UW still benefits from downtown property

While many know that the location of the University of Washington campus was originally plotted in downtown Seattle, few know that the University continues to own and bring in revenue from that property today. In the heart of downtown lies 11 acres of Seattle real estate, commonly known as the Metropolitan Tract. Managed by the UW Real Estate office and third party companies, the tract brought in a little over $9 million during the 2007 fiscal year.

What was once wooded property donated for the first state university, now includes the Rainier Tower, the Rainier Square, the Cobb Building, the Fairmont Olympic Hotel (originally the Four Seasons Hotel), the IBM building and Puget Sound Plaza. According to the Web site, the land contains more than 200,000 feet of rentable commercial space, 450 hotel rooms and 92 residential units.

The Fairmont Olympic Hotel stands on what was the first University building. In 1861, following a legislative act in 1854, 10 acres was plotted in downtown Seattle. Eight and one-third acres was donated by Arthur Denny. Charles G. Terry and Judge Edward Lander donated the remaining acreage.

Classes opened in 1861, but the University struggled during the first few years. According to the book "Denny's Knoll" by Neal Hines, enrollment barely surpassed 100, and the University was almost shut down twice due to lack of funds.

Despite a rocky few years, Washington legislature formed a committee in 1889 to investigate the future of the University. In 1893, the current campus site, about 593 acres at the time, was purchased for approximately $28,000.

University regents expected to sell the downtown property and priced it at $250,000; there were no buyers.

The Board of Regents decided to keep the land, foreseeing Seattle's growth and the possibility of profitable leases. In 1902, they began advertising for renters.

The first lease was under the Moore Investment Company in 1904. It was taken over by the Metropolitan Building Company in 1907, for which the tract is now named. One of the selling points of original property was that it was considered to be state property and therefore tax exempt. The property remained untaxed until 1910.

The Metropolitan Building Company developed much of the land, adding on several of the buildings that remain standing today. During its lease, a portion of the tract was relinquished to the Community Hotel Corporation who built the Olympic Fairmont Hotel in the early 1920s.

The Metropolitan lease expired in 1954, leading to a lease under University Properties, Inc., known today as Unico Properties, Inc. Today, Unico continues to manage the majority of the tract with the exception of the hotel property. According to the 2007 report to the Joint Legislative Audit and Review Committee, the company is "responsible for all operations, leasing, maintenance, repair and necessary capital reinvestment."

Under the University Properties, later the Unico lease, the Metropolitan tract expanded. Several skyscrapers were built, including the Washington Building, which at its completion in 1960 was the tallest building in the city. The IBM building was built in 1964. The iconic Rainier Tower, known for its narrowed base, was finished in 1977.

Unico's lease goes until 2014, while the Olympic Fairmount Hotel is leased until 2040.

Today, the tract is worth millions. According to the September 2007 Metropolitan Tract performance report presented to the UW Board of Regents, internal valuation of the downtown property was about $680 million.

The property itself generated about $6 million in net revenue, said Jeannette Henderson, director of UW Real Estate.

Despite the millions that the property generates, Henderson says that in the big picture of the University, the income from the tract is not that much.

"Of the $294 million dollar University investment, which includes the endowment, the metro tract is about 2 percent," Henderson said.

The tract deed states that profit from the property can only be used in the UW building fund. Henderson estimates that since 1998, the distribution to the campus has been $8 million. Under the University's real estate advisors supervision, a portion of the revenue has been used for improvements in the Metropolitan Tract. Recently, the Cobb Building, the oldest building on the tract, has been undergoing renovation.

Henderson believes that what makes the Metropolitan Tract so significant is not its financial contribution but its distinct characteristics.

"It's a unique asset ... in that it's in that downtown business core. ... To my knowledge no other university owns property in a metropolitan area. Lots of universities own property but it's usually rural. Columbia used to own Rockefeller Center but it was sold years ago," Henderson said.

Despite its rich history, Henderson has found that few people are aware of UW's downtown property.

"I ask people, 'Have you ever thought why there is University Street in downtown?' It leads right to the site of the original University building on the side of hotel," she said.

To Rainier Square visitors, the only evidence of a former University building is a plaque outside of the Olympic Fairmont Hotel and historic Seattle pictures displayed below the Skinner Building.

The Metropolitan Tract is something that Henderson believes everyone should know about.

"It's pretty interesting," she said. "It's an asset that we're all quite proud of."

[Reach reporter Erika Cederlind at news@thedaily.washington.edu.]