‘Stretch goals and tenacity’ lift downtown developer

Each Sunday, the AJC brings you insights from metro Atlanta’s leaders and entrepreneurs. Matt Kempner’s “Secrets of Success” shares the vision and realities of entrepreneurs who started their dreams from scratch. The column alternates with Henry Unger’s “5 Questions for the Boss,” which reveals the lessons learned by CEOs of the area’s major companies and organizations.

Find previous columns from Unger and Kempner on our premium website for subscribers at www.myajc.com/business.

Marvin’s tips:

— Learn to be a great communicator. You have to sell people on your big idea and plan.

— Pursue what you are passionate about. That gives you the drive to overcome obstacles.

— Be tenacious. Put the business at the top of your list, and don’t consider failing as an option.

Legacy Property Group

Based in downtown Atlanta.

David Marvin, 58-year-old founder and president.

His wife is head of IT for the company. They have three children.

Annual revenue: On pace to hit $70 million this year, up from $62 million in 2013.

Profit margin: The business overall is profitable, but some individual restaurants in the group are not.

Business: Legacy includes ownership interests in land, buildings and businesses including 11 restaurants and special event spaces (STATS, Der Biergarten, Max’s Pizza, etc.); hotels (many of them in downtown Atlanta, including Embassy Suites, Glenn Hotel, Hilton Garden Inn and a planned Homewood Suites); 1,000 parking spaces in Atlanta.

Staff: About 700, most of whom are full time.

Ownership: Marvin founded Legacy. For some parts of the business he has ownership partners. Some employees have ownership stakes as well.

Marvin’s pay: His annual salary is about $100,000, but with other disbursements, he and his wife together are paid a total of between $300,000 and $400,000 annually. He works about 75 hours a week.

“I was probably infected with the developers curse: we are all way too optimistic.”

“I worked 100 hours a week. My personal net worth dropped to 10 percent of what it had been. That was OK.”

“In some measure, being in my own business was one of the first really positive feedback experiences that I had had.”

“I always look for things that have a high barriers to entry…. That’s just good business.”

David Marvin got into business renovating one kitchen at a time. Now, he builds towers, launches restaurants and owns hotels.

In between, 58-year-old Marvin spent much of his life working for others and wishing he could make something of his own. By the time he moved to Atlanta just before the 1996 Summer Olympics, he had some experience but little money.

Today, Marvin’s Legacy Property Group specializes in development in downtown Atlanta, where it manages more than 1 million square feet of space. He’s also branched into areas he knew little about: opening restaurants such as STATS and Der Biergarten as well as hotels, such as Embassy Suites near Centennial Olympic Park. He expects his 700-employee business to generate $70 million in revenue this year. So much, and yet he nearly lost it in the recession.

Probably the most profitable, busiest developers figure out exactly what they are good at and then they go stamp those kinds of projects out. I’ve never found that to be terribly interesting.

I always look for things that have high barriers to entry. Things that are little more difficult. Things that are a little grittier in terms of urban. That’s just good business. Having barriers to entry generally means it is a little more difficult to make the investment, but if you are successful you then have the promise of being protected.

I grew up in the suburbs New York. With the benefit of some scholarships I went to Choate School, which was a prestigious Connecticut prep school. We were not a wealthy family. Choate had a really wonderful (carpentry) shop. I got exposed to that as I languished a bit as a student. It activated the love I have of building.

(After graduating from high school,) I purchased a pickup truck for $300 and decided to go into the carpentry business. I built a custom kitchen. I built an addition for somebody on their house. I built 200 radiator covers. In some measure, being in my own business was one of the first really positive feedback experiences that I had had. But I decided the path to building bigger and better things was through engineering.

Marvin earned an engineering degree and started working for other people, including stints overseeing work on Navy subs, construction projects in Arizona and real estate developments in Florida. Along the way he got an MBA and a graduate degree in real estate development.

I don’t ever remember saying no to an assignment. I’ve just figured it out. There are certain attributes that are good for an entrepreneur: willing to take on stretch goals and tenacity.

I always wanted to be in my own business. I recognized I needed to be patient and work for others gain some experience and build up my financial balance sheet.

Marvin came to Atlanta as the local representative for a man who had interests in both development and sports marketing elsewhere and was trying to build a foothold in Georgia for the upcoming Olympics.

I was a one-man real estate subsidiary. Nobody had any money. This was all make up as you go. We were just arriving in Atlanta so we didn’t have the longstanding belief that downtown Atlanta was no good. We observed a lot of people were coming to downtown Atlanta for a meeting or a convention or perhaps a game. Then they would leave as quickly as possible and find their dining and hotel accommodations elsewhere. Buckhead, for example. We thought a game changer was the Olympics and the development of Centennial Olympic Park, which changed a big area of blight into a beautiful urban park.

He secured land beside the planned park. Chinese partners covered half the $7.2 million price tag and agreed to seek investors in China who would finance a hotel. But their recruitment efforts failed.

We were faced with losing the property in bankruptcy. We had a fantastic piece of dirt. This was a once in a lifetime opportunity. This was an opportunity for me to transition to entrepreneurship. I wasn’t going to let this one go. I was probably infected with the developers curse: we are all way too optimistic.

He leased out the property during the Games. That helped generate enough cash to make loan payments for awhile. Eventually, he lined up financing and won tax breaks and other incentives from the city of Atlanta to launch development.

The Embassy Suites hotel was our first hotel and 10 times bigger than anything we had ever done before. A truth of business and real estate development is you not only have to figure it out, you also have to convince a lot of other people that you are capable, whether it is your lender or franchiser or partners.

I had one assistant and a part-time bookkeeper. I visited the hotel every day before it opened and then after it was open for the first year. I attended every hotel conference I could and rubbed shoulders with other hotel owners to learn what were the factors in their success. I read books and hotel trade magazines fairly voraciously.

He earned an $800,000 development fee on the $45 million project and got about a 7 percent ownership stake to compensate him for his work. By refinancing the project’s loan in 2007, the partners could pull some cash out. Marvin’s share was about $3 million, which he used to make deals on other projects. But the hotel project was left with an $80 million loan just as the recession took hold and real estate values crashed.

It was devastating. We faced losing the asset through lender foreclosure. This was one of several deals that were facing absolutely stare-down negotiations with lenders. It was three years of hell. Any of the major deals could have bankrupted me either by calling on personal guarantees or calling on huge tax (liabilities). I resolved to dealing with them one at a time, dealing with them in a forthright way with the lenders.

I worked 100 hours a week. My personal net worth dropped to 10 percent of what it had been. That was OK. I like to be worth a lot more, but I don’t define myself by my net worth. One of the things that comes from being self made: I had the sense if I lost it all, I could do it again.

We never missed a loan payment. We never defaulted on any loan. I’ve probably regained 75 percent (of my net worth).

Marvin bought bigger ownership stakes in projects at affordable prices as he regained his financial footing.

In a weak moment we decided to get into the (restaurant) business. We concepted and developed and then turned the keys over to trusted third-party operators. But we had a bad experience in terms of the restaurant operator. That forced our hand to really get into the restaurant business.

We do this 100 percent with our in-house team, which gives us a lot of flexibility. When you are doing it yourself, if you decide to make a change, it is easier. We have a lot of fun with it.

We’ve moved within the world of land development, senior housing, retail, condos, hotels, restaurants, parking. We have climbed a lot of learning curves. While execution has probably been more difficult than if we had tried and true methods, the reward has been that we could cherry pick opportunities.