John Kratzer demonstrated that Petco Park was more than just a ballpark, and if San Diego wants to keep its football team, he said it should do the same for the Chargers facility.
Kratzer, president and CEO of JMI Realty, and Dennis Cruzan, co-founding partner of Cruzan Monroe, livened up the Burnham-Moores Center for Real Estate's Breakfast at the BMC on Tuesday with insight into the Petco Park development, some bantering and trumpet playing.
Kratzer led the 26-block master planning and development effort that created Petco Park. He moved to San Diego in 1998, when JMI Realty was founded. JMI Realty is owned by Kratzer and John Moores.
“He’s probably one of the sharpest real estate guys I know. He knows finance, he knows inspection, he knows operations — he knows it all,” said Cruzan, who moderated the event.
Cruzan wanted to make sure the audience heard Kratzer’s whole life story — from starting businesses as a 37-year-old to underwear modeling and horse cutting. In return, Kratzer slipped Cruzan’s trumpet onto the stage and asked him to play a few tunes.
Kratzer dropped into the Petco Park project as an outsider with a fresh perspective. While at times it was daunting (17 lawsuits), contentious and political, Kratzer said the really cool thing was that “people who mattered in San Diego” wanted to get it done.
“While we did a lot of things wrong, one of the things we did do right was tap into all of these great, existing leaders in San Diego who were willing to help us out,” Kratzer said. That included Malin Burnham and Cruzan, who introduced Kratzer and his team to the key stakeholders in the city.
Kratzer said the Chargers deal is a “huge deal” for himself personally and for San Diego. If San Diego loses the Chargers, Kratzer said he doesn’t think the city would get another football team, because the cost is almost prohibitive.
San Diego’s economy is largely driven by tourism, and a mixed-use facility with exhibit space, a concert venue and meeting space — like the plan offered by Mark Fabiani — could “boost the tourism industry tremendously,” Kratzer said. It has the possibility of being used 150 days each year, he said, and could put San Diego in a position to host the Super Bowl.
“The NFL will make its investment. ... There’s a game being played where no one will take the first step. The reality is the NFL will put $200 million in … I believe the Chargers will put $200 million. So you get $400 million there. But I don’t think the city will invest in it and the taxpayers will embrace it if it’s not more than a ballpark,” Kratzer said. The campaign slogan for Petco Park was “more than a ballpark,” he said.
The Petco Park project was to be considered a success if it achieved $311 million in private development. According to Civic San Diego’s scorecard, the development value is up to about $1.7 billion, Kratzer said.
“I don’t think the city or the taxpayers are going to get comfortable as a practical matter investing in a football-only facility. But I think if you can start to demonstrate to them that it’s more than just a ballpark, that it’s more than a stadium, then they will,” Kratzer said.
He added that the hotel rooms in San Diego play a “huge role” in this. When the Super Bowl was held in Jacksonville, Fla., cruise ships were brought in to accommodate guests because they didn’t have the number of hotel rooms that San Diego has, Kratzer said.
Kratzer said Moores taught him to see how momentum could build around a grand vision, when all he saw were the obstacles. Kratzer saw the obstacles of entitlements and other legal challenges. Moores focused on the vision, and “as things started rolling, the obstacles fell down in front of us,” Kratzer said.
He said they were lucky that at the time residential development downtown was burgeoning, urban lifestyles were being rediscovered and it was clear that there was demand for hotels in the area.
If the private development hadn’t been successful, there wouldn’t have been a ballpark, Kratzer said. Kratzer was hired to work with Larry Lucchino, a situation that proved to be difficult as Kratzer said Lucchino thought he was in charge of the private development, and Kratzer had to ask the hard questions. The two have since resolved their differences.
Interaction with the community also helped the project succeed; in 1998 there were 184 public hearings. When the deal was cut with the city, Kratzer said they insisted upon a joint venture with a fairly high level of private control to act as private developers.
“What we all realized was that we could do stuff the city couldn’t do. We could make stuff happen procedurally much quicker than the city could,” Kratzer said.
Kratzer learned how to delegate through working on the Petco Park project. He said he’s a “control-oriented guy” and wants to understand and participate on everything that transpires in a project, but realized that this project was too big and came to understand that teamwork was the way to get it accomplished.
The project was a real estate deal and political campaign combined, Kratzer said, and those who weren’t getting both ends accomplished didn’t make it to the end of the project.
Moores instilled in Kratzer that it’s always about doing the next right thing and that if he did the next right thing, everything would work out, he said.
Kratzer has companies in both California and Austin, Texas. On flights to Austin, Kratzer said it’s “shocking” how many people are going from San Diego to Austin to consider corporate relocations. Those looking to relocate are courted and offered incentives in Austin, and Kratzer said California should take a page out of that book to reverse the trend.
Kratzer spoke with a man who runs a title company who said that between 2003 and 2008, 150 companies moved to Austin, 100 of them from California. The other 50 were mostly interstate relocations.
“It is pretty scary to see people leaving California who you know are creating jobs, and who are paying big taxes and investing,” Kratzer said.
Housing is inexpensive in Texas, there’s no state income tax, and no CEQA (California Environmental Quality Act) requirements, which can add two or more years to a large project, Kratzer said.
“I think Texas has a property-rights mentality … You have to prove why the property owner shouldn’t build or develop what they intended for that property as opposed to what we deal with here, where you need to satisfy multiple levels of design review, multiple levels of regulatory and discretionary reviews,” Kratzer said.
He added that Texas is still being thoughtful about architecture, but in San Diego, there’s about three years of additional regulatory hurdles to jump through.
Despite those challenges, Kratzer said he thinks the future for commercial real estate in San Diego is bright, “barring some catastrophic event at the state level.”
“If you want to be part of a community where you can make a living and live and not disengage … If you want a place where you can make a difference, be involved in the community, make a good living and have an incredible lifestyle — San Diego is always going to get high marks there,” Kratzer said.