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News for the Hospitality Executive |
| By Jack Snyder, The Orlando Sentinel, Fla.
Knight Ridder/Tribune Business News Feb. 24 -- Jim Seneff is no stranger to recession. When he started his first business in 1973, the economy was in a downturn. And he was expanding his business during the country's previous recession, in 1990-91. Now the country is in another recession, but Seneff's outlook is still sunny. Having started all those years ago with a $5,000 loan, he has built an empire, both privately held and publicly traded, that has amassed more than $5 billion in assets. It spans retail, hotels, restaurants, retirement homes, real estate development and finance. His flagship operation -- CNL Financial Group -- is one of the largest privately held real estate investment and financial services companies in the nation. The company -- based in the distinctive office tower next door to City Hall in downtown Orlando -- is 100 percent owned by Seneff and his wife, Dayle. Publicly held Commercial Net Lease Realty, of which Seneff is chairman and chief executive officer, leases buildings nationwide to some of the country's top retailers, including Eckerd, OfficeMax and Barnes & Noble. Some of its clients have struggled recently, with the country having entered a recession last March. Heilig-Meyers, Waccamaw/Home Place and Homelife -- all Commercial Net Lease tenants -- are now all in bankruptcy. But Seneff thinks strong retail locations are the key to escaping harm in such situations. A bankruptcy court can accept or reject an existing lease. If the lease is accepted, the rent payments continue; if the contract is rejected, Commercial Net Lease gets its property back and, because of the prime location, leases it to someone else. Commercial Net Lease's business is built around the "triple-net lease," under which the tenant pays all operating expenses of the property. The term "triple-net" refers to the landlord getting his rent after, or "net," payment of the building's taxes, insurance and utilities by the tenant. These days such leases may also require the tenant to pay for repairs and maintenance as well. From his earliest days in real estate, Seneff reasoned that, if one was very careful in selecting locations and tenants, and in securing them with long-term rental agreements, a lot of the volatility and uncertainty of real estate investment could be tamed. Still, his start in real estate was fairly conventional, if somewhat contrarian. His first major deal was the acquisition of 11 acres on South Street in downtown Orlando. At the time, downtowns everywhere were in decline and out of favor with investors. The real action was in the suburbs, which allowed Seneff to buy the downtown parcel for about $3 a square foot. Two office buildings were eventually developed on the property, which is clearly visible from the East-West Expressway. By 1978, however, Seneff was focused on investments based on the triple-net lease, and the company's portfolio grew steadily. Between 1985 and 1992, for example, its assets grew from $100 million to $1 billion. But, the big growth was yet to come. In 1992, a Seneff company was hired to be the adviser and operator of Golden Corral Realty Corp., the publicly held company that ran a chain of Golden Corral restaurants. Golden Corral Realty was a real estate investment trust, which is required to return 90 percent of its net earnings to investors. Eventually, Golden Corral Realty was renamed Commercial Net Lease Realty. In 1997, the REIT's shareholders voted to buy Seneff's advisory/operating company for 2.2 million shares of stock and absorb it into the operation. The deal was valued then at more than $35 million. The advisory/operating unit was owned by Seneff's CNL Financial Group and Robert Bourne, a longtime investment partner of Seneff's; Gary Ralston, then and now president of Commercial Net Lease; and Kevin Habicht, then and now chief financial officer of Commercial Net Lease and Seneff's brother-in-law. CNL Financial Group -- that is, Seneff and his wife -- was the biggest beneficiary of the buyout because it owned nearly 77 percent of the operating company. Besides being the REIT's chairman and chief executive, Seneff is one of the company's largest investors, with more than 5 percent of all outstanding shares. Today, Commercial Net Lease shares are traded on the New York Stock Exchange. The REIT owns or has interests in 360 properties in 40 states, with combined space totaling about 6.8 million square feet. It leases its stores to 95 different retailers spanning 30 lines of business. While Seneff remains deeply involved in Commercial Net Lease Realty, in recent years he has branched into other businesses ranging from retirement homes to banking. In 1995, he started CNL American Properties Fund, a public but untraded investment trust that invests in properties leased to restaurants. Tenants include such familiar chains as Arby's, Bennigan's, Taco Bell and TGI Friday's. The trust took a giant leap forward in 2000 when an affiliate, CNL Franchise Network LP, formed a $1 billion alliance with Bank of America to finance its expansion. In 1997, Seneff formed CNL Hospitality Corp. to invest in the hotel industry. The trust has partnerships with some of the marquee names in the industry -- such as Marriott and Hilton -- to operate and, in some instances, jointly own hotels. Just last month, CNL Hospitality agreed to buy eight hotels across the country for $181 million from Marriott International. Marriott will continue to operate the properties, which boosted CNL's hotel portfolio to more than $1.75 billion. The hotel deal was struck despite the recession and the travel slump caused by September's terrorist attacks. CNL Hospitality Chief Operating Officer Charles Muller has a simple explanation: The company invests for long-term results and believes in the industry. In less than five years, CNL Hospitality, another public but untraded investment trust, has grown to 51 hotels in 22 states with more than 12,000 rooms combined. CNL Retirement Corp., created in 1998, invests in assisted-living centers operated by the top companies in that business. The properties target those who can afford the rent and extra care -- not people dependent on Medicare or Medicaid. To cover the real estate development side, Seneff has also created CNL Realty & Development Corp. The company, which does build-to-suit projects for corporate clients and select other development, recently completed a 150,000-square-foot building for Wycliffe Bible Translators in southeast Orlando. The company also is undertaking -- as market conditions warrant -- the Moss Park Community near Wycliffe in a once-rural area east of Orlando International Airport. The Moss Park project will include 2,650 homes, hotels, shops and other commercial space. The worldwide headquarters of Campus Crusade for Christ is part of the community along with Wycliffe. On the money side, CNL Financial has a markets unit that offers a range of financial services. Other units work Wall Street to raise capital. CNL is heavy into "securitization" -- the pooling of leases or loans to back securities that are then sold to investors. Sales people stationed across the country work through financial planners and others generate investments in the real estate trusts. About three years ago, Seneff got a call about investing in Alliance Bank. It just so happened that, on his list of things to do, owning a bank had not been crossed off. He bought the bank -- he and Bourne are majority owners -- and renamed it CNLBank. Seneff's goal for the future is as simple as his empire is complex: "To continue to grow all companies in various niches." CNL LINEUP:
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