Ty's Score
(An Interview with Ty)

Posted March 6, 2005

The Santa Barbara Newspress
Creator of Beanie Babies has become a hotel magnate on South Coast

Ty Warner and his plush toy company, Ty Inc., exude an intentional air of whimsy and mystery, much like Willy Wonka, who owned the chocolate factory in the famous children's book.  And the 60-year-old, self-made billionaire seems to enjoy playing games like hide-and-seek and scavenger hunt when anyone inquires about him or his fabulously successful Chicago-based toy empire.

There's no company history or biographical information on the official Ty Web site and none available on request. The elusive Mr. Warner has given just a handful of personal interviews since those tiny pellet-filled Beanie Babies first gained star-status in the mid 1990s.

Few locals know much about the man, although he has lived part time in Montecito since 1999 and has steadily purchased Montecito's most exclusive hotel properties, including the Four Seasons Biltmore and Coral Casino, the San Ysidro Ranch and the Montecito Country Club, plus Goleta's Sandpiper Golf Course.  Now Mr. Warner has announced his intention to buy the long-neglected Miramar Hotel and remodel it to new heights of luxury. When the sale is completed, it will give him a near monopoly on the ritziest lodgings and clubs on the South Coast to add to his four-star holdings in New York, Hawaii and Mexico.  Much like the fans of the plush toy that made him rich, it seems, Mr. Warner is a collector.

Despite Mr. Warner's reluctance to tell his own story, Beanie Baby fans and journalists over the years have pieced together a history that tracks his path from toy salesman to tycoon. Forbes magazine estimated his worth at $6 billion, and ranked him the 65th richest person in the world last year.

"Although I do work while I am here, Santa Barbara is very much a getaway with a sense of escape for me," Mr. Warner said in a rare interview conducted by e-mail. "I do value my privacy, however, the wonderful thing about being in Montecito is that the people here are kind and respectful.  "If I had all day, I would take the morning to read the paper front to back, while enjoying an espresso on my patio. I would probably play tennis or take a long bike ride along the beach," he said.

Warner employees interviewed for this story spoke on condition of anonymity, saying that they had been asked to respect Mr. Warner's privacy.  "I respect Ty to the nth degree," said one. "He's a character and he gets involved in his projects on an amazing variety of levels."  He's known for being extremely detail-oriented, highly creative, inquisitive, uncompromising, shrewd in business, demanding of his employees -- juxtaposed with the heart of a toymaker and a gift for seeing things through a child's eyes.

Close associates of Mr. Warner say he has never married, but has a steady female companion. He has no pets. He doesn't own a boat. He has a great sense of humor, is a little offbeat, but not eccentric.  He grew up in Chicago, and was named Ty after the great baseball player Ty Cobb. Mr. Warner's father was a salesman, his mother a pianist.

According to one online article, he participated in baseball, football and basketball while attending St. John's Military Academy. He studied drama for a year at Kalamazoo College before trying Hollywood.  He had no luck in Tinseltown, according to a 1996 People magazine article. He went back to Chicago and took a job selling stuffed animals for plush toy company Dakin, spending 18 years there before leaving in 1980.

Montecito resident Nina Terzian, who owned a doll and plush toy shop in Chicago in the late 1970s called Beauty and the Beast, recalls meeting Mr. Warner during his sales rep days at Dakin. They have been friends for more than 20 years.

"I had the finest selection of plush toys in my store at the time, and he would come in and look around and talk to me and ask me what people liked and didn't like," Ms. Terzian said. "Then one day he told me he was starting his own company, and he was designing his own plush toys."

On a trip to Italy he discovered a nice range of soft, cute and cuddly plush cats. Realizing that nothing like them existed in the United States, Mr. Warner reportedly came home to develop his own line.  "They were these beautiful animals. Everything about them was impeccable. They were cuddly and the material was the softest, and the eyes and everything about them was just right," she recalled. "He really paid attention to the details. I bought everything that he had, because they were done so beautifully."  Ms. Terzian said hers was the first store to sell the products Mr. Warner created.

Mr. Warner founded Ty Inc. in 1986, at the age of 42. Beanie Babies debuted in 1993, and within three years consumer demand pushed sales to an estimated $200 million, by some accounts. By 1999, Mr. Warner had landed at No. 33 on the Forbes 400 list of richest people in the United States with an estimated net worth of $5 billion.  What made Beanie Babies such a hot item, even though beanbag plush toys and other stuffed animals had been around for decades?  "The answer to that question is what everyone in the toy business, or any business, would like to know," said Rob Bobinski, who owns two Kernohans Toys stores on the South Coast. "If the answer was that easy we would all be rich."

Even though the popularity of Beanie Babies has eased since 2000, plush toys by Ty Inc. continue to sell well with both loyal fans and new converts, Mr. Bobinski said.  "They are one of the few items in our store that we have a waiting list for. People will call and want to know when a new order arrives. We don't have a lot of items that have this kind of dedicated group," he added.  Mr. Bobinski said that Ty Inc. product quality is above the industry standard, yet the company manages to keep prices affordable.  "He puts out a great product and for the kind of quality you get, it's very hard to beat the price. Beanie Babies sell for about $6 each.  That's a very easy price. It's like paying for two ice cream cones or a Blenders. But this is something that people can enjoy for a long time."

Ty Inc.'s strategy of selling only to specialty stores boosts the cachet, Ms. Terzian added.  "Beanie Babies never sold to the big chains, and that creates longevity in products," she explained. The strategy is one she aims to follow for a new line of dolls called Only Hearts Club that she created with her husband, legendary toy designer Rouben Terzian.  "We're following in Ty's footsteps. He's been very helpful to us. He was very grateful that I believed in him when he first started and he never forgot it," Ms. Terzian said.  Last year Mr. Warner was able to get the Terzians and the Only Hearts Club dolls into one of the most important toy fairs for the industry, even though exhibition booths had long sold out.  "Ty told us, 'Come to my booth.' It was his way of thanking us for believing in him," Ms. Terzian said.

Although Mr. Warner is known for his generosity to the community and charities around the nation, he can be decidedly unfriendly when it came to protecting his dominance in the beanbag toy industry.  Ty Inc. has filed numerous copyright infringement suits -- reportedly more than 100 -- over the years against companies that produced similar looking plush toys.  "They keep flooding the market and we have to stop them," Mr. Warner was quoted in a Los Angeles Times story that ran in 1997. The same story mentioned that Ty Inc. had in turn been sued in 1995 by North American Bear Co., which charged Ty Inc. of copying some of its plush bears. That case was settled confidentially in September 1996. Ty Inc. recently faced a hefty $700,000 fine after a judge found that Mr. Warner had tampered with a witness by asking him not to testify in another copyright infringement case against Softbelly's Inc.

Other stories showed Mr. Warner could be flamboyant when he wanted to prove his company's success to doubters.  He reportedly took out an advertisement in the Wall Street Journal in December 1998 proclaiming that Ty Inc. was the biggest toy manufacturer in America. When the statement was challenged by industry giants Mattel and Hasbro, Mr. Warner's head financial officer wrote a letter to the competitors verifying that Ty Inc. had over $700 million in income in 1997. That compared with the $500 million income that Mattel and Hasbro had combined in the same year.

Greg Rice, Mr. Warner's righthand man, confirms this story.  Mr. Warner would not divulge information about the company's current financial picture, but research firm Hoover's estimates Ty Inc. sales at $485 million in 2003, nearly half of the $850 million in 2000 at the peak of the Beanie frenzy.

Mr. Warner's diversification into property appears to have started in 1997, when he first met Mr. Rice, then a broker of hotel properties, while on a commercial flight.  "We started talking about the hotel business and he told me that the Four Seasons in New York was one of his favorite places to stay. I told him that the Hong Kong owners were selling it," said Mr. Rice, who now works exclusively for Mr. Warner as the executive vice president of development for Ty Warner Resorts & Hotels in Montecito.

Mr. Warner's first hotel purchase was the landmark New York property for $275 million in spring 1999, a deal brokered by Mr. Rice. A year after that he purchased the Santa Barbara Four Seasons Biltmore and the Coral Casino together for $150 million in May 2000. When the Biltmore purchase was announced, Mr. Warner's representatives told the Los Angeles Times that he was embarking on a long-term strategy to buy quality hotels based on a "very, very selective basis."

In September 2000, Mr. Warner bought the San Ysidro Ranch for an estimated $30 million. In June 2003 he picked up the Sandpiper Golf Course in Goleta for $25 million.  Last year, he went on another buying binge, starting with the Kona Village Resort on the Big Island of Hawaii for $60 million. Then came the Montecito Country Club for $40 million in August 2004, followed by $100 million for Las Ventanas Resort in Los Cabos, Mexico.  Last month Mr. Warner announced his intention to buy the long-neglected Miramar Hotel from hotelier Ian Schrager. News of Mr. Warner's plan to complete the renovations on the eyesore sparked cheers from the  community.  He's also building a 15,000-square-foot home designed like an Italian villa on six acres along Channel Drive, near where he paid $500,000 in 2003 to rebuild a bike path. To make room for his estate, Mr. Warner purchased three homes on three separate lots, at least one of which will be bulldozed depending on what happens with county permits.

County planner Mark Walter said plans include a two-story home that won't be "one of those incredibly extravagant things that people see elsewhere in Montecito."  He said the grounds will include a lake, multiple thematic gardens such as rainforest or tropical, gazebos, fountains, walkways, and a plantation lawn.

With each purchase, Mr. Warner was not content in simply having real estate assets. He set out on ambitious renovation plans, sparing no expense to take care of the smallest details.
"That's the secret to his success. He wants to make everything beautiful and to do things just right," said Ms. Terzian. "That's the philosophy he had with Beanie Babies and now he's applying that to all the
properties he owns." e-mail: mzate@newspress.com

Q&A WITH TY WARNER

Q: Business aside, what inspired you, personally, to tackle the Miramar Hotel project?
A: I think a few of my financial consultants would say that business was completely "aside" in the decision to purchase the Miramar Hotel. I have a tremendous amount of affection for this area. It is difficult to see such a highprofile beautiful piece of coastal property being boarded up and off-limits.

Q: How has your life changed since you first came to Santa Barbara?
A: The first thing that comes to mind is that I have learned to be a lot more patient. However, speaking in terms of the Miramar (Hotel), the community has exhibited enough patience with the existing state of the property. From now on our motto should be "focus" -- a collective focus on getting things done there. I think that we really need to work together in helping the Miramar realize its potential.

Q: What advice would you have for other creative minds who have a product they would like to launch?
A: If you know in your heart it is a good idea, don't give up or compromise it. Before I started the Beanie Baby line, the industry rule was that a $5 collectable item could not work. Enough said?
Although he's shrewd in business and demanding of his employees, friends say Ty Warner has the heart of a toymaker and a gift for seeing things through a child's eyes.

News reported by the Santa Barbara Newspress (3/6/05)