Archive for the ‘Washington DC’ Category

Honoring John Dingell

Thursday, February 12th, 2009

In the coming days I will pick up on my previous post by sharing some additional insights from the McCain campaign. I wanted to pause for moment, however, and reflect on my friend John Dingell’s service to this country.

As Deputy Director of the US Office of Management and Budget in 1973, I first met John Dingell and was deeply impressed with his passion and commitment. As a result of our meeting, we were able to ensure continuity of a wild life sanctuary. This began a 35 year friendship between a conservative Republican and a leading Democrat.

What mostly impressed me about John is his perseverance and dedication, never losing a step when the Republican revolution in 1994 resulted in his losing his powerful position as Chairman of the House Energy and Commerce Committee. This was apparent more recently when again found his position changing. John Dingell’s commitment to excellence and devotion to his country is an inspiration, and we could not have a better man to honor as the longest serving member of Congress in our history.

Inauguration, Alfalfa, McCain and Palin

Tuesday, February 10th, 2009

It’s been a few months since my last posting, but recent events in Washington, namely the inauguration of President Obama, brought old friends and campaign memories to the forefront.

The January 20 Inauguration and the January 31 Alfalfa Club dinner brought me in close quarters again with John McCain and allowed me to bring John and Sarah Palin together for the first time since election night.

I have met numerous times since the election with John McCain and have been heartened and inspired by his refusal to look backward, his total absence of bitterness or even disappointment, and his singular focus on helping meet the challenges facing our country. Senator Obama was gracious to have a dinner the night before his inauguration honoring John McCain, and the bipartisan spirit of the gathering together with John’s heartfelt and supportive remarks added to my admiration for this man of extraordinary character. The next day was the Inauguration Day, and that night I was privileged to host a dinner at my home for John, Cindy, and a small group of friends and supporters. It was light hearted, and the only looking back consisted of stories by John, Lindsey Graham, and Susan Collins about some of the lighter moments and faux pas on their trips to Iraq and Afghanistan and other hot spots.

A little over a week later was the Alfalfa Club dinner. Alfalfa is a 200 member club with mostly illustrious members such as leading Senators, Congressmen, CEOs, Supreme Court Justices, and former Presidents, as well as a few such as myself, who somehow slipped past the screening. The club does absolutely nothing other than an annual dinner filled with patriotism, bipartisanship, and very humorous speakers, including traditionally the President. Each member is allowed to bring two guests and one of mine this year was Sarah Palin. The night before, last reported by Roxanne Roberts of the “Washington Post”, Marlene and I hosted a small dinner at our home for my Alfalfa guests and a few other friends. Here is what impressed me most over the weekend:

  • The warmth John McCain showed toward Sarah Palin when she arrived at my home Friday night. It was the first time they had been together since the election, and their good feelings toward each other were evident. 
  • The gracious and engaged Sarah Palin was with everyone. It was great to see her in deep conversations with people like Alan Greenspan, Madeleine Albright, Walter Isaacson, and Mitch McConnell. For sure, nothing shallow about this lady. 
  • The celebrity treatment Sarah received from the highly sophisticated crowd at Alfalfa. There were as many or more people lined up to meet her as there was for President Obama. 
  • Sarah’s singular focus on her job as Governor of Alaska. She left Anchorage on a 2:30 a.m. flight Friday so as not to miss a day on the job, and she singled out people to meet who could be impactful to Alaska, including President Obama.
  • Sarah’s grace and charisma reminded me of why she had been selected as John McCain’s running mate.

All of this brings me to a few reflections on the 2008 campaign which I will offer in the coming days, in a series of a few postings.

Rays Of Sunshine In The Storm

Monday, December 1st, 2008

The real estate industry as widely reported is in the middle of a major slump with commercial values now following residential on a downward path. However, I see rays of sunshine amidst the storm and believe there are sharp differences in areas of the country and property types. My conclusions at this point are:

  • Commercial real estate nation wide is falling and will continue to fall in value
  • Adjustments will be less severe than the residential sector, and recovery could begin earlier, driven by positive cash flows generated by most properties
  • The decline in the Washington area will be milder due to the stability and even potential growth of the federal government and services to government
  • The hotel sector will take the hardest short term hit due to more sudden drop in revenues and massive debt maturities in 2009 and 2010

As an economic forecaster, I have a great deal to be modest about. However, my observations are based on my 18 years as a board member including seven year as Co-Chairman of CB Richard Ellis, the world’s largest commercial real estate services company; eight years as President and CEO of Marriott Hotels and Resorts; and 17 years as founder and Cochairman of Thayer Lodging Group, a buyer, owner and operator of hotels.

Let me comment briefly on the Washington area and then hotels. On November 10, The Washington Post devoted its entire business section to commercial real estate, and you won’t do better than that for a comprehensive view of our area. In one interesting side to the story, Dana Hedgpeth reported that the bail out itself increased demand for office space and suggested that “between 2 million and 4 million square feet of office space could be gobbled up over the next three years as new regulatory agencies take shape and as lobby shapes, accounting firms, consultants, and asset managers position themselves to take advantage of government intervention efforts.” Even more revealing to me was an article by Tom Heath who talked to a number of Washington real estate investors who agreed the Washington area was less vulnerable.

So much for the sunshine – now back to the storm. In the same Washington Post article, I was quoted on the hotel industry: “Major hotel chains have reduced their projections for revenue per room and are predicting a decline in profits. If these projections are correct, there will likely be tighter financing standards that could lead to distressed selling.” The most salient measure of hotel performance is the revenue per available room (Revpar), and it was jolted by a 5.9% drop in September, as reported by Smith Travel Research. Starwood Hotels predicted a 10% Revpar decline across its portfolio for the fourth quarter of 2008, and a decline of 5% for 2009. Another industry consultant, PKF, predicts a 4.4% Revpar decline in 2009. These are dramatic and exceed the drop after September 11, 2001. On top of that there are an estimated $5.9 billion of debt maturities in CMBS structures alone in 2009, according to Tropp Management Services (TMS). Declining cash flows, higher financing standards, limited debt availability, and massive debt maturities do not mix well. Thus, while financially, strong owners will be able to inject more equity (which they should do), many owners do not have that ability. So, there will be distress sales and a sharply negative impact on values. Hotel REITs and management companies are already reflecting this distress with sharply lower stock prices.

So much for the storm, now back to a little sunshine. Past downturns have always been followed by sustained growth in hotels Revpar and profits. This occurred after the 1991-92 recession and after September 11, 2001. There is usually a year of drop, a year of stabilization, and then a number of years of growth. Indeed both PKF and TMS are predicting 2010, will show a modest Revpar increase. I personally believe 2010 will be flat, but due to lack of financing for new development/supply addition, the recovery will be robust starting in 2011.

Have you ever tried to movies?

Let me close with a personal experience that demonstrates how rays of sunshine can peak through and eventually prevail.

In 1999, my firm, Thayer Lodging Group acquired Washington’s largest hotel, the 1338 room Wardman Park Marriott. We completed a major refurbishing including redoing all guest rooms, adding and renovating meeting space, and much more. We now had the finest convention hotel in the area, and business began to take off, with 95 percent of it conventions or large corporate group meetings. Then came September 11, 2001, closing Reagan National airport and severely inhibiting travel to Washington. Every single major group cancelled. In November we were running 4 percent occupancy and losing a lot of money. But there was hope – a major convention planned in early to mid December had not cancelled, and it would bring much needed revenues. Then came the anthrax scare. The convention client happened to be the U.S. Postal Service, and it too cancelled.

We couldn’t cover operating costs let alone debt service. However, we jointly agreed with the hotel’s manager and minority owner, Marriott Corporation to put up additional funds to keep the business alive and out of foreclosure. Through 2002 and 2003 we gradually built the business back up, aided by outstanding performance by Marriott, and Thayer’s managing director, Carroll Warfield. The hotel had a record profit year in 2004, and we sold it in July 2005, resulting in a return of 2.4 times our investment. The message – in the middle of a storm, all is not lost. Persevere with determination and belief because eventually the storm will abate and the sun will shine again.

Go Teddy Go!

Friday, February 29th, 2008

As readers of this blog know, I’m a huge Washington Nationals fan – even though I didn’t get the winning bid to own the team. What non-Washingtonians may not be too familiar with is the great Nationals tradition of the Presidents Race.

In the middle of the fourth inning of every home game, the four presidents featured on Mount Rushmore — George Washington, Thomas Jefferson, Abe Lincoln, and Teddy Roosevelt – race around the stadium. They’re puppets – huge puppets.

Alas, Teddy Roosevelt – one of my favorite presidents (I get that from John McCain, I guess) – never wins.

So unfair.

A grassroots movement has sprung up, with thousands of fans chanting “Let Teddy Win!” I’m with them. I say to the Powers That Be: Even out the playing field! Give Teddy a chance! Don’t rig the race – just be fair.

If you’re a Teddy Roosevelt supporter, I encourage you to check out this great new blog I discovered: http://blog.letteddywin.com/ . You can follow all the latest Presidents Race (and Nationals) news and even show your support for Teddy. And hopefully I’ll see you at the new ballpark.

Let’s go ‘Nats1 Let’s go Teddy!

Yes, Fred Malek Does Blog

Friday, October 19th, 2007

 

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.