Perry Dealy, president of Manchester Development

The president of Manchester Development, driving the Manchester Pacific Gateway project on the Navy Broadway Complex, soft-spoken Perry Dealy, has been developing San Diego real estate for nearly 30 years, arriving here in 1977 to work as staff architect developing SDSU’s master plan and finishing its new arts building. He later worked on its bike trails, new library and the athletic master plan for football and baseball. Later, he ran Pat Bowlen’s development of what is now called the Wells Fargo Plaza in Downtown San Diego, and worked on the San Diego Convention Center expansion, Lindbergh Field master plan, Rancho Bernardo Corporate Center, Centerside office towers in Mission Valley, Century Centre office complex in Irvine and the ever-popular Qualcomm Stadium expansion. (Financing of the Qualcomm expansion was not his idea.)

Earlier, he served with the Marines in Vietnam, earned a bachelor’s degree and a master’s degree in architecture from North Carolina State. He, his wife and son live in Point Loma. He prefers to ride a Tomaso, an Italian road bike, having given up his Harley 15 years ago.

Metropolitan: What are the chances of shrinking the Pacific Gateway project below 2.9 million square feet?

Dealy: Not likely to happen. It’s the right size for the proper balance.

But that’s what you said at 3.1 million square feet.

We had above-grade parking and we’ve put it below grade, so we didn’t really lose any program space. We reduced the bulk and scale (above ground) by 300,000 square feet. Actually, we were up to 3.2 million square feet when we heard CCDC and the community raise concern about the bulk and scale.

What’s the breakdown of the 1.65 million gross square feet of Navy and commercial office space? What about subsequent phases?

It’s 373,000 for the Navy. That’s a first phase and as it turns out, that’s all they’ll probably require. It does not look like they’re going to take that option (for a second building). Looks like it will be a private building instead.

Office?

No, hotel.

So there will be another 1.2 million of office space, right?

Correct.

What’s the timing expected to look like, development and construction?

There are eight blocks in the master plan. The four southern blocks including the Navy build-to-suit will commence construction in 2007. The Navy building should be well under way in February and the other three blocks would be under way by summer of 2007. By January we have to have our lease approved by Congress, no later than Jan. 1, 2007. After we get the CCDC consistency review approved, then we will finalize our lease and submit to the Navy a signed lease, which then goes through an approval process through the Department of Defense and Congress. They’ll have three months to get that completed. If they could do it in two months or one month or three, it’s in their hands at that point. Existing legislation allows for this project to take place. We’re optimistic that once we sign our lease that we will get it approved by the federal government.

Who do you work with?

We deal with both Admiral (Len) Hering, and Capt. Mike Allen. They’re very professional, they’re fast and efficient. They’re decision makers, very professional and are working hard as our partner to do what they can to help the project become a reality. They’re committed to the Manchester team and they cut through the red tape whenever possible.

Has the bureaucracy been worse for this project than anything you’ve done?

Absolutely not. We thought we’d be inundated with red tape. But we are dealing with the highest level of real estate professionals within the DoD and the U.S. Navy and they have full authority to make decisions. It’s been, quite frankly, a pleasant surprise in getting decisions made. They are reviewing all of the business plans for the real estate deal. They are looking at the build-to-suit for the Navy office building. They are reviewing the master plan. They did (review plans and revisions before CCDC reviewed them) except for the one plan that became controversial. That’s the 3.2 million-square-foot foot version with four acres of open space and bridges across the Paseo. It was maximizing the development agreement. It went simultaneously to the Navy and CCDC. Since then, we’ve respected the fact that the Navy needs to review it before we submit it to the public. I think they want to be aware of where the planning is and to make comment. It’s their property. They’re the landlord and they have to approve everything we do on the property.

What next document or agreement needs to be reached with the Navy?

That’s the lease agreement. That one we (should have) conclude(d) by the end of July.

When would groundbreaking be for what?

While the architecture of each building in Pacific Gateway must meet detailed city design standards, the $1.2 billion project will transform an area now home to a nearly 80 year old military building.

Two hotels and a Class A commercial office building and the Navy office building would all be 2007, about 185,000 square feet for the commercial office building. All the remainder is in Phase 2. The southern four blocks are the smallest parcels. The height of the buildings is 400 feet at Broadway (and Pacific Highway) down to 120 feet near Seaport Village.

The next phase of office could go as soon as 2008; it just depends on the market. We have to wait to relocate the Navy into their new building before we can tear down their old ones and build the two tallest buildings. They would be on Broadway and Pacific Highway, and on E Street and Pacific Highway. Those two buildings contain about 800,000 or 900,000 square feet of office, combined. There’s another freestanding office building of 200,000 square feet at Harbor Drive, between E and F, that we could build simultaneously with the second phase. But given the kind of tenant base we’re going after (if the demand improves), we have the ability to do that 200,000 square feet earlier, so a total of 400,000 square feet of commercial office in the near-term is possible.

The hotels will all be condo hotels, like the Hard Rock Hotel. Not unlike the Hard Rock, we see an opportunity to have consumers enjoy ownership into a hotel, so as you travel into San Diego on vacations, you’re able to have a place pre-determined in a Downtown urban waterfront environment. There’s a big demand. We don’t know how deep it is. But there’s a pent up demand for this kind of a project and we think it’s a very good urban alternative. The sales program is part of the equity to make the project more viable financially. That’s a concern. People are saying: “How fast can you build this?” Well, we’re ready to build Phase 1 right away and we’ll go into Phase 2, if the market remains solid, as fast as we can as well.

About $1.3 billion is the total development value. First phase of four buildings would be valued at $288 million not including the Navy build-to-suit. So add that in and it would worth around $450 million or $500 million.

Who is the artistic heart on the architectural team?

Art Gensler. Hal Sadler is addressing the historical context as it relates to the North Embarcadero Visionary Plan and is responsible for the Navy build-to-suit, along with collaborating with Art Gensler on the master plan, and liaison with CCDC. He’s turning out to be more of an integral part. The change the master plan has been going through, trying to address the historical context of what was intended for the plan, and how to integrate it all.

What happened to Gordon Carrier?

Gordon was part of three architectural firms on the team to help us with the master plan and once we got more involved in the modifications to the master plan, there was only room for two large architects. So we chose to stay with one of the the largest international architects in the world (Gensler), with offices in 26 cities around the world, and Tucker Sadler because of their longstanding history with the North Embarcacdero redevelopment and with Hal’s extensive experience with CCDC. It was a very difficult decision, because there is no question Carrier Johnson also is one of the top firms in San Diego and made some significant contributions to the master plan as it was going through its evolution. His brainstorm was to make the Paseo, the north-south passage through the center of the master plan, a significant pedestrian element.

What do you think of the Irvine Co.’s sincerity in developing more office Downtown, negotiating with Bosa for the old Catellus site, and negotiating with CCDC for the site north of One America Plaza?

I think they wouldn’t have hired the kind of people they did if they were going into a holding pattern. You don’t hire (Steve) Black and Tom Sullivan for nothing. They’re are implementers. They implement product.

Would their projects be a good thing for you?

Yes, I think so. What the Irvine Co. will bring are great relationships throughout California, considering how many tenants they have relationships with. They can give their tenant base opportunities to move into new product Downtown. We certainly encourage competition. You don’t want to build more than the market can bear. But we like our location and believe we offer a different type of product with the Navy proximity, water proximity. I think there’s room for both, not unlike the Lankford building (Broadway 655) and the Petco Park building (DiamondView). We hope they’re both successful.

Is there any satisfying those who’d prefer this property be a park?

Plans for Pacific Gateway call for extra wide corridors down the streets, opening up view corridors to the water that presently do not exist because of the mass of the existing Navy Broadway Complex.

When’s the last time a park was built Downtown, outside of the Park at the Park? Of all the locations CCDC could build a park, they’ve had no money to build them. More important, the North Embarcadero Visionary Plan with the 8.4-acre park around the County Administration Building, the two-acre park in the Navy master plan, we’re going to wind up with 35 acres of open space, parks, promenades and plazas along the bayfront.

Doug (Manchester) has made this a significant commitment of his time and resources, and in terms of his own manpower. I think as he’s traveling, he’s staying engaged with this on a daily basis. It’s hard to say how many hours he put in, going through the design and the business side of the project. Everything will be approved by Doug before we formalize any final decision. He feels a lot of pressure to make this a great front door to the city, which is one of the reasons why he’s committed to Gensler Architects, which has tremendous experience in urban mixed-use around the world.

More importantly, he’s been following the Navy Broadway project all along; he competed against a list of nationwide developers and was selected because he had the best waterfront experience. He’s a San Diego developer, a local, and he gave a good economic package to the Navy. He’s “proven” with all the projects he’s built over the years.

What about the criticism that he’s too litigious?

Urban myth. There have been a number of situations where there wasn’t even a lawsuit and disagreements were resolved through business negotiations. I think he’s brilliant. He’s an icon in our industry, not only locally but nationally. He’s contributed unbelievably to this renaissance in Downtown, along with Ernie Hahn and John Moores. I admire him tremendously. I’m working for a man who owns an empire. I enjoy working for him. He’s got a great mind; he’s always thinking of positive solutions constantly. And he has lots of other diverse interests. He’s not just a real estate developer and owner. He has lots of technology investments and is on the board of major corporations. He has a diverse set of investments.

Why do you think the Union-Tribune is so critical of him.

Because Doug hasn’t gone out of his way to schmooze everyone in the community. He’s worked hard to be a good business person, be a good family man and has contributed to charities throughout the community. But he and his wife don’t go out seeking recognition or acknowledgment. That could be misconstrued as arrogance but there’s no way Doug can be considered arrogant. He’s motivated. He’s competitive. But he’s not arrogant.

I think reporters don’t like him more than he doesn’t like reporters. Sometimes what gets conveyed in the public may not be a good representation of some of his qualities and what he’s given to the community.

How much time are you devoting to this project?

This project alone, 30 hours a week, and another 30 doing everything else.

What’s the status of the Lane Field project?

We’re proposing a five-star hotel that will be a major hotel flag — haven’t picked an operator yet — with 500 to 800 rooms. There could be a second-phase hotel. There would be retail, parking, and possibly some office, about 1 million square feet gross, including the hotel, on Lane Field. That’s about four developable acres. The cruise ship terminal is four or five acres.

How did the Port District staff react when Manchester became a partner with Viejas to develop Lane Field?

They embraced it as someone who can get things done on the waterfront. That’s another nasty rumor (that the port doesn’t like Manchester). We’re the No. 1 tenant they have. We pay more rent than anyone else on the tidelands, between the Marriott and the Hyatt.

Manchester employs about 1,800 people, including about 1,400 on the waterfront at the Hyatt. The other 300 are opening the Grand Del Mar and some are in Idaho. More than 1,000 Marriott employees on the tidelands don’t actually work for Manchester.