The Making of Emery Bay
- The Monthly November 1, 1989
- Michael Fox
How does a banker from Alabama end up developing the Emeryville shoreline? One step at a time.
Unlike most communities, Emeryville avoided large scale real estate developments (and the attendant down side effects) until the late 1970s. But when a thirty-story building was constructed on the bayfront, Emeryville residents quickly realized that concerted action was required to ensure that future development met the needs of the entire city. These needs included low-and moderate-income housing, retail shopping, and an unblocked view of the bay and beyond. Local citizens became involved, outspoken and - to use a favorite East Bay verb – politicized.
The developer who strode into this volatile situation in 1986 was J. David Martin, the young founder and president of The Martin Group, a real estate development and management company established in 1984. At the time he began dealing with Emeryville, Martin was in his early thirties, a soft-spoken Alabaman with experience in real estate lending and, on the other side of the fence, leasing and developing. Although he had lived and worked in Northern California since 1979, Martin was unknown to the people of Emeryville.
The process of real estate development is essentially a dance of competing interests. The outcome of the tango between David Martin and the city of Emeryville is Emery Bay, a complex of offices and apartments, a retail center (Powell Street Plaza) and Emery Bay Marketplace (which includes the experimental Public Market). I spoke to David Martin to learn how a project of the breadth and scope of Emery Bay is actually brought into existence. Inevitably, our conversation reflected the perspective of one of the dancers.
THE MONTHLY: How does somebody get started in real estate development? He doesn’t take the bar mitzvah money and start development projects.
DAVID MARTIN: I came to California in 1979, from Alabama, which is very much like a Third World country, a whole different mindset. I had $7,000 and a car payment, and I went to work for Union Bank. You have a personal relationship with the business community when you’re a banker. I spent two-and-half years there studying the Bay Area. I went to night school and worked on my MBA. In that process, I decided that what I wanted to do, like my father and my grandfather, was get into the real estate development business.
TM: What was your first project?
DM: I went into partnership with one of my customers on a project in Pleasant Hill called Business Park. A couple of years later I started my own company, it’s a very simple story: You buy a piece of property, build a building, sell it, go out and build two buildings, sell them, the you build five buildings and sell them…and so long as you don’t make a mistake along the way you can keep walking up the steps. Emery Bay is the largest project we’ve ever built.
TM: What is the nature of you company now?
DM: If you look at the history of development companies, those that grew out of the ‘50s and ‘60s grew out of construction-related fields – who could build it cheapest. In the ‘60s and ‘70s it tended to be the marketing and brokerage community. These guys controlled the tenant. In the ‘80s and ‘90s it’s the finance industry driving most developments.
TM: In my experience, financial people are not usually the most visionary people.
DM: My experience is that there are two kinds of financial people. Those who leave, and those who stay. The ones who stay are more number-crunchers. The one who leave tend to be more entrepreneurial; they want to take what they’ve learned and something with it.
TM: Whose idea was Emery Bay itself? How did it come into being?
DM: Emery Bay in its current form was not envisioned from day one. It was an evolution of ideas, like most things this scope. We had been out in the 680 corridor [Interstate 680], building in a more suburban market, providing facilities for companies that were relocating from S.F. out, and they were looking for affordable housing, vacant freeways, excess labor. There were a lot of major moves out there in the late ‘70s and early ‘80s and the affordable housing got expensive, so the goose sort of sat on the golden egg and broke it. We looked for somewhere else to go. We came back over the hill here, and looked at this inner East Bay corridor. The reason most of these properties were skipped over in the first place is because they were relatively expensive compared to the 680 corridor. When the land in the 680 corridor got more expensive it began to balance out, and these properties became more interesting.
It was also becoming more popular to have an urban lifestyle than a suburban lifestyle. As we watched the rehab of older neighborhoods in Berkeley and Oakland, it became clear that as the population began to regenerate in this area, there would be a need to service it.
TM: What as the first step?
DM: The first thing you do is study the situation. We studied this area for almost a year. What we found is that you have Emeryville – bordered on one side by Berkeley, which tends to be non-growth location, with an expanding university, rent control, tough parking ratios and limits on retail – and on the other side, Oakland, which hems you in with the port and a lot of light industry. What we saw was a need for rental housing, for retail development, for sufficient parking. So, there were natural pressures – with the Bay on one side, Berkeley and Oakland on the other – pushing Emeryville. Also, there were some fairly large pieces of land: some truck terminals, some ten-and twenty-acre parcels, a thirty-acre steel mill. It wasn’t like, say, West Berkeley, where there were small houses and business that would have taken a lot of time to assemble.
TM: Once you’ve studied it, what’s the next step?
DM: You have to say that politics was a major part of it. The history was that Watergate Tower was converted to condominiums in the late ‘70s, and Pacific Park Plaza, a thirty-story tower, was built. Then there was a whole political upheaval when John LaCoste [former police chief of Emeryville] and that regime rolled in. There was a rebellion against the whole high rise, concrete mass kind of building. We saw an opportunity to create a real estate product that would meet demands and also fill the political need of having something that was more human-scale and mixed-use.
TM: Who else, besides the politicians, did you consider?
DM: We met with a lot of citizens groups, business groups, homeowners, artists, to find out what their needs were. Some developers go out and draw pictures, do renderings and say “Here’s what we think you need.” We spent almost a year sitting down in front of people and pushing a blank piece of paper at them, not necessarily in a literal sense, but saying, “What would you like to see?” We spent nine months listening, and at the end of that period we tried to bring everything together in a plan.
TM: By the time you’d put this plan together you hadn’t bought one acre of land?
DM: No. It was only after we’d come up with a plan that we went out and started optioning land. We said to the landowners, “If your truck terminal is worth x, we’ll pay you more than what it’s worth today, but you need to give us time to get our plan approved by the city, we’ll pay you x plus 10 percent or 20 percent. We’ll pay you more than what it’s worth today, but you need to give us time to get our plan approved by the city.” So we put up our option money and got some time. Then we went to the city with our plan (which at that time was just three office buildings) and we had a lot of community support. I don’t remember the exact number, but we had over twenty citizens stand up and compliment our plan and suggest that the city support it.
TM: So Emery Bay started with just three office buildings?
DM: Today Emery bay is a$300 million project. But, when we started, that was an almost ludicrous number, a huge elephant. So we decided to wrestle the elephant one leg at a time. The first leg was these three office buildings. I said, if this works, there all these other things I want to do.
TM: When you first consulted citizen’s groups, you showed them just the three office buildings?
TM: So when you went back to do the next steps…
DM: Then we went back to them and said, “Now that we’d like to do is build some apartments.”
TM: So the project evolved a step at a time?
DM: Exactly. It’s like a big puzzle.
TM: What if people agreed with the individual elements but, in the end, the overall result didn’t work?
DM: In a perfect world, you’d like to go out ad spend two years studying it and tweaking it and making a perfect plan, and then go out build it. Life, unfortunately, tends to be a series of compromises, and you have to compromise your way through, keeping your eye on the end goal. What we really wanted was to create a community. The goal was a mixed-use, urban village. We kept pushing, we really had no idea how much we would actually get built.
TM: How do you go about putting together a team for such a project?
DM: People have compared the development business to an orchestra. We may not be able to play instrument be we damn well better understand how it sounds. You try to get the best experts and orchestrate them.
TM: What skills do you look for?
DM: The first thing we look for is people who understand our vision. We want someone who, when he comes in and you explain what you’re doing foes, “Yeah, yeah.” We try to hire personalities, not resumes. There is a character for what we are doing here, a fabric we’re weaving into all this. I’ll give you an example: We build a public market. Now, there’re damn few public markets around; we need someone to manage it; there aren’t any public-market managers. Well, we got one. He’s never done it before, we’ve never it before. But it doesn’t matter because he understands what we’re trying to do and he just does it. And he does it really well. I think he sleeps down there.
TM: Some would say the risk in any development project is assumed by the bankers since it’s their money out there. Do you have any of your money in this project?
DM: Oh, yeah. We had to put all the option money we got ready to buy the project. The bankers are prepared to fund a project when a lot of the risk is gone. The land is bought, the soils are clean, the city is giving final approval, and sometimes even after you have tenants. Then the bank stands up and says “Here’s the money.” In the meantime, there is a lot off your money exposed id any of those things don’t work. That is the real in our business. Once you get to where the bank outs there loan in place, eight to ninety percent of the risk is gone.
TM: What responsibility does the developer have? I mean what you do affects people’s lives for many, many years to come?
DM: Basically, there are tow kinds of developers: investment builders and merchant builders. A merchant builder is like a home builder in the sense that he builds the house, sells the house, gets the money and goes away. We are an investment builder. We build it and we own it. We operate it. So we have a different approach. If these buildings don’t work, either for the business community or the residents, we have a problem – empty buildings. Personally, it gives me a lot of pleasure to see people shopping in my shopping center, and eating in my public market, living in my apartments and enjoying it. That’s a lot of the satisfaction that keeps us going.
TM: Are their any misconceptions or stereotypes about developers that you would like to correct?
DM: As many as there are about reporters.
TM: Any that really offends you?
DM: You can’t get offended in this business. There will always be a certain number of people who, no matter what you do or how well you do it, aren’t going to like it. It’s just one of those facts of life, and that’s okay. You can’t make everyone happy. You have a certain responsibility to try, but you have to realize that it’s probably not going to happen.
TM: In ten years, what would you want people to say about your work?
DM: I’d like to be able to drive down the street and see a building that I did ten years ago and smile and know that it worked, that it contributed something to people’s lives. Actually, in some ways, I feel like we’re artists, and our canvas is the landscape. What you see here is an active piece of that art that you can participate in: You can go sit in our jazz club, shop in our markets, live in our markets and that’s who we are. We’ve taken all we have inside of us, between our ears and in our hearts, all that we can muster, and what we’ve produced is who we are. In that sense I feel like an artist who wants to hang my paintings in a gallery and say, “There I am. What do you think?”