It’s been a whirlwind period of growth for Bob Olson, who over a 10-year stretch has gone from Orange County’s biggest and best-known hotel developer, to the largest in Southern California, to the most prolific in the Golden State.
While other real estate execs’ complaints about regulations and challenges building in the state are commonplace, Olson sees things a bit differently.
Being able to navigate the tricky regulatory waters here “has been a good barrier to entry,” and kept other national hotel builders on the sidelines while his R.D. Olson Development—now the largest hotel developer in the U.S. west of the Mississippi River—has been able to grab new business up and down the state’s coast, Olson said.
Since 2008, R.D. Olson has completed 18 projects with nearly 2,700 rooms. Those projects have a value approaching $2 billion. Eight of those projects are in Orange County.
“When it comes to developing hotels in coastal California he has no rival,” said Joe Ueberroth, founder of Newport Beach-based Bellwether Financial Group and now a partner with Olson for a high-profile project just kicking off in Dana Point.
While Newport Beach-based R.D. Olson has an active development pipeline across the state and in other western U.S. markets—an AC Hotels by Marriott is in the works for Maui this year, next to an existing Residence Inn that his company opened in 2016—his projects in Orange County stole the show over the past year.
n A new 271-room, 14-story Marriott Irvine Spectrum, the largest full-service hotel to open in South OC in a decade, opened to fanfare in Irvine, giving the city one of its hippest new nightspots with the Honey & Hive rooftop bar.
n The 130-room Lido House, the first significant hotel to open in Newport Beach in a decade, opened in April and is surpassing initial projections in terms of occupancy and average daily rates.
n Dana Point Harbor Partners LLC, a three-company venture that Olson is part of, was selected by the county to revitalize that city’s 300-acre marina, in what will be one of OC’s largest commercial real estate projects over the next few years.
“It’s been a busy few years. Last year was especially busy for us,” Olson said.
Those trio of local developments, along with a lengthy list of other achievements in 2018—including an eye-opening, previously unreported local transaction in Surf City—are why the Business Journal selected Olson as its Businessperson of the Year in the real estate sector (see other profiles, pages 4, 6, 8 and 10).
Construction, then Development
Olson’s success has often come by doing things differently: He talked his way into University of Southern California’s grad school without having an undergrad degree, for example.
He got his start in the business through his R.D. Olson Construction business unit, which has worked on several billion dollars’ worth of hospitality and other types of construction since its inception in 1979.
The development arm of the company began work in 1997, with a focus on ground-up hotel development in the Western U.S. Funding for those projects has come from a variety of sources, including institutional-type sources, as well as wealthy investors and professional athletes.
Keeping a close eye on the bottom line helped the company ride out the Great Recession and kick off new projects well before others started work in the area. His work at the 174-room Renaissance ClubSport in Aliso Viejo was among the largest area hotel projects to open amid the last downturn. After that 2008 opening, projects in Oceanside, San Juan Capistrano and Tustin soon followed.
Much of his work has been done in conjunction with Marriott International, the Bethesda, Md.-based hospitality giant (Nasdaq: MAR) that awarded him the Developer of the Year award in prior years, and last month gave him its Partnership Circle Award, “Marriott’s highest honor,” for 2018.
The relationship between Olson and Marriott has trended towards higher-end properties the past few years.
In the Irvine Spectrum, Olson built a 210-room Courtyard by Marriott in 2014, an eight-story property across the street from the headquarters of Taco Bell Corp.
When the option presented itself to build a second hotel next door, Olson initially considered a slightly more upscale, Residence Inn-type property.
Irvine Co., which owned the land, wanted something snazzier, however.
After considering a Starwood-branded hotel, as well as an independent hotel, Olson eventually made a deal to build the higher-end Marriott Irvine Spectrum.
The estimated $120 million development, which opened at the end of 2017, is the first full-service Marriott to open in the city in nearly 30 years, and is a prototype for other similar Marriott hotels going up elsewhere in the country.
“Bob has extraordinary vision in hotel development and continues to set new standards in each new project he undertakes,” said Ralph Grippo, a principal at Bellwether who ran the resorts division of Newport Beach-based Irvine Co. at the time of that hotel’s development and opening.
“The addition of the Marriott Spectrum was no different and a key part of the Spectrum masterplan,” Grippo said.
As is typical for commercial properties and land it sells in the city to other developers, Irvine Co. has the right of first refusal to buy back the Marriott, if Olson and his financial partners were to ever sell it.
While the hotel would appear to make a good fit with the real estate giant’s resorts division—which also includes the Resort at Pelican Hill, Hotel Irvine and Fashion Island Hotel—there’s been no indication that Olson is looking to sell the property, or that Irvine Co. has designs on buying it.
“We always build to own,” Olson said.
A few sales have occurred when the opportunity presented itself the past few years.
Last year, for example, Olson quietly sold off his ownership stake in Huntington Beach’s 250-room Paséa Hotel & Spa, which he opened in 2016 in a venture with Newport Beach-based hospitality investor Eagle Four Partners and Pacific Hospitality Group of Irvine.
Financial terms of the deal were not disclosed by the parties, but sources familiar with the transaction tell the Business Journal that Pacific Hospitality and Eagle Four bought out Olson’s interest in the project in a deal that values the hotel component of the Pacific City mixed-use development at more than $900,000 per room, or $225 million.
That’s one of the highest per-room sales prices for a larger-sized Orange County hotel on record. The 250-room Montage Laguna Beach, which traded for $360 million in 2015, or about $1.4 million per room, is the highest-reported price-per-room transaction in the region.
Local Vibe
Good luck getting Olson to sell his new Lido House property, which opened five years to the day after the Balboa Island resident first responded to a request for proposals for the city-owned site, which R.D. Olson runs under a long-term ground lease.
Olson’s been a mainstay at the estimated $70 million project—modeled after his own home—since the opening.
A hotel development wasn’t the only idea floated for the former city of Newport Beach’s city hall site, officials noted.
But “then Bob came along,” said Mayor Marshall “Duffy” Duffield, speaking at last year’s grand opening event.
“We wanted to create a local place” that appealed to area residents, not just tourists, Olson said last month.
So far, job done: about 90% of the restaurant and bar traffic is from locals, he said.
The hotel’s occupancy is running around 80%, beating initial projections, notes Lido House General Manager Adam Beer.
A similar local vibe is in store for Olson’s next big OC project in Dana Point.
Dana Point Harbor Partners LLC—a venture backed equally by R.D. Olson Development, Bellwether Financial, and Newport Beach-based Burnham Ward Properties—in October kicked off a 66-year lease of the county-owned harbor site, which is set to get about $338 million in upgrades over the next few years.
Olson will build two hotels, a 130-room boutique property that will cost about $90 million to build and a 136-room affordable hotel to cost nearly $28 million, according to county filings.
Retail developer Burnham Ward will oversee the nearly 29-acre commercial portion involving redevelopment of shops and restaurant space, a project county filings show will cost an estimated $91 million to build and encompass about 116,727 square feet.
Bellwether Financial will handle renovations of the marina and boat storage consisting of 2,296 boat slips and 388 dry boat-storage spots on about 20.5 acres. Marina renovations should cost about $109 million, the dry-storage facility, $20 million.
The three development groups are equal partners and will share equally in costs and operation.
For now, the retail component will be first in line for development since its entitlements have been secured, while entitlements for the hotel and the marina itself are still pending.
Olson envisions the project as a “Pacific City on the waterfront,” with a mix of hospitality, retail and other elements.
Olson “brings incredible value and expertise to our Dana Point Harbor partnership,” said Scott Burnham, partner and chief executive at Burnham Ward and its investment and development affiliate Burnham USA.
“He is considered to be one of the very best in the country when it comes to hotel development and he is at the top of his game.”
Cost Worries
Olson has designs on several other projects for 2019, outside work in Dana Point, although some are in flux: Olson said he’s decided against moving ahead with one potential project in Los Angeles County, and others could follow depending on market conditions.
“Rising construction costs are killing deals for us,” he said last month.
Select-service hotels—those that typically are built without restaurant or banquet facilities—are in danger of reaching a saturation point in the region, he added.
“We’re looking to go more into full-service,” he said.
