Never short on advice
Several years ago I became interested in buying the Herring Hotel in Amarillo with the idea of turning it into condos and temporary executive housing. The Herring was a historic, but neglected property which had been purchased out of bankruptcy for $15,000 by a California investor who was trying to flip it for a big gain. My entrepreneurial spirit surfaced and I could see transforming it into something profitable, as well as something good for civic development. I was living on my ranch at the time, but had a social friendship with Liz Pickens who said, “Why don’t you talk to my dad about it?” So I called Boone and he said, “Sure, come on in, we can have lunch and discuss it.”
A love for the game
At the time, he was flying high with Mesa Petroleum, the Amarillo exploration company that initially made him rich and famous. He was the highest paid executive in America, a media darling, and had just hit upon a simple business model that would really define him going forward – find an oil company whose assets were worth more than their market capitalization, then just buy all the stock and sell all the assets. If a company had a market capitalization of $50 million but the assets were worth $70 million, you just buy all the stock for 50 then sell off the assets for 70 and, presto, you just made $20 million. He took a lot of heat from people who thought a company shouldn’t be destroyed that way, but they were normally the people who had a comfortable position within that company. His logic, in my opinion, was fairly unassailable.
I remember sitting at his breakfast table one morning right after he had banked about $50 million on his Gulf Oil deal. (The group he led made over $700 million.) He described how it unfolded: “Our lawyers told us that after we launched our takeover bid, we might have 2 weeks before they mounted an effective counter strategy. 2 weeks went by, then 4 weeks, then 6 – they never came up with a counter strategy.” This was the kind of thing which just reinforced his publicly stated views that most American CEOs were lazy, entitled incompetents who should either “get to work” or be replaced.
So anyway, I had this lunch meeting set and was expecting a quick restaurant trip, but Boone had a different idea. When I got to Mesa headquarters he took me into the boardroom where his assistant had laid out a lunch for not only the two of us, but all his top lieutenants who he had asked to sit in and listen to my idea. (Except for David Batchelder, who never fit the Mesa mold and decamped for La Jolla early on).
Boone made introductions and then had me describe my idea to the group. At the time, Amarillo was home to several NYSE companies and I thought there was a market for corporate lodging downtown near the headquarters buildings. A company like Mesa, which brought in a lot of out of town visitors could logically take advantage of putting them up in a nice and convenient location. And if Pickens signed on to the concept first, I figured the others would be a cinch. So after I finished describing my vision, his guys (and they were all guys) weighed in, one by one, with their opinions about the concept and the chances for success. All in all, the feedback was pretty negative. Boone had a negative opinion about the property from the get-go, and his executives didn’t think there was enough market demand to make it profitable.
As soon as lunch was over, Boone ended the meeting and ushered me out, saying, “See, I just saved you a lot of money…..and you owe me lunch.”
The Herring Hotel
Unfortunately for Amarillo, the Herring Hotel still stands as a shell in downtown with little prospect of being rescued. Boone subsequently lost control of Mesa Petroleum, but quickly founded BP Capital where he made $4 billion, of which he says he has “lost $2 billion, gave away $1 billion, and still have $1 billion.” He is still making deals and I still owe him lunch.