for a former gym teacher from Dazey, N.D. (pop. 100, give or take),
69-year-old hotel magnate and billionaire Gary Tharaldson is pretty
Tell the richest man in the state that you’re flying in to visit him
at his Fargo headquarters and he’ll offer to fetch you himself, rolling
up in his red Cadillac crossover and wearing his everyday work uniform
of shorts and a sport shirt. Cruising along one of Fargo’s main drags,
he’ll frown at all of the undeveloped land–potential competition for the
existing hotels (even though they aren’t his).
“He’s beyond down-to-earth–he’s almost subterranean,” says Bruce
White, a successful Marriott franchisee who has known Tharaldson since
they both started in the hotel business in the early 1980s.
Tharaldson is a driven, shrewd cost-cutter. In March 2006 he sold a
portfolio of 130 hotels in a variety of chains to Goldman Sachs for $1.2
billion. Six months later he sold the Westward Ho Hotel & Casino in
Las Vegas, which he’d owned for only a few months, to Harrah’s at a
profit of $109 million.
“Real estate was going crazy in Las Vegas back then,” he says.
Not long after, it cratered. Those sales capped an empire-building
effort that began in 1982 when Tharaldson bought a Super 8 motel in
Valley City, N.D. He added other low-end hotels and then moved into
“limited service” business-suite hotels (no room service, no
restaurants), eventually operating more than 350 across the country.
Almost immediately after his massive windfall–with only a brief
time-out to head to the 2006 NCAA men’s basketball final in
Indianapolis–Tharaldson, then 60, started on his next act.
“I wondered what I’d do with the money and if it would change me,” he
recalls. In his Fargo office, looking over projections for his current
enterprises, he says, “I think it didn’t.”
This time out he is placing big bets on natural resources: ethanol,
raw land and water. It adds up to an estimated personal fortune of $930
million. The plan is to build his current holdings into an additional $1
billion portfolio over the next five years, while his 18-year-old son
from his second marriage, Gary II, the one of his seven children he
considers most likely to succeed him, gets an education.
When Tharaldson got started in the early ’80s, he was an ambitious
working-class guy who’d figured out that the only way to get ahead was
to own assets rather than look for a big paycheck. His style has always
been to set huge goals and then try to exceed them, once telling an
interviewer, “From my youth I always wanted to create something on a big
scale. I wasn’t sure what that would be, but I knew whatever it was it
was going to be big.”
After college at North Dakota’s Valley City State University,
Tharaldson had a brief stint as a high school gym and bookkeeping
teacher (he remains a passionate slow-pitch softball pitcher, manager
and team sponsor; in 2011 he was inducted into the Amateur Softball
Association’s national Hall of Fame) and a longer one as an insurance
salesman. Early on, his plan was to own 200 hotels by 2000.
millennium arrived, he owned 352.
His main advantages were his merciless focus on costs and his
newcomer’s indifference to the way things had usually been done. Bruce
White recalls that Tharaldson stood out–with his company-logo shirts and
down-home demeanor–when he first visited Marriott’s posh headquarters
near Washington, D.C. At the time the hotel industry’s focus was on
luxury and volume. Hotels were routinely built with 120 or more rooms,
regardless of market size, recalls Marriott’s Liam Brown, president of
the chain’s North American midmarket brands. Tharaldson, however,
concentrated on midsize cities and on building only as many rooms as a
market could fill. Brown recalls that Tharaldson also found a way to
create an upscale feel at low cost by putting room entries in interior
hallways rather than on a building’s exterior.
“That was a big step forward for our brand,” Brown says.
Tharaldson started his own construction company to save on building
costs. He also put laundry rooms behind the front desk in his early
hotels so night clerks could fold towels when things got slow.
Meanwhile, for Hilton, Tharaldson was one of the first franchisees to
switch from poured-concrete construction to less-expensive wood frames,
says Hilton Senior Vice President Phil Cordell.
White says, “The whole industry benefited from Gary’s innovations.”
Tharaldson helped develop a hotel niche that could prosper in both
good and bad times. The swings of the real estate market taught him
patience and a long-term view. When land values plummeted in 2009, he
hunkered down rather than take losses. “I had a period of nonliquidity,”
he notes drily. “I’d hate to sell too soon or too low.”
Similarly, the portfolio that he hopes will make him another billion
is designed around industries he believes can ride out economic cycles.
One project is Cibola Vista Resort & Spa, a time-share near Phoenix
where Tharaldson and co-owner Neil Cumsky have built and sold 248 units
and are now constructing 40 more. (Cumsky says he and Tharaldson became
partners after lunch in the kind of midmarket chain restaurant
Tharaldson patronizes exclusively, in this case a P.F. Chang’s.)
Tharaldson says he plans to sell off $80 million of his raw land
holdings this year, which by his count would still leave him with
roughly $120 million worth.