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Wharton alumni
entrepreneur David Marshall turns troubled properties into real estate
gold.
David G. Marshall, founder, chairman and CEO of Amerimar Realty Corp., likes to downplay the difficulty of developing real estate. He tells you that "it's not rocket science" and that anybody who's willing to spend enough time can excel at it. "If you're customer-service oriented and you give people what they want, you'll succeed," he insists.
But the truth is, Marshall, a Philadelphian who earned his bachelor's degree at Wharton in 1961, has made his career in the toughest niche in real estate. He takes on troubled properties and turns them around, rethinking their strategies and refurbishing their worn-out features. Buildings that other folks flee—ones that are bleeding money and hurting for tenants—are just the sort that he wants. For him, real estate entrepreneurship is about turning lead into gold.
Perhaps his best-known project, the Rittenhouse Hotel in Philadelphia, had such an ugly history that, when he bought it, folks told him it was jinxed. Likewise, a retail center he purchased in San Francisco had become such a local joke that Bay Area cab drivers told tourists not to go there.
To Marshall, the appeal of these properties is plain: They are where you can make the most money. Real estate developers, he says, typically choose between two approaches to the business: Staying busy or getting rich. "You stay busy by buying normal projects and making a standard return, which is fine," he explains. "If you want to get rich, you buy something in deep distress and really work it."
In essence, he looks for the worst house on a good block. If the city or neighborhood in which a property is located is thriving or poised to do so, he'll take on a building even if its roof has collapsed or its offices are 95 percent empty. Unlike many developers, he doesn't limit himself to a single region. Though he has naturally focused on his home city, he does deals around the country. One of his few inflexible rules is avoiding economically moribund places. Even the best building can't overcome a dying city, he says.
Marshall started his first real estate company while still an undergrad. He grew up around the real estate business in the suburbs of New York City—his father was a mortgage broker. He noticed that Rockland County, New York, northwest of the city, was poised for growth. It hadn't filled in like the rest of the region because it had long lacked an easy, direct link to the city.
"They'd just built the New York Thruway and the Tappan Zee Bridge, and I figured out that this would make the county grow," he recalls. "It was really pretty simple." He persuaded his dad to quit his job, and together they started a business. "We were the only mortgage company in Rockland County. We were fishing in the pond when they'd just stocked it. I'd commute every weekend back to New York from Wharton."
The firm thrived, but after graduation, Marshall had to serve a stint in the Army. His dad died while he was away. When he left the military—now married with a child—he was forced to start over. He landed a job as a mortgage banker. That career eventually took him to Philadelphia National Bank. There, in the mid-1970s, he came to know the Bass Brothers, four wealthy Texans who invested as a team. The Basses bought a stake in the real estate trust that Marshall started and was running for the bank. Within a few years, they wanted him to build their real estate portfolio.
At the time, the brothers shunned publicity. They therefore insisted that Marshall call their new venture David G. Marshall & Co. That lasted until about 1980 when both Time and Life magazines put the brothers on their covers. At that point, Marshall called up his boss and lobbied for a name change. "I said, 'There's no point in trying to pretend that no one knows who you are, and I can get a lot more bang by calling up and saying I'm with Bass Brothers Realty. So we changed the name." In 1987, he bought the firm from the Basses and soon renamed it Amerimar.
That same year, he also took on the Rittenhouse Hotel, a property so troubled that it made Marshall's risk look foolhardy. The hotel itself was a skeleton. Two different developers had tried to finish and failed. "It was a vacant shell when I bought it," Marshall recalls. What's more, Rittenhouse Square, which the hotel faces, was then afflicted by the sorts of ills that hurt many American cities in the 1970s—drug-dealing, aggressive panhandling, street crime.
Where others saw peril, Marshall saw potential. The square, now widely considered Philadelphia's most desirable neighborhood, was just a couple of blocks from City Hall and the city's business district. Still, Marshall understood that, no matter how much money he poured into the hotel, he'd fail unless the square itself improved. He and several other business people therefore formed a committee to refurbish it.
"We'd meet every Monday morning in our board room," Marshall says. "We'd meet with the mayor, the police commissioner, the district attorney and anyone else we thought was appropriate. I said to the mayor, 'Mr. Mayor, I can clean Rittenhouse Square, but I can't police it. I want 24/7 police protection out there. If you do that, I'll clean it.' And he said, 'You got it.' I went around to all the owners of buildings on the square and said, 'If you want to help pay for this, this is your piece of it, but if you don't, you've got a free ride on me.' They all kicked in."
Marshall
sees his effort as just a basic part of the attention to detail that
any real estate deal, or for that matter, any entrepreneurial venture
requires. "We spent $150 million on the Rittenhouse Hotel,
but if the doorman is rude to you, what's the good? If the food
in our restaurant is too salty, same thing. If it's legal, ethical
and moral, we'll do it for a customer. If you want a purple elephant
delivered to your room, we'll do it."
His creed
has paid off handsomely. Not only does the Rittenhouse continue to thrive,
but its hotel rooms—the building also houses condominiums—generate
more revenue than any other in Philadelphia.
Pier 39 in San Francisco and Denver Place in Colorado had equally checkered histories when Marshall decided to buy them. Pier 39 had been envisioned as San Franciso's version of Baltimore's Inner Harbor or Boston's Faneuil Hall. The shopping center had a prime waterfront location, but had been badly mismanaged.
"It was the laughingstock of San Francisco. We realized this when we got into a cab at the airport and asked the driver to take us to Pier 39, and he turned around and said, 'Why?'" With that conversation, Marshall understood that the pier had not only financial woes—it was stumbling toward bankruptcy—but an image problem, too.
To upgrade its reputation, Marshall's company recruited popular local businesses and restaurants as tenants and, perhaps just as important, reached out to the crabby cabbies. "We handed out dashboard coffee mugs, which said Pier 39 on them. We'd give coffee to all of the cab drivers, but we had to pour it in the Pier 39 mugs. We had lines of cabs outside. That changed the whole impression of the market."
At Denver Place, Marshall faced a development bollixed by bad luck, rather than bad management. The office, hotel and apartment complex was built just before the energy industry, on which Denver then depended, had slumped. Hard times had left the office building nearly empty and the apartments half empty. The hotel had a master lease with a tenant, but that company had gone bankrupt.
As Marshall puzzled through the development's strategy, he decided that the apartments needed to offer luxury hotel services. "I went into the manager of the hotel and said, 'What happens if somebody in the apartments wants a limo to the airport?' And he said, 'We can't do that. That's a hotel service.' And I said, 'What if they want room service? And he said, 'We can't do that, either. They'll steal the dishes.' So I said, 'This is a totally new ballgame. It's not the hotel against the apartments and the offices. You're all working as one.' We offered hotel services to all of the apartment dwellers, and immediately the occupancy went to 95 percent."
Marshall tried to offer the same sort of hospitality to the offices. "When tenants moved in, we'd roll a cart into their suite with coffee and Danishes. We'd make deals for them in the apartments." Even so, the building didn't fill.
That's when Marshall and his senior officers decided to add "a world-class health club"— something no one else in Denver had. "It took us about six months to a year to convince the lenders that that was the way to go," he recalls. "But as soon as it opened, CEOs of major companies would come to town and want to work out there. So that primed the pump, and the occupancy soon went through the roof."
According to David Marshall, the definition of entrepreneurship is "all attention to detail."
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