Martin’s Magic Touch

  • Real Estate Monthly
  • December 3, 1993
  • Sarah Thailing

J. David Martin, the man who built Emeryville, didn’t stop at city limits.

At 38, the sandy-haired developer who still talks in the honeyed tongue of his native Alabama has built or manages 5 million square feet of Bay Area real estate worth an estimated $1 billion.

Over the years he has sold off about 2 million square feet to pay the bills, finance new projects or put money in the bank. But in an era when the clutches of the credit crunch have most people in the field twiddling their thumbs, Martin is probably the most active developer in the Bay Area. He is still hammering away at projects from affordable housing in San Jose to office and shops planned in Novato’s Hamilton Field.

His keys to success: partnerships with powerful financial partners and city governments, a portfolio balanced with office, retail and residential properties, and a specialty with urban locations where he faces little competition.

In Emeryville, the tiny bayside city of 4,500 people tucked between Berkeley and Oakland, he and an array of partners created what come call “Martinville,” where shops and offices have replaced abandoned industrial sites and truck terminals.

Most recently, a $25 million, 260-unit second phase of EmeryBay Club and Apartments, built jointly by The Martin Group and San Francisco-based affordable housing developer Bridge Housing Corp., is slated to open Dec. 9. The Emeryville Redevelopment Agency contributed the land to help make 40 percent of the units affordable.

Martin tries to discourage use of the term “Martinville” to describe the $400 million EmeryBay development – which includes a 10-screen United Artists multiplex, apartments and shops, and is corporate headquarters to software maker Sybase Inc. and biotech Chiron Corp. But he clearly gets an ego boost from the impact he has had on what was once an industrial backwater.

The developer sometimes spends his evening parked in the EmeryBay surface lot watching people flood into the movie theaters and Kimballs’s East jazz club.

“People kept telling me, ‘It will never work, because people won’t live in an industrial zone,’” Martin said. “If you drew a circle around the project, half the population were fish and the others were low-income.”

Even so, the dearth of retail in the Oakland-Berkeley area and the lack of new housing stock because of Berkeley’s rent control laws made Martin sure it would work. Apparently it has: The project is 95 percent leased.

“My profession is a lot like art,” philosophized the slight bearded Martin, casually attired in a black turtleneck, slacks and loafers. “My canvas is the landscape. It’s sort of the ultimate canvas, If you think about it. We get to create these pieces of art that are participatory. You can live, work and play in it.”

To be sure, not everyone thinks Martin’s development belongs in a museum. Emeryville’s artistic community balked at hi boxy black-glass office buildings and his suburban-ish shopping mall.

Others complained about a lack of aesthetics at his San Francisco retail project at 555 Ninth St., with its Toys ‘R Us and Bed Bath & Beyond tenants, which The Martin Group developed with financial partner Northwester Mutual Life Insurance Co. After buying out Martin’s interest in the summer of 1992, Northwestern bankrolled a $750,000 renovation, painting it white and adding architectural details, such as awnings.

Martin makes no apologies, saying he knows what makes tenants happy and projects work.

Real estate industry experts use words like “visionary” and aggressive” to describe Martin.

“He’s one of the brightest guys in the business,” said Merritt Sher, founder of Terranoomics Retail Services in San Francisco, which co-developed Powell Street Plaza in Emeryville with Martin, later selling it to Aetna as an invesment.

“His handshake is his word,” said Joe Tanner, city manager of Pleasant Hill, where The Martin Group is developing a new downtown.

But not all real estate industry denizens describe Martin in flattering terms. Many will hurl plenty of accusations at him – but only from behind the protection of anonymity. Once called Martin “Teflon man, because controversy doesn’t stick to him.”

Today, Martin sounds more like an environmentalist or a politician than a developer. He talks supportively about green belts, urban-limit lines and development that relies on the existing infrastructure of streets and sewers.

Martin said he is truly an urban developer. “we have tried not to contribute to urban sprawl,’ he explained.

His urban projects include a “Super K” Kmart to East Oakland, a 40 acre mixed-use project in largely poor Marin City, and a neighborhood shopping center in Richmond City Center, a downtrodden inner-city area abandoned by retailers two decades ago.

But make no mistake about it, Martin never strays from realizing the importance of the bottom line.

“It has to be financially viable, or you can’t keep doing it,” he said. “It’s the same problem an artist has. At some point in time you have to start selling your paintings, or you can’t keep creating them.”

The Martin Group has sold off a variety of its developments, most of them in Silicon Valley, to individual and institutional investors, as well s to tenants. Chevron Corp., for example, purchased office buildings in Shadelands Office Park in Walnut Creek.

But in a time when bankruptcy and foreclosures are commonplace in the development business, Martin doesn’t have a single back mark on his record. Some concepts have failed, such as a European-style fresh-food public market at EmeryBay that has since given way to food stalls selling Chinese, Japanese and Indian dishes. A proposed property-management merger with Prometheus Development Co. fell apart in 1991. And, of course, Northwestern took over the Toys ‘R Us development, which real estate sources said took loner to lease than expected.

“Martin was very farsighted in trying to offer large retailers a location with lots of parking in San Francisco,” said one broker. “But it was a little a head of its time.”

Martin, who began his career as a construction lender with Union Bank, credits his clean track record to his financial background.

“When you grow up in the baking business, you’re conditioned to be financially conservative in the way you structure deals,” he said.

How has he managed to escape the pitfalls that have trapped other developers?

For one, while at Union Bank, he forged a relationship with Teachers Insurance and Annuity Association, the world’s largest pension fund with $127 billion in assets.

That has lead to TIAA financing on most of his deals. More recently, he has teamed up to invest in real estate investment trusts with the moneyed Schnitzer Family of Portland and the Yale Endowment Fund. He also works with city governments in Emeryville, Pleasant Hill, and Marin City.

“Government has a hidden resource – its land,” Martin said. “We try to help government turn it into an economic resource that generates tax revenues and creates jobs. It’s good business and good public policy.”

Joe Callahan, who brought Martin on as a partner in his venture developing Hacienda Business Park in 1980, credited his one-time protege for his financial savvy. “He has been extremely clever in talking advantage of those financial resources that have remained available, because there isn’t any conventional financing out there. Not many people have been able to maintain those relationships.”

In addition, The Martin Group provides asset management services for 1 million square feet of teachers’ pension properties, including Silicon Graphics headquarters campus in Mountain View, Mission Falls in Fremont, and an airport property in Livermore.

What’s next for the developer? After successfully getting a plan approved for Hamilton Field, he sees opportunities at other decommissioned military bases.

For now, he is moving the head-quarters of his 50-employee company to spanking new offices in San Francisco’s historic Shell Building. The 26th floor offers sweeping views of the city skyline and Bay.

Not bad for a guy who started The Martin Group a decade ago in a cramped Danville office, hidden behind a Burger King.