Hagamans building an empire
How $180m hotel owners made their fortunePHILIP MATTHEWS
Hotel owners Earl and Lani Hagaman are said to be worth $180 million and they live in one of Christchurch's finest houses. They talk about business and politics with PHILIP MATTHEWS.
Two huge portraits hang above the stairs in Earl Hagaman's grand home in Fendalton. That is his father on the left as you look up and that is his mother on the right.
These are figures from the remote past who resemble characters from fiction. Dad was a used-car salesman in Los Angeles and he looks the part. The hat, the tie, the thin moustache. His son once said that he worked "to get just enough for whisky and poker".
Hagaman was born in Los Angeles in 1925 and remembers living in "a half-built shed" during the Depression. In the story of his origins, he told himself every day that he would make it on his own.
He doesn't need to be told that he has. On New Year's Day, Hagaman was honoured as a Companion of the New Zealand Order of Merit for services to business. The National Business Review has put him on its rich list, estimating that he is worth $180 million. He is executive chairman of the Scenic Hotel Group with 17 hotels, including one in Tonga. His much younger fifth wife, Lani Hagaman, is executive director.
They have inserted themselves into the Christchurch narrative, handing out big donations to local causes. The private St Andrew's College got $250,000 one year. The Christ Church Cathedral was another beneficiary.
When they shifted up from Queenstown in 1989, they bought their house at 10 Coldstream Court from Sir Robertson Stewart. Its 2007 ratings valuation is $3.94m.
This big white house with a black and white marble staircase was built in 1935. The Ballantyne family and horse trainer Clarrie Rhodes had it before the Stewarts. According to legend, Noel Coward performed there when he toured Australia and New Zealand during World War II.
That makes sense. It feels like a quiet slice of California, a movie star retreat from the 1930s. The tennis courts and the swimming pool shaped like a piano. The palm trees and Hagaman's long, red, 1959 Cadillac reflecting the sunshine.
"I found a home when I came to New Zealand," he says. "I love this place."
No, he doesn't miss Los Angeles. Traffic jams drive him crazy. Ironically for a guy in the travel business, he hates to travel.
His story is that he came to New Zealand in 1980, loved it and never left. He bought a house in Queenstown in his first week and started making a new fortune. He was already in his mid-50s at that reinvention and was already wealthy.
Hagaman speaks slowly and quietly, still with his Californian accent. There are old-fashioned manners and politeness. His wife is addressed as "honey" or sometimes "baby". It sounds vaguely chivalrous.
You have to go through a few other people to get to him. Push the buzzer outside and an assistant answers, opens the gate remotely and steers you into the house. Once you are in the dining room that doubles as a boardroom, his wife's personal assistant appears and fetches a coffee. Then Lani Hagaman materialises, with a public relations professional at her side.
Amid all these exits and entrances, Hagaman's own arrival is low key. He appears in the doorway, tall and thin with a thick pelt of dark hair.
He is now 88. He makes the story of his wealth sound like the easiest thing in the world.
"I came to visit a friend of mine named Ralph Brown who moved down here. I said: 'Boy, I love this place' and applied for residency. He had one hotel. I had been in a number of businesses and had quite a bit of money accrued. We bought the Southern Cross [in Dunedin] and another and another."
Brown seems to have been a restless soul. He shifted to New Zealand in 1972, after trying Spain, and bought a hotel in Queenstown which became the first in the Scenic group.
"He was a lifelong friend. We waterskied and scuba-dived together, chased girls together."
Brown was also a jetboating champion who died of a heart attack in Canada in 1995 aged 69, just one week after winning the world title. Lani Hagaman remembers that even his death became a kind of adventure. He died in the middle of nowhere. Two daughters from different wives had to be tracked down.
"You really missed him, Earl," she says to her husband.
Throughout the conversation, she talks to and about Hagaman with a kind of reverence.
"Probably nobody realises that in 30 years, you have never taken any money out of the hotels," she says.
"Not five cents," he says. "Put it all back in growth."
"No-one else in New Zealand ever created a hotel chain," she says. "He is very much a self-made man."
It becomes clear that Lani Hagaman has a grasp of the details, the day-to- day. Her husband looks to her to fill in the gaps in the story, the dates and facts.
He is executive chairman and she is executive director.
How did the two meet? "Can I say this in the right way?" she laughs. "Earl hired me."
"I hired her as financial controller," he says. "And she's been controlling me ever since."
She was barely in her 20s and he was in his 60s. His fourth marriage was coming to an end.
"We worked together and travelled together because of the hotels," she says. "I don't know quite what happened but one thing led to another.
"What I really loved about Earl, when I first met him, is that he's a world brain. He's not a narrow thinker. He reads everything. He watches all the business markets. My phone call this morning wasn't: 'Good morning, honey, how are you?' It was: 'The market's crashed, down 300 points'."
He remains that involved?
"I'm involved every day," he says. "I'm going to retire the day they put me in a pine box."
"He started with nothing and saved every penny that came his way," Lani Hagaman says. "He didn't want to be poor. That was his bottom line."
Three children have grown up in this opulence: Zane, Skye and Toya. Hagaman has four other children from earlier marriages. Three are in the US and one, Damon, from whom he and his wife are estranged, lives somewhere else in New Zealand.
"We have nothing to do with Damon," Lani Hagaman says firmly. "He lives his life and we live ours."
In the US, the young Earl Hagaman put himself through university, trained as an accountant and began working in the oil business, "syndicating oil drillings, putting deals together with a bunch of guys".
There is another portrait above the stairs, from this former life. The painting depicts Hagaman as a suit-wearing executive in the 1970s. That life came to an end in 1980.
Speaking of the oil business, Lani Hagaman suggests another reason for her husband to suddenly feel restless at the end of the 1970s, other than simply falling in love with Queenstown. When Ronald Reagan was elected president, he signalled that the oil "entitlements" programme, which had acted as a form of subsidy for producers, was coming to an end.
She says that the entitlements were "really the basis" of Hagaman's business. Reagan promised to remove those and other controls.
Oil was unpredictable at the best of times.
"I remember one day we did an oil deal with Aristotle Onassis," he says. "We were flying back to Los Angeles and one of the Arab-Israeli wars broke out and killed the deal. Onassis's daughter Christina was in the meeting. But she wasn't quite as pretty as this one" - he gestures towards his wife - "so I didn't make a play".
Then there were the times he crossed paths with Richard Nixon. These and other anecdotes will surely appear in the story of his life. He wants to call it You Won't Believe It - Hell, I Don't Believe It.
Should we even believe that he is worth $180m? The NBR wrote of the couple that "all of their wealth is tied up in trusts, which means they are, personally, as poor as church mice". Lani Hagaman likes that bit about church mice.
"The trusts hold most of the wealth," Hagaman says. "If you own it personally, somebody will try to take it away, for sure.
"I had an ex-wife problem a while back. It's all settled now. She got half and claimed she was entitled to more. I paid her a sum to go, and she went."
That was his third wife, Barbara. The marriage officially ended in 1982 but more than 20 years later, she sought millions in New Zealand and US courts. The legal fees alone were astronomical.
During the process, Hagaman gave the courts a property declaration that showed he had just US$5.7m in separate property assets. An income and expense declaration showed an income of about US$14,000 per month from social security and rental investments. But he declared that his monthly expenses far exceeded income.
His former wife was incredulous, arguing that Hagaman "hides out in New Zealand claiming poverty", giving away significant amounts in donations and "has admittedly tied up the vast majority of his wealth in trusts and other complicated schemes".
They are not quite church mice, then. When Hagaman turned 80, in 2005, it was reported that he "spent several hundred thousand dollars" on a party, including $12,000 on clothes for himself and his wife. They live well.
That beautiful 1959 Cadillac parked outside is an image of success. Hagaman loves the streamlined car's "ridiculously high" fins, which are usually seen as an expression of US post-war dynamism and prosperity. When he was casting about for an image to represent his hotel chain, that car seemed to fit.
Besides the Cadillac, Hagaman has a mahogany speedboat from the same year, kept in Picton. He used to waterski behind it. There is a 50-metre cruiser up there too, for deep-sea fishing. There are two Cessna planes, which he says he still flies, parked in a hangar at Christchurch airport.
Sometimes he gets in one of the planes and heads to one of his hotels. Nothing like a surprise visit from the owner.
But is this an undercover boss scenario or do the hotel staff recognise him?
Lani Hagaman laughs. "They certainly do recognise Earl when he walks through the door. I would wonder if they didn't."
There are other property investments but the hotel chain remains the visible peak of the Hagaman empire. The earthquakes put two of three Christchurch businesses out of action.
Charlie B's Backpackers Hostel closed just before the February 2011 quake and the land has been acquired by the Government for the central city plan. The building that housed Scenic Suites in Kilmore St is still standing but the Hagamans won't be going back in.
The quaint Tudor-style Heartland Hotel Cotswold in Papanui Rd has stayed open throughout.
And the future? Charlie B's was a good business but a new backpacker hotel is uneconomic to build, Lani Hagaman says. But they intend to do more in Christchurch.
"We're different from developers, who will put something up and expect a return on their investment and lease it out to a hotel group," she says. "We like to own or maybe do a joint venture with somebody. We are certainly looking and there are plans - some that are warm."
With hotels in Haast, Franz Josef and Fox Glacier, the Hagamans have long been evangelists for the West Coast. Hagaman can sound like something of a stuck record about his dream of a road connecting Haast and Hollyford. He and Ralph Brown were talking about it as far back as 1980.
"We need that road," he says. "The country needs it. It would be the most scenic drive in the world. It would open the West Coast to Milford Sound. But they just can't get the $300m together to put it in."
"The West Coast struggles," Lani Hagaman says. "You open that up and it adds to employment. I can't see a negative."
Dunedin is another favoured place. Lani Hagaman owns a 42 per cent share of the small Dunedin Casino. A shiny silver-on-black Ace of Spades business card advertises her husband's role as director.
When developer Jing Song tried to get a $100m, 27-storey waterfront hotel off the ground, another Hagaman company, Capri Enterprises, made a submission against it. To some in Dunedin, this looked like one hotelier using the hearings process to sink another. Not so, Lani Hagaman says.
Instead, Capri Enterprises owns big chunks of industrial and commercial land that would have been in the shadow of the hotel. The bottom line is that their own property would have become less valuable and tenants would have been disturbed.
"We can't stop somebody building a hotel," she says. "But the development and its location was very questionable."
It's true that the plan did seem more than a little unrealistic. She says that Dunedin hotels tend to hover around 60 per cent occupancy, meaning that you would have to question the viability of a new hotel.
"Yes, Dunedin does get full when the All Blacks come to town for a night here and there. Dear old Ralph had this saying which I quote constantly. 'You don't build a church because you're full on Easter Sunday.' Believe me, we're in there and we can't see the demand.
"Not knocking Dunedin. I think it's stunning but why would you put all that investment in Dunedin, which has been stable or gone backwards slightly economically? It hasn't grown at all, for years."
Picton has been another favoured place. Back in the 1980s, Hagaman had a vision of Picton as the next Queenstown and built a shopping mall.
"Earl always says he got 25 per cent wrong and 75 per cent right," Lani Hagaman says. "That's a pretty good average. Picton was almost one of the 25 per cent wrong, not for any bad reason. It's a really lovely wee place."
"The mall's never lost money," he says. "It's always paid for itself. It just didn't boom like I thought it would."
Of course it was good news that the Government opted not to green light a new ferry terminal at Clifford Bay, which could have killed off Picton.
"Fabulous news," she says. "[Transport Minister] Gerry Brownlee and I have had many conversations about that. Every time I got in his ear, I said: 'You have to be kidding.' "
Political influence? It's not that far-fetched. The Hagamans have been big contributors to both National and ACT. Ten years ago, ACT gave Hagaman a Sir Roger Douglas Award for his continuing support.
"I've supported Sir Roger pretty much from day one," he says. "He's got good, solid ideas about what the economy ought to be doing, how it ought to be run and whatnot."
He says he doesn't recall exactly how much he has given to the party over the years. Only one $10,000 donation is recorded under his name since 1996. The support continues - even the ACT website is sponsored by the Scenic Hotel Group.
They have kept an eye on recent leadership changes. Lani Hagaman says they are still waiting for the new leader, Jamie Whyte, to come south and introduce himself.
"We don't know him," she says. "We've never met him. John Boscawen was a really solid character and I'm very disappointed that he didn't get in [as leader]. He put his heart and soul into it."
As for their generosity and philanthropy, even that is directed by an ACT- style philosophy.
"The bottom line for us is that we want to give a hand up, not necessarily a handout," she says. "We get a lot of requests for money."
- The Press
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