The Closing: Sam Nazarian

In a matter of two decades, Sam Nazarian went from Los Angeles nightclub king to luxury hotel mogul to ghost kitchen entrepreneur.

The founder and CEO of SBE Entertainment Group, one of the most influential companies in the lifestyle hospitality space, recently sold his remaining stake in the hotel business to go all in on digital restaurant brands.

It’s not the first time he’s bet on a budding industry. In the early 2000s, Nazarian took a chance when he opened a nightclub in West Hollywood, at the time an unfashionable neighborhood filled with warehouses. He then launched a string of hot spots that helped define the bottle-service and reality-TV party scene of the early millennium.

Just as Ian Schrager used his success in the club scene to create trendy boutique hotels, Nazarian moved into the hospitality space with the purchase of the Ritz Plaza in Miami Beach in 2004, which he transformed into the SLS South Beach.

The young mogul drew further comparison to the Studio 54 founder when he purchased Schrager’s Morgans Hotel Group in 2017, more than doubling SBE’s footprint and adding brands like the Delano and Mandarin Oriental.

Nazarian started with a leg up. His father, an Iranian refugee who fled the Islamic Revolution with his family and settled in L.A., is a billionaire who made an early investment in the tech giant Qualcomm. Now in his mid-40s, the younger Nazarian has grown out of his rich-kid persona and is moving on to the next phase in his career.

Just last month, he finalized a deal to sell his remaining 50 percent stake in his hotel business to his partner, the publicly traded French hospitality firm Accor. The cash- and asset-swap deal values the business at about $850 million.

Nazarian is now doubling down on what he sees as the next big thing and building out a new empire for his line of eateries, which includes Umami Burger, Krispy Rice and Plant Nation.

Born: July 22, 1975
Lives in: Coral Gables, Florida, and Bel Air, California
Hometown: Born in Tehran; raised in Los Angeles
Family: Married with two daughters, ages 4 and 2

What was the Los Angeles club scene like back in the early 2000s when you got started there? There was a falling off of a lot of strong [nightclub] owners. The scene was really controlled by four or five promotional groups.

When we started really looking, we’d go to Miami, New York and London and we’d come back to L.A. and it was just warehouses. It was pretty boring. It wasn’t a place I would say that was on the cutting edge of nightlife for entertainment by any stretch of the imagination.

Did you think it would be a multimillion-dollar business at one point, or was it just something you and your friends were having fun with? I was 25 or 26. My family and I started investing in some boutique hotels, and I really kind of fell in love with the dynamics of the boutique hotel space. My “aha” moment as I was investing in these hotels was when I realized there was just such a misalignment: The guy that was running the bar at our hotel was part of a completely different company than the one  managing the restaurant. I started thinking to myself at that time, wouldn’t it be great to have a platform where all these verticals are under one roof, so [you don’t] have to pay fees to multiple operators as the equity guy?

Tell me about the first hotel you bought. It was the Ritz Plaza in Miami Beach [in 2004], which is now the SLS South Beach. Then we bought the Meridian Hotel here in Beverly Hills, and that ultimately became the first SLS hotel to open, in January 2009. Best time to open a hotel.

You just sold the remaining half of SBE’s hotel business, but that deal was put in place in 2018. What did you see back then that made you think to get out of hotels and double down on ghost kitchens and restaurants? In 2018, it was a perfect storm. I always felt the risk to what I was doing was not getting to scale. I’d seen a lot of great operators that just couldn’t get out of their own way. Ultimately, they got gobbled up by private equity or debt structures.

We acquired Morgans Hotel Group in January 2017, and it more than doubled our hotel footprint. But I also knew that as we were pivoting to the asset-light management model, we were still not big enough. The lifestyle category was now something that everybody was focusing on in the hospitality space.

The ghost kitchen space is really competitive. How do you plan to compete? One thing that separates us is that we own and create our own brands. By having up to 20 brands — and we treat every one of them like they’re Sweetgreen or Chipotle — we put in the marketing, the budgets, the social influencers, the digital media buys. We’re then able to cross-train our cooks to be able to cook the multiple brands at one time.

Really, the whole premise was to unlock the value of distressed real estate. It could be a restaurant that just went out of business. We’ve done now 42 leases during Covid, where we come into a restaurant that has been around and has the infrastructure. Unfortunately, their lease was up or they left, and we made a very compelling deal with the landlord.

Did you have any hesitation about getting out of hotels? Any second thoughts? You always have second thoughts. Especially with these brands — most of them I’ve created personally. But honestly, when we agreed to do this deal I was on the road 250 days a year. I was opening up offices in Singapore, London, Miami, New York, L.A. The pace was just exhausting. Having a young family, and getting the value that I got, I think was a win-win.

You converted some of your properties into distribution centers to help out something like 7,000 of your employees. Are you worried about how the Covid wave impacts their lives? This is probably the thing that keeps me up the most. A lot of those employees are now Accor employees, but in many cases they’re still part of my family. When this happened, it was the most devastating thing I’ve seen. And I’ve been through a couple cycles now. We still have close to 3,000 employees around the U.S., and a lot of them cannot come to work still. It’s scary.

You had considered taking SBE public at one point. Do you ever think about how things would be different now if you went through with that? There are a lot of benefits of being public, and there are a lot of downsides of being public. One thing being public does is it really gives you access to capital, it gives you access to debt, it gives you the ability of having liquid currency. I don’t regret it now.

Your family is from Iran, and they fled during the Revolution. Do you remember that time? I was so young, I don’t really have much of a memory of Iran at all. My earliest memories are us very hastily coming to this country. A lot of people were in the mindset that the Revolution was going to be short-lived, and everyone was going to be able to go back. It took a while for a lot of Iranians to accept the fact that this was going to be the new norm. Some of them never did.

My first memories are living in a hotel with my four siblings and my parents … and getting acclimated to a brand-new city, a new language, new schools. It was not easy, and I give the credit to my parents. My dad was born in the ghettos of Iran as a Jew in 1931. He built this whole life for himself and his family, and had to give it all up again when he was 49 years old. There’s a lot of heroic stories like that for me, a lot of the great wins that our community had that enabled a lot of people of my background to be successful.

Your father had a successful construction business. What did you learn from him? The only asset that enabled him to be successful again in another country was his reputation. It’s not an easy thing to do for an Iranian Jewish family coming to a new town and understanding a whole new culture: letting their daughters, as well as their sons, be as ambitious as they wanted to be. Those are the things I continue to learn from him.

How did you meet your wife [model Emina Cunmulaj]? I met my wife on holiday on Jan. 1, 2010. We happened to be in the same restaurant and we had a mutual friend who introduced us, and the rest is history.

You’ve been splitting your time between Miami and L.A. How many homes do you own? We have a home in Bel Air here in L.A. When I acquired Accor’s stake in the full-service restaurant business, I started spending a little more time here because that’s where that company was based out of. Also my parents are here, so I come and spend some time with them. I’m a Florida guy. We have a home now in Coral Gables. We had a home in Miami Beach before that, and I have a place in New York, in Tribeca, which we don’t really go to that often right now.

You have a couple of homes and a private jet. What’s the most extravagant thing that you’ve bought? I don’t think it’s extrav —  I couldn’t function if I didn’t have a plane.

When I was younger, I was an idiot. I used to buy cars that were very extravagant, and I think that’s well documented. These days if I’m going to be extravagant, it’s more art. We’ll make an investment in art if my wife and I feel that it’s something that will have a good value proposition in the years to come. I’m kind of obsessed with that.

Now that I’m done with my SBE deal, if I am going to be extravagant I am looking at boats. I haven’t really put my finger on what kind of boat … but I’m definitely in the market looking for it.

I read about this habit you have of drinking Diet Cokes and smoking American Spirits. How did you pick those up? That’s something out of an old article, because in the last six years I haven’t had any soda whatsoever. Now mind you, it’s not like I’m the healthiest guy in the world, but I gave that up. I used to have like 10 or 11 Diet Cokes a day. I wasn’t drinking coffee back then, so maybe that was my caffeine option.

The smoking was the stupidest thing I picked up. Most people started smoking when they were 14 or 15; I picked it up at 21, 22, like an idiot.

Do you have any vices now? I love pasta. I love coffee. I love a good tequila. I love a nice bottle of wine and a good cigar. All the things that are good high quality, but nothing I would call a vice.

Back in 2014 the Vegas gaming board was looking into you and they found some drug use. You stepped down as president of the company at the time. How did that feel? I think it was unfortunate, because it was not the way in which it was depicted. It was a stupid, one-off occasion that happened a year prior to the hearing. But it made it seem like it was a much bigger problem than it was. Eight months later we were in talks to merge with Morgans and it was a blip, an unfortunate blip, but something you definitely learn from.

The other thing that came out of that was this extortion payment with Suge Knight. What happened there? It was just a stupid thing that typically you’ll find with guys that are high net worth. People in town will try to take advantage of people, and that’s all that was. I’ve never met Suge Knight and I’ve never been in a room with him, and that’s all in the past. I think I’ll let the record speak for itself.

I imagine that in the nightlife business, there’s a lot of sketchy situations and sketchy characters that you come in contact with.  It’s not even just in the nightclub business. When you’re high-profile, you’re a target. I think that’s something that is just a reality of life. Especially today, more than ever, you have people that are willing to say and do whatever they need to, or threaten to get whatever they’re in it for, which 90 percent of the time is money.

You have this motto about how access is currency. How do [people] earn and spend that currency? The best table, the best bottle of wine, everybody wants some sort of opportunity to bypass the line, feel good about themselves. In many cases, that’s what hospitality people do, we’re in the business of making people feel good about themselves. Right or wrong, that’s just human nature.

What do you think about Joe Biden as the incoming U.S. president? I’m hoping we’re not focused every day on what the president’s doing, like we have been for the last four years. The thing I’m excited about is that the tone in the country just comes down. I’m generally a Republican, but if that’s what comes from this then I’m all for it.

What does your foundation focus on? In every market we went into, we worked very closely with families of fallen soldiers and the families of fallen police officers. My dad was a former officer, one of the first officers in 1948 in Israel, and it was something that always resonated with us. The other piece is inner-city youth.

My wife also has a tremendous foundation in her country. She’s from Montenegro, through her family actually. We build anywhere from 15 to 20 homes a year in Albania and some outskirts of Montenegro for families that are in dire straits and completely unable to do so for themselves. I’m very proud of what she’s doing.

You’re still pretty young. Where do you see yourself in 20 to 30 years? There are other businesses I’ve always been very curious to explore, and that I’ve done a tremendous amount of work on, that I see myself ultimately acting on in the next 20 years. I was not a hotel guy when I opened my first hotel in 2009, and now I’ve sold the business 11 years later. I still love looking around the corner.