Even 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 unpretentious.
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.
When the 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.
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