[Commercial Marketplace '97]

It's A New Day For The Samis Foundation

Journal editor

Years ago William Justen was as frustrated and puzzled as anyone by Sam Israel, the eccentric millionaire who owned 42 mostly derelict buildings in the city and who seemed content just to let them rot.

"I was discouraged that nothing was happening with them," said Justen, who never met the man but got a look at his buildings while working in the city's Department of Construction and Land Use. He encountered them while working as the city's project engineer for the Pike Place Market and later as DCLU director. "Now I have a different point of view."

Today Justen looks at Israel's portfolio from the inside out, having been handed what for him is a dream assignment: maximize the long-term value of Israel's debt-free and diverse holdings.

While other developers make decisions based on their financial return over 10 years, at the Samis Foundation "We don't even run that analysis," Justen said. "We don't even care."

As managing director of real estate for Samis, Justen's outlook is more like that of a Japanese real estate company executive who looks at ownership in terms of centuries rather than decades.

"My task is to fine tune this huge real estate portfolio to maximize the long term, sustainable income to support the foundation indefinitely. We're thinking about hundreds of years."

William Justen
Justen said he doesn't know the value of Israel's portfolio. It includes 40 properties in the city of Seattle; thousands of acres of orchards, cattle ranches and farmland in eastern Washington; storefronts in downtown Ephrata; Mercer Island waterfront and parcels scattered from Blaine to Hoquiam to Vashon Island.

Even if Justen did know the value he wouldn't reveal it because he doesn't think it matters. The purpose of the foundation is to support Jewish education in Washington, help resettle refugees immigrating to Israel from other countries, and environmental protection. Maximizing income available for those needs means generating higher income from the portfolio, but not selling it. "Selling it would mean eventually running out of money," Justen said.

Today, though, Justen is buying and selling selected pieces. He purchased Smith Tower last year because, "I needed Park Place." Having gotten a monopoly on the block he plans a major redevelopment which will turn the obsolete office tower into Class A space.

Justen is also taking bids on Eastern Washington acreage, selling timber and offering property for orchard development.

"We're selling some of the stand-alone pieces that don't fit my business plan," Justen said. Those pieces include an Aurora Avenue condo site, commercial space in Ephrata and the Mercer Island waterfront where Israel once planned to build his dream house. He ended up spending much of his time living in a trailer at Soap Lake.

The business plan calls for focusing on downtown Seattle properties, particularly Pioneer Square, where upgrades will boost the value of Samis's properties and bring about what Seattle City Council President Jan Drago calls a renaissance of the historic neighborhood.

Justen will renovate 14 buildings in Pioneer Square over the next three years, doing everything from minor life-safety improvements on some to total renovations on others. The work will bring as many as 200 units of market-rate housing to Pioneer Square and return to useful life spaces which have been vacant for up to 50 years.

"This is Seattle's opportunity to have a thriving SoHo District with a mix of uses: galleries, artists, businesses, restaurants and housing. It's a unique opportunity to do that.

"It's sort of a dream that it came to me," Justen said.

The Samis Foundation was set up in 1989 by Israel to fund his philanthropic efforts. The 17 volunteer trustees include Martin Selig, Eli Almo, Morris Piha and Irwin Treiger and represent considerable real estate knowhow. But after a 1995 study of Israel's portfolio done by the University of Washington's Center for Community Development and Real Estate, the foundation decided it was time to hire some help.

Bob Filley, director of the center, said the report included a recommendation that Samis hire an experienced, full-time executive to manage the portfolio.

Justen's plan included buying the Smith Tower because "I needed Park Place."
"We told them this was a serious job. They needed a strong person at the helm," he said.

Filley said Justen's experience working for the city as well as his work in renovation of the old Seattle steam plant for Zymogenetics and assembly of land for Fred Hutchinson Cancer Center were critical for Samis.

"William sees what things could be and that's the goal of the Samis Foundation," Filley said.

An unspoken goal of the foundation, and now Justen, also seems to be changing the image Sam Israel has in the community.

Israel's nephew David Hasson, vice president of the Samis Land Company, said unlike many people he understood how his uncle's life experience, age and character affected his approach to business and sometimes made enemies of neighbors and city officials. "My brother and I were the brunt of a lot of bad phone calls," Hasson said.

Israel was a one-man operation and found it difficult to delegate responsibility. Though he had a plan and continued buying property up until he suffered a stroke, he had no incentive to create more wealth and didn't want to incur any debt. Though it often was frustrating to wait, Hasson said is delighted now to be helping make his uncle's buildings live again.

"He had a heart bigger than the public perception," Filley said, as evidenced by the fact that he left his fortune to what he considered worthy causes. "This was a decent man. He just had a different philosophy."

That philosophy had little room for building maintenance.

"He did generally neglect his buildings," Filley said, because his interest was not in them but the land they sat on. "He saw land as eternal."

After coming to Seattle in 1899 from the island of Rhodes, Israel worked as a cobbler and later developed an assembly line process for shoe repair. During World War I he got a contract to rebuild Army boots at Fort Lewis and was able to buy his first building, naming it, appropriately, the Army Building.

He eventually sold the shoe business but not the building -- never the building. He also hung on to six tons of rubber heels, selling them during World War II at a handsome profit that was donated to the Red Cross.

Israel kept on buying buildings. But his motivation, Justen said, wasn't wheeling and dealing, it was ownership.

"He had an instinct to want to own property and enough business savvy to know the good ones from the bad ones and to concentrate
Samis Foundation properties in Pioneer Square: 1. Butler Block, 2. Corona Hotel, 3. Hartford Building, 4. Collins Building, 5. Florence Theater, 6. Drexlel Hotel, 7. Northern Hotel, 8. Schwabacher Building, 9. Yesler Building, 10. Washington Shoe Building, 11. US Rubber Building, 12. Mottman Building, 13. Fifth & Yesler Lots, 14. Scientific Building.
his ownership," Justen said. Israel often ended up with odd pieces he'd acquire as part of portfolios or estates.

"It's probably the most diverse real estate portfolio that anyone's ever had," Justen said.

Israel started buying land around Ephrata and Soap Lake in the 1940s because it reminded him of the country of Israel. He operated a major cattle ranch for a number of years and whenever property came up for sale he'd buy it, living off the income from his properties, the cattle business and the sale of the shoe business.

He lived frugally. His only luxuries were hunting, fishing and photography.

Justen has discovered that Israel allowed himself one other luxury: roof repairs. When fire codes changed significantly in the 1940s and 1950s, requiring expensive life-safety improvements, the owners of many old buildings simply closed off the top floors. Not Israel. Though parts of some of his buildings have been empty for up to 50 years, Israel kept the roofs in good shape, preserving the buildings for the kind of renovations Justen is doing today.

"He didn't have the inclination or the knowledge of how to develop real estate," Justen said. When he was 90 his nephews talked him into his first rehab, the Scientific Building at Occidental and Jackson. The building houses artist studios, restaurants and retail on the ground floor. He rehabbed the Hartford Building in 1991 where the foundation's modest offices are today.

Some of the renovations Justen plans to carry out in the next three years will also be modest. The US Rubber Building and the Mottman Building will see only a "soft rehab" to fill up the empty spaces, keep rents low and provide upgrades to the elevator and electrical systems.

But other projects will transform Pioneer Square, adding hundreds of units of market rate housing in a neighborhood where today 80 percent of the housing is subsidized.

One Samis project, the Northern Hotel, was one of the first grand hotels built after the Seattle fire. Today the building is home to the Colour Box nightclub and four vacant floors of hotel rooms with fireplaces and 16-foot ceilings. The high ceilings will allow mezzanines in each of what will be 60 apartments.

The Washington Shoe Building, which currently houses artist studios, will eventually be redeveloped, perhaps as a mixed-use project with lofts and offices.

Israel's laissez-faire management style led to very low rents which provided spaces for artists and small, start-up businesses not unlike his own shoe company. Justen says he is sensitive to the fact that this will change as redevelopment proceeds.

"We want to keep artist space in Pioneer Square, we think that's important," he said. "We're focusing more on the buildings that are empty. Filling up the empty floors is a win-win. It increases the tax base and brings housing, jobs and residents to Pioneer Square."

Hasson said the foundation is also committed to keeping rents in some spaces low enough for small businesses to afford: "(Sam) lectured me many, many times about the need for startup companies."

Justen's biggest effort is to preserve the Smith Tower. It was state of the art when it was built in 1913 by typewriter and gun magnate L.C. Smith, but today's tenants want larger, more efficient floor plates and have high electrical demands.

By filling in the lightwell and making a central core, architects Hewitt Isley have designed modern 10,000-square-foot floor plates. The redevelopment includes maintaining the same massing of the small buildings that are on the block today.

Justen proposes saving the facade of the Collins Building and creating a new facade for the Drexel Hotel, what he calls "Seattle's ugliest building." The wood-frame building that is today covered with asbestos siding is the only commercial core building that survived the Seattle fire and that may present an obstacle to Justen's plans for the block.

"Even though it's ugly, the fact it survived the fire is important and we want to acknowledge that," Justen said. "But it's basically a shack. Hopefully it won't be a battle. I hope we can serve Seattle better by preserving Smith Tower."

Morris Piha said he is delighted that the board hired Justen, who is moving aggressively to improve Samis properties, the neighborhoods they are in and the foundation's relationships with its neighbors and the city. "We have a leader," Piha said. "He is a mover and a shaker."

But Piha is not sorry that it has taken so long. Had Israel been the aggressive developer type, his buildings might have been torn down or sold. The foundation and the city might well have missed the opportunity they have today.

"Developers are like prize fighters," Piha said. "One punch and you can be out. Some wonderful developers have missed the market."

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