Dawn Serpa is president of The Surland Companies, a private, 13-year-old residential and commercial developer that builds 100 to 200 houses per year. It is currently building Redbridge in Tracy, a 450-home project that mixes an array of housing sizes and styles in one subdivision, and plans to build Tracy's first mixed-use urban village.
Unlike some developers, Serpa does not fear the "smart growth" movement. She even complains that many local regulations prevent traditional neighborhood developments. CP&DR Managing Editor Paul Shigley interviewed Serpa at her office in San Ramon.
CP&DR: You do business on both sides of the Altamont Pass. How big a difference is there in the two locations?
Serpa: There are still large pieces of land in Tracy, and in San Ramon there clearly aren't. There are tremendous political differences. Tracy is still a small town and still operates more like a small town. Things in that community have a lot to do with what you do in the community, how you give back to the community and how involved you are and your reputation. San Ramon is a little more strategic. It's very much by the book, follow the rules and go through the process and say a few prayers. But San Ramon is fairly friendly to development, versus Danville and Pleasanton and Livermore.
CP&DR: How would you characterize the political atmosphere in the Tri-Valley area?
Serpa: I tend to see things as opportunities rather than as obstacles. Many of the politicians are becoming more educated on development and on the entitlement processes and on what options are available to them. Politicians are a little bit savvier about trying to see certain development opportunities occur in their communities that benefit the entire community. And I see that as a positive. I think there are lots of ways to make money in this business. Why not make it while you are making someone else happy and doing something good for the community you are building in?
I do think there are people in the industry who see it as another obstacle and just as an excuse for no-growth and an opportunity for no-growthers to stand up at a podium and condemn their projects. But I think if you really listen to what they say, the Sierra Club and most of these groups and these people ask for very specific things. They want transit-oriented development, they want sustainable development, and they can articulate those things and define them. They are sort of banking on the fact that most of us don't get it, and if we don't get it we're not going to get our project approved and, therefore, there is slow growth or no growth. But I think if you actually listen to what they say and give it to them, what are they going to say then? I'm of the mindset, give them what they are asking for.
CP&DR: That's a different approach than many developers take.
Serpa: Yeah. I think we spend a lot more time figuring out how we can do it, how it can be financially viable. And there are so many opportunities at the state level and at the federal level to get funding for these projects. But you do have to invest some time in figuring it all out, making sure that your team understands it and wants to go in that direction.
CP&DR: Give me some examples.
Serpa: The quintessential builder team is comprised of the director of purchasing and the forward planner and the VP of finance and the head of construction and the president. It just has that conventional program in terms of manpower. It's probably going to have a difficult time because they are not going to have high-level people on staff who understand these other issues that take research and a different level of sensitivity and a whole different area of experience — understanding the ins and outs of smart growth and some of these public-private partnership benefits. You need to invest some time and some money in people who have different skills than what we're used to having.
CP&DR: What sort of people would you bring in to work on a project?
Serpa: We have some development consultants who are specifically interested in doing infill type of development and redevelopment and revitalization. Most of the people who are interested in that can help in forward planning and putting together projects that are transit-oriented development and mixed-use, rather than a typical subdivision.
CP&DR: Is it difficult to build in the Bay Area?
Serpa: It's difficult if you want to do things the easy way and the way that we as developers and builders have done them for years, which is to find a site and build 100 houses with four different plan types and three different elevations and not go through the aesthetic review process. … It's difficult unless you are willing to be flexible and reinvent parts of your business.
CP&DR: Does the development community as a whole recognize that?
Serpa: I think they recognize it. Whether or not too many of them are willing to do anything about it is another story. It's hard to change
CP&DR: What's the market like these days?
Serpa: The more affordable market is stronger. The discretionary market is not as strong. People aren't as wealthy as they were last year. Job-security is an issue for people.
CP&DR: Where is the market going?
Serpa: It will rebound like it always does. It's going to rebound slower than most people think. The only thing that's saving us in our industry is that there is such a shortage of product in the market and there is still such a pent up demand from people who want to buy a house. But I think we're going to run through that. I happen to think things are going to get a little bit worse before they get better for some people.
CP&DR: You've been building in Tracy for nine years. How have you seen that market evolve?
Serpa: It's become more sophisticated. For quite a while it was a real affordable bedroom community. We sold a couple houses last year for $975,000. I think it's an evolution. What we're selling for $225,000 to $250,000 is a two-bedroom cottage that's on a 3,000-square-foot lot. It's a little tiny dollhouse. You can't get a three-bedroom ‘real' house for less than $350,000 — when the average sales price there two years ago was about $170,000. Because land prices in the Bay Area went up so high and the very basic tract homes in the San Ramon and Pleasanton area sell for $700,000, $800,000, then Tracy at $350,000 still seems like a bargain.
CP&DR: Is it good, from your perspective, that prices have gone up in Tracy?
Serpa: They have enough affordable housing to last them through eternity. You can't say we need that much affordable housing in one community with a population that size. They did need move-up housing so they could start seeing job-growth and seeing businesses relocate there and establish themselves there. … They were sort of a dumping ground for a while.
CP&DR: Tracy seemed receptive to anything.
Serpa: It was their naivete. They didn't really have the mechanisms to watch over things like that. They didn't understand how it would affect their community in years to come. So when the big growth boom occurred over the last three years, they went, ‘Woah.' And that's when Measure A passed. [Editor's note: Measure A, which passed in November 2000, restricts the number of new houses in Tracy to 750 per year.]
CP&DR: Do ballot initiatives like Measure A worry you?
Serpa: They do because anything that sort of boils everything down to a number doesn't really help the bigger issue. In Tracy, their bigger problem is they just weren't getting what they wanted from the development world. … They were getting a lot of really affordable housing — not attractive housing — going up very quickly and in areas, such as view corridors, where maybe they didn't want to see that. So instead of saying we want to control the development process from a creative and visionary standpoint, they controlled it by numbers, which is what the average citizen does. They don't know how to handle it any other way.
CP&DR: Do you try to head off these ballot initiatives?
Serpa: The industry does – the BIA and the HBA. Some of them are not all bad. Did we actively, aggressive fight [Measure A]? No. I understood where these people were coming from. It's hard to philosophically argue with people saying, ‘Hey, this is too much for us. This is overwhelming our community. We're not happy about what we're seeing.' I couldn't really disagree with them.
CP&DR: What would make you life easier as a builder?
Serpa: Land being less expensive. When we're not being in the position of developing the land, either the developer or the landowner understanding the bigger picture. It's difficult when everyone is gouging everyone. It's hard to have anything left to do anything great. It becomes all about cutting and cutting and just trying to eke something out. And I think that's a tragedy. It would be really nice if landowners, whether it's a farmer or whether it's a developer, would understand that to get a great project, you can't get the ‘maximum' value out of the land that you're consultant is telling you to get.
CP&DR: That has to be a tough sell.
Serpa: It's impossible. I don't see that changing. But I think the great projects that you see in California or anywhere in the country are generally about a developer or a landowner saying this is going to be something amazing and I'm going to do my fair share and contribute some of the profits I would make to make this thing amazing.