Better than Bonds

Arnold Sigurd Kirkeby (rhymes with irk-a-bee), 44, breakfasted early at Manhattan's tony Hampshire House, which he owns. After breakfast he slowly smoked his way through two fat, black Rey Del Mundo cigars. Then he was ready for battle.

It was one of the toughest fights of Midwesterner Kirkeby's nine-year career as a hotelman, and the stakes were high: control of Manhattan's 375-room Sherry-Netherland Hotel. Sharply at 10 a.m., big, confident Mr. Kirkeby arrived at 14 Wall Street for the annual meeting of Sherneth Corp., which owns the Sherry-Netherland.

Sherneth stockholders had not met since 1936, when, under a ten-year voting trust, a committee of bondholders took over the bankrupt hotel. In 1943, Kirkeby, who has an eye for bankrupt properties, started buying into Sherneth. When the voting trust expired this January, he owned $1,000,000 worth of the corporation'" bonds, 26% of its stock. But the trustees refused to give him a voice in running the hotel. So, his dander up, Kirkeby began collecting proxies.

At last week's meeting, after he had threatened to go to court if the counting weren't done at once, he won, hands down.

Man of Caution. Once a messenger boy in Chicago's La Salle Street, Kirkeby now owns nine hotels worth $30,000,000. Last year they had a gross income of $20,000,000, a net after taxes of $1,500,000. He first got interested in hotels in 1934. His explanation: "I was dealing in Government bonds then and the going was getting very rough. But hotels--they were practically giving them away and I didn't see how they could go much lower."

Kirkeby tested the water before he plunged in. He leased two small hotels in Chicago, used them to learn the business. In 1937 he took the plunge, paid $500,000 for a lease on Chicago's bankrupt Drake. He liked the water fine. In rapid succession he bought Chicago's Blackstone, Los Angeles' Town House (later sold for $100,000 profit), Manhattan's Gotham.

No Bonds. After a four-year breather, Kirkeby started buying again. He concentrated on class hotels because "it costs no more for maids to clean an $8 room than for a $3 one." He picked up the Nacional in Cuba, the Beverly Wilshire and the Sunset Towers in Los Angeles. Then, backed by Chicago's sewer contractor Steve Healy, he bought Chicago's 3,000-room Stevens from the Army. (The Stevens, too, was subsequently sold.) But Kirkeby's biggest splash was the Hampshire House, ankle-deep in carpeting, knee-deep in income.

Kirkeby is not abashed that he didn't learn the hotel business from the scullery up, like many of his competitors. The important thing for success, says he, is to know finance, although he admits that "any flophouse can make money these days." But he does not think he will grow much bigger; he has found enough hotels to keep his money busy. Said he: "A lot of people might say that I'm a speculator . . . but . . . the last thing in the world I want to do is buy a low-interest bond."

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