae at a lower price. Sallie Mae vowed, however, that it would fight to keep the deal intact ‘to the fullest extent permitted by law.’  …

‘Several deals have collapsed under their own weight. There will be more,’ said Frederic V. Malek, chairman of Thayer Capital, a private-equity firm in the District.”

Indeed. I’ll be curious to watch as the trend continues. My further sense however is that does not signal the end of the buyout boom.  We in private equity will just need to be more conservative in our pricing and leverage and earn returns the old fashioned way of growing revenues and profits.

In its October issue, Washingtonian magazine puts me on its “Super Power” list — the 150 most influential people in Washington.

Here’s what they say:

“Fred Malek. He lost his bid to own DC’s baseball team, but the GOP insider and corporate-buyout artist doesn’t lose often.”

I appreciate the praise. But as far as DC’s baseball team in concerned, here’s what the Washingtonian magazine said about me last year:

“Fred Malek: … we wouldn’t have baseball without him.”

It was a pleasure to work with a visionary leader like Mayor Tony Williams and all the members of my Washington-based ball group team. I am deeply gratified to have played a role in bringing baseball to our city. We are also pleased that it is in the hands of strong local owners, with a solid team president like Stan Kasten.

I had the opportunity to do an interview with Virginia blogger Jim Riley of Virginia Virtucon. It was a great experience. We talked about the future of the Republican party – both in Virginia and nationally. We also discussed topics such as the Malek family’s involvement in charities such as Americans Friends of Cancer Research. Here’s an excerpt from the interview in which he asked about my entry into the blogging world:

“Jim Riley - Switching gears a bit, you recently started blogging yourself. What inspired you to join the blogosphere? Do you have any blogs that you like to read? ­­

Fred Malek - Well, I enjoy writing. I’m very late to the party in being competent in the use of a computer frankly, but even being late to the party you can’t help but realize the power and reach of the blogosphere. At the same time I’ve got a few things on my mind that I wanted to share and invite reaction to. I’m not sure that anyone cares, but writing these few blogs, every couple of weeks – helps to crystallize my thoughts on various issues and is helpful to me. Occasionally I get some reactions that are useful. I read an awful lot of political blogs because it is kind of fun and interesting to see what people are saying, what their thoughts are and I learn a lot from them, but am not sure there are any favorites except yours.”

If you have a moment, I urge you to check out the full interview here: Virginia Virtucon - Ten Questions with Fred Malek.

Let me venture here far beyond my expertise or confidence in an effort to share my views on the gyrating financial markets. I’ll start by saying I have developed my career by building companies and not by predicting markets or selecting stocks. However, it seems we have seen this story unfold before, and it always seems to follow similar patterns which we forget in the madness of the moment. The patterns are:

• The market overreacts in both directions – driven by “irrational exuberance” or doom and gloom.
• These moods of course exacerbate the swings and have the potential to cause panic.
• The tide carries good companies down with the troubled ones, but of course it’s hard to recognize which are which when the tide moves so rapidly.
• As the scenarios unfold, few have the courage of their convictions to buck the trend, and this in itself accentuates the swings.
• The swings usually tend to last longer than anyone predicts.
• The value is ultimately realized as sanity returns and the markets adjust, usually regaining much of the lost ground, or giving up some of the great gain.

In my view the credit markets, buyout values, and stock market were due for adjustment. In fact a few months ago I was quoted in the Washington Post stating that the buyout values were unusually frothy and couldn’t last forever. Some private equity firms were borrowing nine times operating earnings on acquisitions (at Thayer our buyouts average only 3.4 times leverage) which means any bump in the road could sink a company and not allow it to pay its interest, let alone retire debt. Also multiples on real estate had risen to unfound heights (6 percent capitalization rates down from 9 or 10 just a few years ago – cap rates being the inverse of multiples).

So yes, a correction was in order, but not this tidal wave. It is at times like this that he most productive investments can be made. And yes, it does take courage of your convictions to cut against the grain and take the risk. My belief is that the preponderance of evidence suggests that this is a time to take risks!

1. The economy is fundamentally sound. We enjoy continued GDP growth, low inflation, and low interest rates. Further, corporate profits continue to increase, even if at a more moderate rate.

2. Major deals are still moving forward with some at more reasonable, reduced prices.

3. There continues to be great liquidity around the world.

But, we all know the above. What gives me more confidence today are the actions of great institutions and individuals, to wit:

• Bank of America’s $2 billion investment in Countrywide has risk but in my view is one of the smartest investments in recent months.

• One of my closest friends and a true leader in real estate investing is Joe Robert, head of JER Companies. Joe saw the value of his JER Investment Trust (JRT) sink from a high of $18 to $9 or less. This company has no residential exposure and makes mortgage loans on commercial real estate, yet its stock was pounded along with other commercial mortgage REITS. What did Joe do? According to the Washington Post, he personally purchased $8 million of JRT stocks in the last several weeks.

In sum, don’t take my beliefs or take confidence in popular known trends. But do watch what the smart money does. It says, we have seen an overcorrection where solid companies have been punished, and there is opportunity for selective investing and lending.

A few months ago, I accepted the post of Finance Chairman of the Republican Party of Virginia. I’d like to share a little bit about why I accepted that position, and the Fred Malek Blog gives me a good opportunity to do so.

I believe very strongly in the importance of the Republican Party of Virginia, because I believe that Virginia is a crucial state for Republican Presidential candidates. If Republicans cannot win Virginia, then we cannot win the Presidency. To keep Virginia in the (political) Red, we absolutely have to rebuild our Party here in Virginia in order to give it the structure and leadership it needs to make our case to the people of the Commonwealth.

While then-RPV Chairman Ed Gillespie initially persuaded me to take this role, the people I have watched since then have only strengthened my resolve and my enthusiasm. The competence and dedication of other leaders in our Party has been impressive - from Lt. Gov Bill Bolling and Attorney General Bob McDonnell, to the members of the Central Committee and the District Chairs, to my Finance Co-Chair Lisa Gable and the many others who have stepped forward to help.

While Ed Gillespie’s resignation to become Counselor to the President seemed like a loss, I now believe we are in best shape ever due to the impressive leadership of the aforementioned people, and two other important people:

• Former Lt. Gov. John Hager, who was elected RPV Chair, is a dedicated public servant. He resigned his position as Assistant Secretary of Education to take on the RPV Chair position where he will work full time without pay. That kind of dedication, combined with his leadership and competence will show great results for the RPV.
• Charlie Judd is an exceptional Executive Director, with the experience, judgment, and staff to run one of the finest state political organizations in the country.

So where do we go with this tremendous team?

1. Our first priority is this Fall’s State Assembly and Senate races, where Democrats are making a full on assault to achieve majority in one or both of these chambers.
2. This must be followed by attention to Congressional, Senate, and Presidential races in 2008.

This team, led by John Hager, has the ability to make the Party of Lincoln the majority party in Virginia for years to come. I’m excited to be a part of this, and excited to keep Virginia in the Republican column for a long, long time.

The questions are everywhere these days: What’s going on with the stock market? Why the wild swings? And more specifically, what’s causing all the turmoil in the financial and credit worlds, and what are the solutions?

I’ll be blogging my thoughts about these important issues more in the coming days and weeks, but for now I wanted to share with you the angle I take in today’s Washington Post business section. The question here is how the rockiness specifically affects the Washington DC financial community.

Frederic V. Malek, who was a senior adviser to Carlyle from 1989 to 1991 and then founded Thayer Capital, said the effect on Washington would be less severe than on other financial centers.

“The Washington area has been generally resistant to large swings because of the stability of government employment and spending,” Malek said. “This is likely to settle down in the coming weeks or months. And I suspect that this will have a lesser effect in Washington than in the rest of the country.”

Would love to hear your thoughts.