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July 22, 2010
Nearly 40 years ago, Michael Malone launched a music company in an abandoned Seattle stairwell. His rent for the space at 619 E. Pike St. was $25 a month.
Today, the Seattle native owns about 480,000 square feet of real estate in the Pike/Pine corridor on Capitol Hill. He bought it because he wanted an urban campus for his company, AEI Music Network.
The company, which now operates as DMX, provided sound tracks for restaurants and stores. It grew into a worldwide company and when Malone sold it in 2001 sales were $160 million a year.
Malone is now CEO of Hunters Capital, and has dedicated himself to preserving and revitalizing the neighborhood, which has become a magnet for shops, night clubs and restaurants, especially independent ones. Elliott Bay Book Co. recently moved into one of his buildings.
Pike/Pine is a place where on some evenings you can stumble across street performers ranging from solo acts to a brass band or join an exuberant pick-up game of dodge ball at Cal Anderson Park.
“You can't go there on a nice night when things aren't rocking,” said Art Wahl, a Seattle commercial real estate agent who tracks retail trends. The restaurant scene “has just gone nuts. It's just the place to go.”
It's also the kind of place that other landlords would love to replicate, though the Pike/Pine experience shows it takes time. It requires a lucky architectural legacy to build on, and it helps if City Hall is willing to foster the process with regulation and oversight.
Proximity to downtown makes the corridor attractive, but the cultural and architectural character is the real draw. In the early 20th century, Capitol Hill became Seattle's auto row and remained so until after World War II. The auto showrooms remain, with high ceilings, large windows and architectural detailings.
The philosophy of Malone and others who bought some of these buildings is key to the neighborhood's success.
“A building is not a building but a community,” Malone says, adding that development is about “assessing and managing the growth of an urban village.”
Developers can be quite competitive but it's different in Pike/Pine. “There's a whole group of people, and we constantly get together to discuss things,” says Malone, naming Liz Dunn, Maria Barrientos, Ted Schroth and others who share retail strategy and talk about what will be good for the neighborhood.
“I think we have an amazing mix of local, creative independents,” Dunn said about the retail scene. She said she admires Malone's commitment. “He's here for the long haul. If anyone is invested, it's Mike. Plus, he's made some really great decisions on tenants.”
Malone strives to bring destination retail to the corridor. For Pike/Pine, that doesn't mean a Costco. It means stores that keep people coming back to the neighborhood, like Elliott Bay Book Co.
Malone doesn't just lure independents. Nor does he focus solely on redeveloping old buildings.
Of the 14,000 square feet of retail and restaurant space in his $32 million Broadway Building — a new mixed-use apartment complex at Broadway and Pine — three quarters of it is leased, mostly to chains such as Panera Bread, a bakery and cafe. The project also has 12,000 square feet of office space designed mostly for small, incubator businesses.
Malone said he tried to get independent businesses for the project. He wanted DeLaurenti, which operates a deli and cafe at Pike Place Market.
“It was a very difficult economic time to go sign new leases,” he said.
He said it's simplistic to say all chains are bad for communities. Malone points to Blick Art Materials, a tenant in his building at 900 E. Pine St. Blick is a national chain, but it's family owned, and Malone said it brings artists to the neighborhood.
The Broadway Building has about 170 underground parking stalls for tenants and shoppers, even though Malone said the city required only 52 because the area will have light rail service in about six years.
“I'm just looking out 30 years,” he said, because he sees the project as a long-term hold.
Though it was not a re-hab, Malone said the Broadway Building helps maintain the urban character of the neighborhood, which is home to Seattle Central Community College. In addition to space for small businesses, there are 94 apartments plus 28 other units that, with double or triple occupancy, will provide housing for up to 76 international students at the college.
City Hall input
Malone has bought some of what Dunn calls the neighborhood's choicest properties, including several with ties to the auto-row era. There is nothing “greener” than saving buildings, says Malone, who's on the National Council for the National Trust for Historic Preservation. He wants to give the structures another 100 years of life.
Malone launched his career as a developer/preservationist about six years ago with the brick building at 10th and East Pike Street that houses Aveda Institute's beauty school and the Havana night club.
“I was just sitting there thinking about the space.” He remembers the a-ha moment when he said, “You know, I've got to renovate this. And that's what I've been doing ever since.”
Malone's real estate portfolio reflects his passion for music. He collects the guitars of pop icons — Elvis Presley, Jimi Hendrix and Chuck Berry among them — and has commissioned statues of the musicians that stand outside some of his buildings.
Development is more of an avocation than an investment for Malone, who says it feeds his entrepreneurial spirit in a way that running a global music company never did. Managing 700 employees “wasn't so much fun for me.”
Malone also works to preserve old buildings through his involvement with the National Trust, and by working with the City Council on what's known as the Pike/Pine Conservation Overlay District. Last year, the council expanded the district and limited the scale of developments in the area. The legislation also encourages developers to retain existing structures when sites are redeveloped, and provide spaces for small businesses and art facilities that add to the neighborhood's character.
Councilman Tom Rasmussen is sponsoring a bill that would improve design guidelines for redeveloping “character structures,” which are buildings that are 75 years or older. A new section to address height, bulk and scale, and signs could be added.
In addition, the Department of Development and Planning is publishing a report on a “transfer of development potential” program aimed at preserving old buildings. It would be similar to Seattle's transfer of development rights program that has preserved rural land by encouraging density in the city. The transfer of development potential would preserve character structures by allowing owners to sell their development rights to others who could then develop taller, bigger buildings elsewhere.
Rasmussen said his goal is to have the council adopt the guidelines by October.
With his success in Pike/Pine, people are curious to know what Malone thinks about one of Capitol Hill's largest upcoming projects: four transit-oriented development pads on more than two acres around the Broadway light rail stop.
King County Executive Dow Constantine, a member of the Sound Transit board, has called the area “among the most important locations in the regions, culturally and economically.”
Sound Transit plans to start seeking ideas from developers in 2012. A year later, developers who make the cut will be asked to submit specific proposals.
Malone isn't sure whether he will bid on the pads.
“I'm more concerned about what's going to happen to it,” he said during a panel discussion on the subject last spring. He's concerned the pads will be sold to one or two development teams that will do a master-planned project that lacks character.
“It's really hard to do urban planning because the best things happen naturally,” he said.
He favors breaking up the pads into smaller sites, figuring that means more chances to get something right. He pointed to Joule, the recently completed mixed-use apartment project on a full block north of the station site, as an example of what could happen if Sound Transit turns over the pads to one or two developers.
“That's exactly what you're going to get,” said Malone.