Does King Neptune rule at Virginia Beach, or is it developer and timeshare impresario Bruce Thompson? With city officials, Thompson is keen to bring more upscale development to a resort area trying to shed its reputation as a “redneck Riviera".
When Bruce Thompson uses the royal "we" in conversation, he's not referring to his multi-million dollar development company, Gold Key/Professional Hospitality Resources. He is assuming kinship with Virginia Beach, his hometown and a city he is committed to improving. As a teen, Thompson worked on a hog farm, driving a tractor on land that was three miles inland from the oceanfront. He tended bar at the Raven, a locals' hangout on 12th Street.
Later, Thompson got into the business of running ski trips to Colorado. A businessman named Edmund Ruffin, for whom Thompson had worked when younger, owned a home in Aspen and would sometimes hitch a ride. Thompson proposed that he and Ruffin build a hotel together—and that is what they did, putting up the Gateway Tours hotel (now the Comfort Inn Oceanfront on 21st and Atlantic Avenue) in 1985. In the 26 years since, the two men have been partners in many Virginia Beach developments, and gotten heavily into the timeshare business. Thompson and Ruffin now own six hotels and five restaurants in Virginia Beach—one of them the Hilton Oceanfront at 31st Street, a private-public partnership that involved years of negotiation and controversy before it was opened in 2005. Thompson’s latest project, 31 Ocean, is a $70 million, 64,000 square-foot commercial complex to be located just across the street from the Hilton and replace a city block of ragtag buildings. Financed partly by the city, the development is scheduled to open in 2013.
Thompson, who is 59 and divorced with two children, has his company headquarters on the same street as this latest project—Laskin Road. There, in a sumptuous boardroom surrounded by large-scale drawings of his developments, he spoke to Peggy Sijswerda. Excerpts.
A reader of HamptonRoads.com, reacting to a story about the Laskin Road development, recently praised your efforts to improve Virginia Beach, but nevertheless called it the K-Mart of eastern beach towns. Is that an unfair description?
In the 1990s we took the Ramada Hotel out of bankruptcy and built Mahi Mah’s Restaurant with a sushi bar. Another hotelier said when tourists see sushi, they’re going to run for high heaven. That was 15 years ago. Mahi Mah’s has been the single most successful restaurant in the Commonwealth. When we built the Hilton, an editorial writer said you couldn’t take a sow’s ear and turn it into a silk purse. The hotel is also at the top.
I think people dramatically underestimate this market. We sell timeshare at the Ocean Beach Club—a $200 million development that we are finishing the last phase of now—for as much as $65,000 per week. In fact, the businesses that are thriving in Virginia Beach today, and we like to say a lot of those are ours, are the ones that have been focused on quality. And the generation that’s out there today loves their family, loves their family time. They appreciate feel-good stuff and that’s what we’re attempting to address.
My entire life I have had people question what we do, and while that blogger might think this is a K-Mart town, we wouldn’t have been able to go to almost $500 million worth of assets here in the city [if that were true]. …We accepted the fact that Virginia Beach is the redneck Riviera, and that’s not the case. People who think the market is that way are wrong.
Why are there still so many conspicuously old, small hotel properties at the beach, by which I mean hotels/motels that have been around for 50 or more years?
We have in fact demolished about 10 of them in the last 10 years. Our city is changing its zoning and code regulations for development. The lot size of the smaller hotels, unless they can be aggregated, will not allow the economics to support a larger development. The city’s new code will allow developers to build as many as 100 units on a lot and buy parking in lieu of providing parking, so I think you’ll start to see some of those smaller lots get developed.
How much has Virginia Beach changed over the last decade or so—and what sort of long-term potential do you think it has as a beach resort?
Many, many years ago there was a huge building boom citywide, and we were unable to keep up with our infrastructure. Roads were horrific. Kids were in portable classrooms. The residents in Virginia Beach elected a city council almost 100 percent focused on the ailing infrastructure. Around the mid-1980s, the complexion of our city council completely changed. We ended up with a large group of business people on the council. We created a tourism growth initiative fund (TGIF) and increased our restaurant and hotel tax and dedicated those funds to improvements at the resort. We made a long list: beautify Atlantic Avenue, get sand on the beach, a new boardwalk.
At that point, I went out with every dollar I could scrape together and bought as much real estate as we could at the oceanfront because as the city was investing more in the infrastructure to create a better resort destination, more people were going to be coming to Virginia Beach. The demand increased so much that we could build nicer properties.
You completed the Hilton hotel in 2005. How difficult was it to get that project done, and how has it changed the boardwalk?
[Chuckles.] Because it was a public-private partnership, it became very, very complicated. Between the idea of a park and the condemnation proceedings that failed and the political ramifications that came along with that, from the time we won the award in 1997 to the day where we could break ground in 2003, it was extremely controversial. A lot of criticism was leveled at us, but I said, “I don’t have a dog in this fight.” The city wanted a four-star hotel and the citizens wanted a park. And if there’s going to be a hotel, I want to build it. I won the award, and I spent a lot of money to design the plan, and if they don’t [want a hotel], just give me my money back, and we’ll go on down the road and do it some other place.
The other part of it was the financial community. If it weren’t for Towne Bank and local banks stepping in at the last minute, no one believed those properties would be successful. I built three hotels previous to the Hilton for less money than we built that one. It was a big investment. It was an extremely difficult process.
How has the city of Virginia Beach supported your development plans? And a related question—should taxpayers be expected to help support private projects?
It’s interesting that Virginia Beach is the only market that has a defined tourism plan that says this is how we’re going to capitalize on tourism. With their continuing interest in developing a mega-entertainment complex and a new convention hotel, we still feel extremely bullish on this market. We can go to a lot of places and build a lot of different properties, but I don’t think there’s any better opportunity than here.
It’s always difficult for the public to understand the economics of what takes place when government creates the infrastructure to allow development to take place, or to partner with a private developer to allow one of his missions to take place—because it looks like tax dollars are going to fatten up the developer’s pocketbook. So it’s always difficult on the front end, but as the city has seen with Town Center and the Hilton project, when you look at it retrospectively, it turns out to be a big win.
Your 31 Ocean project at Laskin Road is ambitious. Is this a good time or bad time for a development of its size?
I have every single retail space committed. People want the idea of what’s going to take place at 31 Ocean. We’re creating an eclectic mix of owner-operator restaurants and boutiques and are establishing our own identity like you might find in Buckhead. We’ve already got the makings of a community in that area. Once we get the pedestrian-friendly environment with the new widened sidewalks and reduced traffic through the center, you’ll see additional development there, and it will take off on its own.
How has the recession affected your real estate portfolio?
Our business has grown during the recession. I think it’s a credit to Hampton Roads as a whole. By and large the shopping centers are still full; people are still shopping. Our hotel industry is seeing growth. Our company has had two of its best years. I feel lucky to be in Virginia Beach.
With its high-pressure sales tactics and such, the timeshare industry doesn’t have the greatest reputation. What’s the default rate on your sales?
Unfortunately, the timeshare industry is still stigmatized by what took place in the mid-to-late 1970s. We got involved in the ’90s just at the time that Marriott, Hilton and Hyatt got into the timeshare industry and Wall Street got involved. In order for those companies to become involved and for the notes to be financed, the timeshare industry had to clean up its act. Years ago people would take a failed hotel and try to convert it into a timeshare project. Today Ocean Beach Club and Turtle Cay are multi-million dollar projects full of amenities. We have over 25,000 timeshare owners. Through the worst economic recession since the Great Depression our default rate has only gone up from about five percent to eight or eight and a half percent.
What’s the state of the timeshare industry these days? I assume it has suffered like all other real estate.
The timeshare industry at large has had a significant setback, and it’s not due to anything other than what has occurred with the economy. In our case, our timeshare business has grown because we have a separate source of financing. Most timeshare companies today, even the big boys, the Marriotts and the Hyatts, are having a problem taking their pool of loans to Wall Street as a mortgage-backed security. Wall Street isn’t buying that paper, at least not in the quantities they had before. So they’ve had to reduce their sales operations substantially. Consequently, timeshare sales volume as an industry has fallen.
Where do you see the concept of timeshare ownership going in the future?
I think it will continue to grow. It’ll be interesting to see how well the timeshare industry adapts to the idea of a vacation club, rather than a fee-simple interest in a condominium unit. There are more and more folks looking at vacation clubs as opposed to owning a specific interest in a specific piece of real estate, such as the fee simple and undivided interests we sell. In Virginia Beach it’s widely known that 80 percent of the folks who come here plan on repeating within 24 months. So they recognize a value. [With timeshare], they can get a nice suite at the Ocean Beach Club and have the ability to exchange. In Williamsburg, though, the idea of a vacation club seems to have a lot of merit.
What will Virginia Beach look like in 20 years, and what will it take to realize it?
I think Virginia Beach 20 years from now will look entirely different than it does today. As the demographics of the residents here change, more people are going to want what we’re doing at 31 Ocean, a live-work-and-play environment with more of an urban feel. The idea of an urban environment, particularly in a resort area, is foreign to most folks today. But as our transportation and parking systems become more refined, the idea of walking and taking public transportation will occur. I’m excited about that.
Your son Josh was diagnosed with ALS, or Lou Gehrig’s disease, a few years ago, and you’ve become involved in fundraising efforts to fight the illness. How is he doing—and what have been some of the high points and low points of your family’s experience with the disease?
Since his diagnosis four years ago, my business has been very successful. ALS is a very expensive disease. I can understand the devastating effect for families that have to deal with the emotional turmoil of selling their house in order to pay for 24-hour care or to [move] a loved one to a facility. Fortunately, Josh is home with us. He has nursing care, and our family all live together with his kids. His health is very good considering he’s a total paraplegic.
We created Grommett Island Beach Park [a handicap-accessible playground at 2nd Street] when we realized that Josh couldn’t go to the beach in his wheelchair. We found out there wasn’t one like it on a beach anywhere in the world. The park was built with funds from our annual JT Walk and Beach Party. Collectively, the event has raised more than $4 million for ALS research and for stem cell grants to assist the ALS Association to build a multi-disciplinary ALS clinic at Riverside Hospital in Newport News, and to build Grommett Island Beach Park.
What’s your idea of a perfect day at Virginia Beach?
I’d get up very early—4:30 or 5:00 a.m.—and review the previous day’s business performance. I would go out on the boardwalk and watch a beautiful sunrise and look at our properties. I would have breakfast with my grandchildren. On a perfect day [chuckles], I wouldn’t go to the office. I’d do yoga and exercise. I’d go play or practice golf. Then I’d go home and have dinner with my family on the deck overlooking the water with a nice bottle of wine. That would be a pretty good day.