A Man And His Mission

From the June 2010 Issue

By Sharon Simonson

It’s hard to imagine Carl Berg, a self-made billionaire and leader of one of Silicon Valley’s largest commercial real estate empires, as a brass-knuckles competitor. At 72, just the memory of his father’s death more than 60 years earlier still brings a catch to Berg’s voice. But if success as a capitalist is premised on being deeply competitive, Berg must be. He spent his childhood in a tiny New Mexico town.

Today he is consistently ranked among Forbes’ 400 richest Americans. Berg is chairman and chief executive of Mission West Properties, a Cupertino-based public real estate investment trust that owns 8 million square feet of commercial office and research and development space in Silicon Valley. His first Silicon Valley commercial real estate investment was in 1965 when he and three partners including fellow valley real estate titan John A. Sobrato bought industrial land in Sunnyvale. Less than five years later, he and John Sobrato were commercial property developers and among the pioneers in the valley’s industrialization. The partnership lasted until 1978 when Berg nearly left real estate to pursue his other business passion: venture-capital investing. Today he has 100 venture investments. His past ventures include the Amdahl Corp., Sun Microsystems and Integrated Device Technologies. His current passion is Cytotech, a company that is pursuing a cure for cancer.

As Berg tells it, his history from small-town boy to the Forbes list consists of a series of beneficial chance meetings engineered by Berg. He met his first significant employer at a local hotel where he sought work during college because he believed Wall Street investment bankers stayed there. Sobrato called him one day at his office after Berg moved to San Jose in the early 1960s upon learning San Jose was one of the fastest-growing U.S. cities.

While Berg still thrives on his entrepreneurial pulse and has no plans to retire, he is not entirely sanguine about Silicon Valley’s future or that of the United States. The cost of doing business will drive companies to shrink their valley footprint more and more, he believes. Manufacturing will continue to shrivel. Slowly the middle class is being driven from the business ranks. Still, he says, it remains among the best places in the world to live, and if anything can save the region from itself, it may just be the climate and geography.

Berg is being recognized for his achievements by NAIOP Silicon Valley at its May 27 Silicon Valley Developers Hall of Fame Dinner.

How was your life growing up?

My dad was in the construction business. He was a heavy equipment operator in Tucumcari, N.M. My brother and I nearly every day in the summertime would walk about a mile down to a Safeway store and that’s where my dad would come over the overpass from work on his way home. My dad would play catch with my brother and I. We went on lots of vacations and every year we’d go to Colorado to visit with our relatives. My dad was killed in 1948 in a cave-in on a construction project. My mom was a school teacher, so after my dad got killed she stared teaching school again. She taught for 45 years, the fourth grade. She died last year at 97. I attended the University of New Mexico in Albuquerque and got a degree in business administration.

How did you come to Northern California?

I was working for a developer in El Paso who built homes, apartments, commercial and industrial buildings. One day we got into a fight and I quit. I looked it up in the newspaper in 1962 and the two fastest-growing cities in the United States were Las Vegas and San Jose. I got a job running a small home mortgage company. One day I got a call from John [A.] Sobrato. In 1969, John and I decided to quit selling housings and go into industrial development. The electronics industry was just getting started.

Why did you and John Sobrato end your partnership?

In 1978 we were really doing well in the real estate business. We owned everything 50-50. John wanted to go into more the high-end buildings, and I preferred the low-end because I always thought that if the economy went bad, the low-end would be easier to lease. That worked for a while but then later, no. I was thinking about getting out of the real estate business and doing venture capital entirely. We decided to split up all of our buildings. We had done very well in the real estate business, but I have done extremely well in venture capital.

You were one of the few who did not get caught up in the overheated days in 2006 and 2007. Why?

I knew commercial real estate would crash. In 2007, I was certain the prices were unbelievably unrealistic, but I also thought after two or three years, it would all be over. There will always be manufacturing in Silicon Valley, but it’s not going to be the same. I think we will keep management, sales and marketing but I don’t think we will keep the massive R&D projects. The quality of people in India and China and the cost for them, you can’t compete in the world market if you are paying our prices. [The Bay Area] is still the best place on earth to live but the real question is: Can we survive with our current standard of living? Things are going to get better from where they are, but it’s going to take a long time, and it’s not going to be the Silicon Valley glory days.

What do you see for the future of Mission West?

The key is the dividend. Based on what I know there will be no change in the dividend in 2010 and probably through 2011. But I’m concerned that a big percentage of buildings in Silicon Valley today may never be occupied again. For 35 years in business there has never been a time I felt my buildings wouldn’t be rented. I have buildings in Fremont on the market for 30 cents a square foot, and I have gotten no calls and no serious interest.


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