An Executive Summary with Mike Covarrubias

The Executive Summary is a brief video series in which Bay Area real estate and land use professionals discuss the arc of their careers, personal interests, and the impact of ULI on their careers.

An Executive Summary with Mike Covarrubias

Mike Covarrubias is Chairman and Chief Executive Officer of TMG Partners. Mr. Covarrubias chairs TMG’s Investment Committee, oversees all of the company’s operations and has directed the company since 1995.  His professional background includes 17 years with Union Bank, including commercial and real estate lending as well as administrative management. In his last position, he served as Senior Vice President and Manager of Union Bank’s Silicon Valley Regional Real Estate Center.  Mr. Covarrubias is a graduate of the University of San Francisco with a Bachelor’s degree in business administration.

Mike Covarrubias has been an active member of the Urban Land Institute for 21 years.  He serves on the local San Francisco District Council advisory board and participaties at many ULIsf events including YLG’s Learn From the Best and ULIsf’s Emerging Trends conference.

Full-Length Interview

Mike Covarrubias, TMG Partners. I’m the Chairman and CEO.

First Job in Real Estate / Land Use Field:

My first job was at Union Bank. I was a management trainee in the early ‘70s and I did most commercial lending and real estate lending and my last job was I ran the Silicon Valley Office for the bank and in real estate construction financing. And then I came to this company in 1984. No, sorry, 1988.

Mentors in Your Career:

I think I’ve just learned a lot of things from different people. Different facets. I’ve learned what I think is good deal making and intensity from folks like Ned Spieker, John Sobrato—guys who were legends in the Silicon Valley when I was growing up. I tried to learn passion for the business from folks like Don Turner who ran Bridge Housing; integrity from a lot of those same type of folks—Bill Wilson, guys who have good reputations for being around and doing what they say they’re going to do.

Greatest Career Satisfaction:

I took over TMG Partners in 1995. So I’ve been running it for at least 16 years and I think the most satisfaction I get from it is the team we’ve assembled and the fact that everybody has worked together and is still here for all those years. We have a reputation for being consistent and knowledgeable and that’s because the team we’ve put together has stayed in place. I think that’s the most proud thing I have about my career.

Toughest Challenges Faced in Your Career:

Our business is always tough, as everybody knows. That’s why there are less of us than there used to be. The definition of a developer I used to say is, not that tough once you’ve had a lobotomy, and it is a challenging business. The flipside of that is that cycles are never the same in our business. Everyone crashes for a different reason, comes back for a different reason as different cycle timings and different locations. Sometimes, in our business, the Silicon Valley comes back first and San Francisco comes back second. Other times it’s the reverse. So, trying to feel your way through that is a combination of—I always say it’s the difference between being an instrument pilot and a gut level pilot. You have to have both. If you try to do it with just one of those, you’ll probably crash.

Lessons Learned from Past Real Estate Cycles:

I think what we’ve learned, and I learn it a little bit better every cycle, is that the tougher decisions in the early part of a recovery are actually the easiest decisions. That is, if you buy businesses or buildings that are priced way below their replacement cost (and I mean way below) you could over analyze what they’re worth. You should buy them because you won’t lose money. And so, my sort of new phrase is, “Go stupid early.” Try not to worry about the analysis. If you’re buying an office building at $60 an FAR, you’re going to do okay; you won’t lose any money. We bought a million feet of buildings last year South of Market, all about that price range and the recovery came much faster than we thought. We should have bought ten times as much as greedy developers would always say. And so, I think the cycle says go aggressive early and then be smart later. You know, don’t wait to keep buying and buying and buying, and I think that’s been the biggest lesson and it continues to be true. It’s just the cycles are much shorter.

Favorite Places in the Bay Area / World:

I think the City has evolved in a very fascinating way South of Market. We have a building that’s always been our pride and joy, the Southern Pacific Railroad building. We bought that in 1998. We bought it from the railroad. We did a gigantic, seismic upgrade and we re-did the surface of the skin and we ended up leasing it to a whole bunch of amazingly successful companies at that time, Del Monte, Salesforce, Autodesk, and the like. We lit the Colonnade for the first time and it sits at the focal point of the City. It’s across from the Ferry Building. It sits at the terminus with cable cars, the ferries, Muni, the light rail. So, it was sort of the gateway building for us, but it takes you into the whole South of Market experience, which now includes the ballpark, it includes the great restaurants. It includes the new high-rise condominiums, the new museums, the Donald Fisher Museum that’s going to get built. So, that part of town to me is the epitome of what mixed-use development is. You’re doing all the needs of a populous that loves an urban experience. So, that’s always been my favorite part of the Bay Area. You can find that concept in many places around the world. And I’m a cliché you know, I like Paris and places like Italy. So, there are lots of those places around the world, but for us, the Bay Area is home and the South of Market, I think, does the best job of putting it all together in one place.

Favorite Ways to Unwind:

Oh, I haven’t figured that out yet. I’m a BlackBerry addict, which everybody knows. So, even when I go on trips, it’s hard for me to put the thing away. I like to travel. I realize there are two ways I proved I was a BlackBerry addict. One was when I was playing golf at Pebble Beach at the Ken Rosen Policy Advisory Board meetings, I realized I would be reading it while the other guys were putting. That’s not a good thing. I won’t tell you the second way I proved it, but it proved that I am pretty intensely interested in what’s going on. So, my relaxing is trying to, you know, put it away for a little while. While I’m traveling, playing golf and those kinds of things.

ULI’s Impact on Your Career:

I have made, as I think is probably, again, the cliché answer, many, many, many, many friends I would have never have made. But more importantly, I’ve struck up a lot of business relationships. In ULI in general, but Council even more so. Whenever we have a Council meeting, I can point to partners of mine throughout the room. They’re equity partners, they’re city people we’ve done deals with, tenants that we’ve known. And so, we always use that connection to expand the relationships. We did a joint venture last year with another development company from Los Angeles, Continental Development Corp, and it was strictly the fact that I had known Alex Rose for years at ULI. He called up one day and said they had this building in the city; would we look at it. We gave him some ideas. He said, “Do you guys want to do it with us” and we did. So, we have a 400,000 square foot building that we ventured with them strictly because of ULI. So, we make great friends, but more importantly for us, we’ve done a lot of business together. Obviously, there’s the education side where the younger kids are coming out through YLG and I think that’s important. We have a couple of our partners here who came up through the YLG. So, that’s probably the third facet.

The Executive Summary, developed by Rob DeWaters and Miles Garber, aims to foster wider professional and personal connections across the ULI San Francisco membership.