- Haas Home
- Haas Newsroom
- Summer 2011 CalBusiness
- Cover Story
- Featured Stories
- In Brief
- Power of Ideas
- Alumni News
- Personal View
- About CalBusiness
- Past Issues
View a Google Map of the Telegraph Corridor Projects
Blood, Sweat, and Prayers
A developer who pays more attention to the numbers than the neighborhood won't get very far—especially around Berkeley's Telegraph Avenue, which may have a history of questioning the status quo but can be equally suspicious of change.
MBA students in the Haas School's new Real Estate Investment Analysis class got into the nitty-gritty of the neighborhood thanks to a new town-andgown partnership between the city of Berkeley and professors Robert Helsley and Nancy Wallace, co-chairs of the school's Fisher Center for Real Estate and Urban Economics.
Southside was the laboratory in the new experiential learning course, in which students partnered with the developers of four complex properties to build the best plans to revitalize them. Along the way, they learned from city and university planners, elected officials, financiers, and other stakeholders just how many pieces must fit together to bring a project to fruition.
"You can build Excel models and your numbers have to work, but if people don't like what you are doing and don't understand it, your project will go nowhere," says Josh Mogabgab, MBA 12. "I was really surprised by how uncertain and risky the process is, and how much it's about building relationships. If you can get something built here it says a lot about you as a developer."
In many ways, Telegraph Avenue feels trapped in time—or rather, a long slow decline, as its retail base of book and record stores has eroded. Crime and safety are longstanding concerns. Historic preservation issues, vocal community groups—including People's Park advocates—and a tangle of city rules like quotas on certain types of businesses have made it a challenging place for business owners and builders.
Mogabgab and his team worked on the type of project that makes developers shiver: the Blood House at 2526 Durant Ave., a half block above Telegraph. The owner's proposal to replace it with 45 units of student housing had already been in the works for 11 years. Not that you can tell that from the street: The faded Queen Anne Victorian remains mostly unchanged since Ellen Blood commissioned the home in 1891, but now seems an anachronism in the busy, high-density neighborhood.
Owner Rue-Ell Enterprises was accused of "Manhattanization" when it proposed the five-story project with ground floor retail space, and historic preservationists blocked plans for demolition. But the owner pressed forward and secured full entitlements—contingent on a complex three-way deal to relocate the structure and another landmarked house to a third lot.
"I've seen many projects get built, but nothing quite like the hurdles we've been through with this," says Dana Ellsworth, vice president of Rue-Ell, which was started by two Cal grads and owns the adjacent Blue Sky Hotel and Top Dog buildings, along with many other Southside properties. "We don't like to even call it the Blood House because we don't think it's worth saving. The whole thing is like something from a horror movie."
Ellsworth was interested in the students' analysis of whether the project is still financially viable after so many changes in the housing market. After looking at five options, students concluded that since the project had already been through the long approval and permitting process, it would be better to go forward than start from scratch. Internal changes to the building layout to maximize space and better match the current market would only require minor permitting and make it more profitable.
"They could still try to go for the demolition by filing for overriding economic circumstances, but that would ruffle a lot of feathers, which may not be worth it for an owner who is committed to the community," Mogabgab says.
The city is keenly aware of the development challenges around Telegraph. In fact, it has been hammering out a new Southside Plan for 13 years. The plan, which the City Council will be reviewing this summer, eases up parking rules and height restrictions and includes policies on land use, housing, traffic, economic development, public safety, urban design, and historic preservation.
It was City Councilmember Laurie Capitelli who proposed the Haas-city partnership to Helsley and Wallace, as a way to harness student energy and ideas for change, as well as bridge the town-gown rift. "The opportunity for us is to capitalize on the resources of the university, and develop an ongoing collaboration," says Capitelli, who has been active in creating a more business-friendly environment in the city. "We hope to continue this next year, and expand it to other neighborhoods."
Helsley and Wallace wanted the class to go beyond the traditional study of finance, urban economics, and land markets. They brought in speakers from several city departments, as well as business leaders, architects, and infill developers, who gave students a sense of the stakeholders involved.
"The city has been fantastic in working with us, and I think it's been an interesting opportunity for everyone involved," Helsley says. "It's important for the students to learn how to navigate the process, and for the developers to get ideas from the students."
It Takes a Village
In addition to the Blood House, students worked on a mixeduse project next door to Urban Outfitters on Bancroft above Telegraph and two church-owned properties farther down Bancroft.
For one of those projects, students proposed "Trinity Village" on property owned by Trinity United Methodist Church across from the Recreational Sports Facility. The mix of market-rate student apartments and retail, plus space for the existing Berkeley Free Clinic and new church facilities, was exactly what the church had in mind, says Bill Blessing, an architect and Trinity member who serves on its building committee.
"As students, they have a non-biased standpoint and a special knowledge about what students want," Blessing said. "They put together a good mix, with an angle—they helped us define our niche." —Laura Counts