At the height of the real estate boom in November 2006, TMG Partners and partner AGI Capital pulled off a major coup: a $100 million capital windfall from CalPERS that could be leveraged into $400 million to invest in new housing.

TMG Partners President Michael Covarrubias fully intended to pump the money into new residential projects across the Bay Area. But the more he and his TMG partners looked into specific deals, the more they came to believe that the region was in the midst of a bubble. When TMG did enter competitions, they got blown away by developers willing to pay far more. When AT&T put its historic office building at 140 New Montgomery St. up for sale, for example, Wilson Meany Sullivan's $118 million winning offer was $25 million higher than TMG's bid.

"We had options on three or four properties here in San Francisco and down in San Jose," said Covarrubias. "We just kept feeling nervous and kept extending the options. Finally, the world cratered and we didn't close on any of them."

The TMG/AGI joint venture, dubbed Avant Housing, snapped up just one property: the 41,000-square-foot 240-260 Fifth St. for $8.7 million, which it is in the process of entitling for housing.

So some 30 months later, 90 percent of TMG's pot of cash remains unspent.

"(CalPERS) jokes that we are one of their best performing partners because out of $100 million we spent $10 million," said Covarrubias.

Instead, TMG's been selling property. It sold Bay Center in Emeryville for $120 million, about $366 per square foot. It unloaded 180 Montgomery St. to Swig Co. and Mitsui Fudosan America for $128 million, or $425 a square foot, about $29 million more than TMG acquired it for in 2000.

TMG, which is celebrating its 25th anniversary, is the only major Bay Area developer that has not had any layoffs.

"We got out of the way of the boulder before it hit," said Covarrubias. "We didn't buy anything in 2006 and 2007. We're liquid. We have no problem assets. No legacy assets. Legacy used to be a good thing. Now legacy means your leftovers from the bad days."

Dry powder

With commercial real estate values plummeting and distressed owners looking to unload property across the Bay Area, that's got TMG thinking of being a buyer again. It's looking at a number of opportunities, though Covarrubius stops short of saying it's ready to reach for its wallet.

TMG may be in the perfect position to pick up key properties at a discount, according to Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. Rosen is part of TMG's new four member advisory board.

The other members are private equity pioneer Warren Hellman, developer Warren "Ned" Spieker and Bay Area Council CEO Jim Wunderman.

"TMG is going to play a big role in helping others work out their problems," said Rosen. "They have a unique opportunity in the sense that values are going to be lower. If you have some dry powder, it's going to be a great time to be an acquirer of portfolios of property."

Rosen said TMG will be increasingly looked to as a partner for distressed owners and lenders looking for help repositioning assets.

"I have always noticed that (Covarrubias) has been able to take situations that are complicated and hairy and work them out," said Rosen. "It's a rare skill in the real estate industry to be able to do that."

Thus far, TMG has heard from only a few troubled or over-leveraged owners looking to unload non-performing properties. The company is negotiating to acquire a broken condo conversion in the East Bay, a shopping center in San Jose and a redevelopment deal in San Francisco. All are distressed deals, but Covarrubias declined to identify them because none of the transactions have closed. In San Francisco, TMG is competing to develop Block 8, a redevelopment site at First and Folsom streets slated for 600 units. And it plans to respond to a request for proposals to redevelop Pier 70.

"We're getting more phone calls from pension fund advisers and banks and owners who have assets that need repositioning or refinancing. I think we're going to be in the repair business for a while. We are going to be helping people with their other assets that are not going according to plan," Covarrubias said. "The tsunami has not hit the street yet, but you can see it building up on the horizon."

China option

Meanwhile, TMG is also exploring opportunities in China. Together with architect [CompanyWatch allows you to receive email alerts with stories related to your companies of interest.

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] HellerManus, TMG has been negotiating a deal with a landowner in the Pudong district of Shanghai.

"It is a phenomenal piece of land in a phenomenal district," said Covarrubias. "It's waterfront. It's historic. It's mixed-use."

While TMG has made it's name by staying intensely local, Covarrubias said he is serious about the China project.

"If it can be done safely and is in our strike zone of services, we can make it fit. It's not a wild expedition. I can't say I'm convinced yet, but it's intriguing enough to keep looking."

Covarrubias said if the project goes forward, TMG would likely do more in China.

"Doing one deal of any kind is never a good thing," he said. "I'll either get comfortable, or we'll go back to doing what we do here."

And on the development side, Covarrubias said he expects the Bay Area to remain quiet for a while.

"It's hard to imagine a new building getting built for quite a while of any product type," said Covarrubias. "Apartments will be first. It's hard to imagine we will need another office building, condo, retail shopping center or hotel in the foreseeable future. We're not going to see $600 (a square foot) for a long time, and we're probably not going to see $500 a square foot."