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The UW: Seattle's unlikely real estate baron
Monday, February 7, 2000
By RUTH SCHUBERT
A plaque in front of the Four Seasons Olympic Hotel offers guests the only clue they're staying on the original campus of the University of Washington.
Same thing applies to shoppers at Eddie Bauer's downtown store, to workers piling into the elevators at the IBM Building or the Rainier Tower.
The wooded, 10-acre plot donated to the state in 1861 for a university now lies in the heart of Seattle's downtown core, and it's still owned by the UW.
The story of how the university ended up owning a $220-million chunk of downtown real estate is part of Seattle lore, but it comes as a surprise to many newcomers. It takes a major change -- like the UW's pending proposal to put up a 26-story Grand Hyatt Hotel on Rainier Square -- to dust off the history of the UW's "Metropolitan Tract" once more.
It is a highly unusual setup. While many universities invest in real estate as part of their endowment portfolios, none can boast as large a single plot of major downtown property as the UW. Ever since Columbia University in New York City sold the famed Rockefeller Center for $400 million in 1985, there's little that's comparable.
"The University of Washington is pretty unique in that, and they're pretty fortunate to have that asset," said Jeffrey Lipton, executive director of facilities management and real estate at the University of Colorado at The property gives the UW an independent revenue source for Lbuilding construction and land acquisition.
Over the past five years, the UW has netted between $6 million and $9 million per year. Between 1955 and 1998, the university's building fund received nearly $134.5 million from the downtown property, and values are only going up.
By law, profits from the property go into the UW's building account, helping to complete construction on just about every building on the UW's spacious Seattle campus.
Money from the tract has gone toward buying the land where the current law school and the College of Architecture and Urban Planning stand. And revenue from the tract paid off the university-issued bonds that funded some of the most visible projects at the UW.
The original UW Medical Center may never have been built without those bonds. And the new law school building is being paid for through private donations and bonds made possible by the Metropolitan Tract.
The story of the Metropolitan Tract begins in 1860, when Washington's 7-year-old territorial Legislature voted to support the establishment of a university in the rough-and-tumble Northwest corner of the United LStates. It was a statement of aspirations more than necessity. Seattle boasted only 200 citizens, and it would be decades before the Alaska Gold Rush, kicked off in 1897, made Seattle a thriving port of departure.
The catch was that someone had to cough up 10 acres around Seattle.
Arthur Denny, one of the original landholders in the territory, had been part of the lobbying efforts to bring a plum state institution to Seattle. With an eye toward the potential benefits of a university, Denny deeded over a portion of his land and persuaded two contiguous landholders to square off the edges by donating some extra acreage.
"The history of land is really the history of the West," said Brewster Denny, dean and professor emeritus at the Graduate School of Public Affairs at the UW. "Those people came here, made those claims to land and then decided what to do with it."
"It was a symbol that this is going to be a great city some day, and we just want to show everybody that," added Denny, who has a keen interest in his family's role.
A building considered monumental at the time formed the heart of the new school. But as Neal Hines noted in his 1980 book about the tract, "Denny's Knoll," the school twice closed for lack of funds. Few students were studying at what might be considered a collegiate level, and by 1878 enrollments were barely creeping over 100.
Yet, when Washington became a state in 1889, the Legislature decided the 10-acre plot wasn't nearly grand enough for the future of Washington. The folks in Olympia decided the university needed to move to a new site at least four times the size of the old campus. There were those, too, who were unhappy with the tavern district creeping up the hill from Seattle's Skid Row.
The university made its big move in 1895, and the old piece of land was put up for sale, priced at $250,000. But the territory, caught in the backwash of depression in the 1890s, couldn't find a buyer.
"We came into ours, you might say, through an accident of history," said Neal Lessenger, the UW's recently retired real estate officer. "Other institutions have gone out and bought their property."
In 1900, the UW Regents decided they might as well hold onto the land and lease it out to a developer. After some fits and starts, a 50-year lease to the property was handed over to the Metropolitan Building Co., giving the "Metropolitan Tract" its name.
From the beginning, the developers and the university wanted the tract to boast top-flight offices that would hoist Seattle's business center -- and its profits potential -- up to the university's land.
The growing tract included the first building in the west devoted entirely to medical and dental offices, the Cobb Building. And, although it has since been torn down, the Metropolitan Theatre was the swankiest of entertainment venues, fronted by a dramatic Venetian facade. The 609-room Olympic Hotel, completed in 1924 and expanded in 1929, was the most sumptuous the city had ever seen, answering the community's aspirations of becoming a world-class city.
As the lease was coming toward an end in the early 1950s, the tract was fully developed. It was valued at $25 million in 1953. While many of those structures were replaced in subsequent years, some of the tract's most visible buildings are still around: the Four Seasons Olympic Hotel as well as the Cobb and Skinner buildings.
With the old lease coming to an end, the Legislature stepped in to settle questions about what the university would be able to do with the land. The UW was granted broad latitude to execute leases of up to 60 years without heading to Olympia to check with the Legislature.
The tract was leased to University Properties Inc., now called UNICO, which holds the lease on all but the Four Seasons Olympic Hotel until 2014.
Under a separate agreement, the hotel is leased until 2040.
Under UNICO's management, the tract has grown skyward. The Washington Building, then the tallest in the vicinity, was completed in 1960. The IBM building opened in 1964, and the Financial Center was completed in 1972. Rainier Square and the Rainier Tower, with its distinctive tapered base, went up in 1977.
The Skinner Building, Fifth Avenue Theatre, Olympic Hotel and Cobb Building are all on the National Register of Historic Places.
Current plans under negotiation with UNICO and the hotel chain, would put a Grand Hyatt at the least financially productive corner of Rainier Square, at Fourth Avenue and Union Street.
The 26-story hotel would represent the biggest change to the tract since the 1970s. The lengthy design review process with the City of Seattle is under way, but the deal is far from over.
"We're further down the road than on anything we've talked about in the last several years," said David Haworth, the UW's metropolitan tract representative. "All parties are still working together to try to make it happen."
P-I reporter Ruth Schubert can be reached at 206-448-8130 or ruthschubert@seattle-pi.com
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