Group Hits Real – Estate Jackpot With Sale of California Property
By Peter Grant Staff Reporter of The Wall Street JournalJan. 5, 2000 12:01 am ET
Heck of a Bet
How’s this for a great day at the race track:
A group that includes San Francisco investor G. William Tischer, former Chrysler Chairman Lee Iacocca and Allen Paulson, former chief executive of Gulfstream Aerospace Corp., has hit the daily double with the sale of a 41-acre property that used to be part of the Bay Meadows Race Track, seven miles south of San Francisco International Airport.
In 1995, the group signed a contract to pay the California Jockey Club $30.7 million for the site, on which it planned a 730-unit housing development. They were given five years to close the deal because that’s how long they figured it would take to get all the necessary approvals. All they had to put up was a $500,000 letter of credit. California Jockey agreed to bankroll the $3 million approval process.
Late last year, as the group closed the deal, it simultaneously resold most of the land to Dallas housing developer JPI and GE Capital, which are planning a large housing project. The price was over $50 million, according to people familiar with the deal, reflecting the sizzling housing market in the Bay Area.
Mr. Tischer declined to say exactly how much his group made. He says they decided to sell now because they feel the market is near its peak. “We would rather take our tremendous profit off the table now,” says Mr. Tischer.
Real estate entrepreneur George Tischer makes $50 million the hard way
High Stakes Poker in Sun Valley, Idaho
Dateline: Sun Valley, Idaho. During the first half of the 20 th century world renown Sun Valley and nearby mining town Ketchum were known for open gambling including poker and roulette. Over time, legends have grown around large parcels of land changing hands at the turn of a card. It’s even possible the property at the center of this modern day fable may have once been won and lost just so.
The present day all-or-nothing game began at the turn of the millennium with a magnificent, virtually undeveloped property located at the base of the ski mountain in world famous Sun Valley, Idaho. Once owned for over 60 years by one family, the 80-acre Warm Springs Ranch was home to Warms Springs Ranch Restaurant, serving Hollywood greats and Fortune 500 moguls including Clint Eastwood, Bruce Willis, Arnold Schwarzenegger, Warren Buffet, Jack Welch, Bill Hewlett and Herb Allen.
In winters, families bundled up for sleigh rides among the resident elk herd. In summers, the creek hosted fisherman and hikers, while tennis courts and a nine-hole golf course energized the regulars. No wonder this prime location, ripe with opportunity, was so deeply coveted. It was to become the centerpiece of a story of wit and perseverance overcoming financial hubris, chicanery and double dealings.
Enter George Tischer, a 30-year veteran of the high-stakes California real estate market and master of the art of creative financing. Tischer was among the first to see the tremendous opportunities in San Francisco’s historic financial district His first purchase, totaling $1million in 1977, was financed in part with cash advances from his credit cards, all of which was paid off within six months of purchase. In 1989 that building sold for $8 million.
In another transaction Tischer purchased a $2.5 million building while borrowing $5 million at closing. After substantial renovations, he pocketed the remaining $1million and later sold the building for $12 million. In 1983 he was the exclusive broker for the Duke of Westminster (the Grosvenor family, the wealthiest family in England) for a commercial sale in excess of $100 million, then the largest real estate transaction in San Francisco history.
Eventually, Tischer turned his sights south to the peninsula. In 1996, along with partners, Lee Iacocca, former Chrysler Chairman and Allen Paulson, former owner of Gulfstream Aerospace, Tischer locked in a five-year, fixed-price option to purchase the Bay Meadows training track from the California Jockey Club. They put up a refundable $500,000 letter of credit and the Jockey Club agreed to finance the estimated $3 million for permits and approvals. (If the Jockey Club did not get the permits and approvals the letter of credit would be returned.) Early in 1998, the group closed the deal and immediately resold the project to Ryland Homes and a Dallas housing developer with backing from GE Capital for a reported $50 million profit.
Amongst friends and business associates George is known for his motto to “Follow your dreams, don’t give up, and never, ever take no for an answer.” Little did he know how critical it would become over the next several years.
Shuffle and Cut
After years of vacationing in the area, Tischer and his family relocated to Sun Valley in 2000. Beginning in 2001 Tischer quietly and persistently courted the Ranch’s owners. In July 2002 they agreed to terms, giving Tischer a one-year option to purchase the property for $12 million. Tischer then partnered with Steve Roth, founder of Secured Capital, now known as Eastdill-Secured, a division of Wells Fargo Bank, who agreed to put up all the capital. Five weeks later, Roth claimed he was not interested and wanted his capital investment back, a request that would kill the deal.
In the first of many legal and financial maneuvers, Tischer put the project into bankruptcy in September 2002, effectively freezing the escrow and stalling the contract voidance until he could find other investment partners.
Within four weeks a second financial partner was brought in and replaced the Roth capital; Tischer dismissed the bankruptcy. Roth’s investment was returned and he was out of the deal. The new partner was offered a 60-day option to purchase 50% of the project, but he wanted control, and Tischer refuses.
Within two weeks, rumors were circulating that the new partner is said to be partnering with local developers and investors, including the $500 million Corning Glass Trust, to take over Warm Springs Ranch and push Tischer out, even though Tischer has six months remaining on his option.
Not able to gain control, the new partner went directly to the family owners and made plans to purchase the property out from under the valid Tischer contract (of which he is ostensibly a partner!). He represented to the owners that if given the title, his group, Sun Valley Ventures, would honor Tischer’s valid contract to buy the property. The property was “sold” twice, a phenomenon that simply does not occur in the Real Estate world. The title changed hands in early Spring 2003, even though the original, Tischer-held option, still had time remaining!
Tischer brought Steve Roth back into the deal and gave him control. He notified the new owners and prior owners that he and Roth will close on the transaction June 10, 2003, one month before his option expires. Roth and Tischer delivered all the money and documentation necessary for the closing. On the day of the closing, the new owner, ostensibly still Tischer’s partner, instead of delivering the deed, filed suit claiming breach of contract, when no breach existed.
The spin went into high gear and small-town cronyism made a play for the high ground. Local papers appeared to repeat rumors and innuendo. Suits and counter-suits were filed in county and federal courts. In spite of multiple lawsuits contesting the property ownership, the new development consortium began developing the property. They submitted proposals to the City and County agencies, hired architects, consultants, engineers and land use planners, and prepared proposals to hotel proprietors.
A long year of findings, depositions and legal wrangling ensued. Then to Tischer’s surprise Roth aligned himself with the opposition and decided to push Tischer out, giving him nothing. In December 2003 Roth agreed to a backroom deal with the opposition. Unbeknownst to Tischer, all along Roth’s ulterior motive was to gain control of Tischer’s contract rights and get a judge to validate his unscrupulous scheme!
Tischer then sued Roth to unwind the illegal transfer. The suits and countersuits dragged on for more than two years. Lawyers came and went, the local media and opposition were ruthless with negative press and innuendo directed against Tischer to curry local sentiment. His finances were squeezed until he had to bring in investors simply to fund the lawsuit.
During this time, the contested owners spent $18 million, over and above the purchase price, on architects, land planners, consultants, and lawyers.
Leave Your Chips on the Table
Throughout 2005 Warm Springs Ranch was in and out of court. In January of 2006 the trial was finally about to begin. The jury was selected. Opening testimony and first witnesses were scheduled when, finally worn out, the new owners agreed to settle. They were ready to walk away rather than continue to face years of litigation and appeals. They completely underestimated Tischer’s persistence and will to prevail.
Adi Erber, a 30-year Sun Valley Ski School Veteran and instructor to the stars, remarks “George reminds me of my good friend, Arnold [Schwarzenegger]. He has the same tenacity, vision and persistence – qualities that make the Governor so successful. George is the most amazing fighter I’ve ever met.”
As part of the settlement the opposing party agreed to sell the property back for their costs, about $30M. Tischer was given a 90-day option to purchase the property. Determined to close on the property, Tischer brought in “Papa” Doug Manchester of Manchester Resorts, owner of the 42-story, twin-towers Grand Hyatt Hotel in San Diego, California, whom he had cold-called two years earlier and had cultivated a strong relationship.
“Papa” Doug, a billionaire and one of southern California’s leading developers, knew that the property is one of the finest pieces of real estate in Idaho and agreed to provide bridge financing. “George has the best instincts and is the most persistent person of anybody I have met in 40 years in the real estate business,” says “Papa” Doug. Tischer exercised his option and the property closed May 1, 2006.
In November 2006 the prestigious international consulting and appraisal firm, PKF Consulting, was brought in by Tischer to appraise the “as is” value of the property. Their valuation came in at $85 million. Nearly three years and endless obstacles overcome, tenacity and perseverance paid off to the sum of a $50 million investment profit, even before ground breaking.
Only one hand remained to be played. In January 2007 Tischer and a new investor group from Europe bought out Manchester and begin the development of a lifetime.
Nine months before the final closing, knowing that in the end he would win back the ranch, Tischer brought in the world-renown, five-star, five-diamond St. Regis Hotel brand, a subsidiary of Starwood Hotels and Resorts Worldwide, the first and only five-star hotel in the history of Sun Valley. Preliminary plans call for approximately 87 branded, five-star townhomes/villas and residences, a 121-room five-star hotel/condo hotel operated by St. Regis, 30 fractional units, an 11,000 sf world-class European spa, and a 9-hole executive golf course with two restaurants. The property value at completion is estimated to be in excess of $600 million.
Throughout this marathon match, Tischer held fast to a motto he adopted in the 1970’s from his goo friend and mentor, real estate mogul and Fairmont Hotel chain owner, Benjamin H. Swig: “Nothing will ever be attempted if all possible objections must first be overcome.” (At his death in 1980 Swig owned real estate from San Francisco to New York City and was worth an estimated $2 billion.) Asked if he would do it again, Tischer says “I’m glad I don’t have to.” Then he smiles and says “But I’m always ready!”