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Sunday, November 9, 1997 - Page updated at 12:00 AM

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Family Farm -- Today It's Downtown Bellevue's Gateway And The Tochtermans Want To Grow Skyscrapers

Seattle Times Eastside Business Reporter

When Denis Tochterman was a young child in a rural backwater known as Bellevue, it seemed as though life on the family farm would never change.

Change it did, though, first with news that the state was going to build a highway through the property on Northeast Eighth Street, then with entrepreneurs leasing land for a nursery, an unfinished-furniture shop and, later, a whole jumble of businesses.

Today, the only remaining evidence of the 15-acre farmstead are some old photographs on the wall of the Tochterman Investment board room.

Four of Tochterman's five children are now running the company, and they're preparing to leave their mark by transforming a property that has become the gateway to the premier city of the Eastside.

If their vision becomes reality, motorists exiting Interstate 405 into downtown Bellevue will no longer see a Kennedy-era Dairy Queen and a haphazard collection of cheap commercial buildings. Instead, the view will be of a high-rise Marriott Hotel, office towers above streetfront stores and a glimpse of a one-acre courtyard.

The Tochtermans' eight-acre "superblock" - what remains of the farmstead after state and city acquisitions for I-405 and three downtown arterials - is across 112th Avenue from the freeway interchange.

Not everyone in town is rooting for the family's third generation in Bellevue to pull off the $400 million, 1.3 million-square-foot project. Others, however, think it's the most

exciting development project since construction of the high-rise Bellevue Place a decade ago..

The Tochtermans have a long way to go before being ready to break ground for redevelopment. But there's been impressive progress toward making it all happen.

The family has struck a deal with Marriott International, which wants to build a 17-story, 525-room Marriott International hotel on the northeast corner. Plans also call for 300,000 square feet of first- and second-floor retail space, 350,000 to 500,000 square feet of office space, 2,900 underground parking stalls and expansion of the city's 4-year-old Meydenbauer Center at Sixth Street and 112th Avenue at the southeast corner of the superblock.

Except for the convention center, the Tochtermans would maintain ownership of the land.

Helping the Tochtermans pull it together are their partners, Jeff Rhodes and Ken Himmel, best-known locally for spearheading the $400 million, three-block redevelopment in downtown Seattle that includes renovation of the former Frederick & Nelson building as a Nordstrom flagship store. Rhodes and Himmel also have done projects in Reston, Va., and Boston's Copley Place.

"It's time now in Bellevue's development for this end of town to go through its redevelopment phase," says Connie Grant, one of Denis Tochterman's two daughters, a managing director of Tochterman Investment and chairwoman of the Bellevue Downtown Association.

The Tochtermans not only must land tenants and financing, but they also say a pending deal with the city is critical. The family has offered to build a larger Meydenbauer Center, something the city couldn't afford to do on its own until 2005.

Tomorrow the City Council will discuss a tentative $55-million agreement under which the city would buy the convention center site and the private developers would enlarge the facility for a guaranteed price. The city ultimately would pay for it from hotel-motel tax money.

A City Council majority appears to support a deal, but the plan also has its critics. Heidi Benz-Merritt opposed the deal in her apparently unsuccessful campaign against Connie Marshall for the City Council.

"It's such a buzzword," City Councilwoman Georgia Zumdieck says of public-private partnerships. "All it means is the public is going to take the risks and the private guys are going to take the profits."

Even if the agreement with the Tochtermans protects the city from construction overruns, Zumdieck argues, expanding the convention center is a risky venture.

First, a farm

Becoming a central player in downtown development is a new role for a family that in the past has been eclipsed by other developers such as Paccar, Puget Sound Energy, Wright Runstad and Kemper Freeman Sr. and Jr.

The Tochterman family came to Bellevue in 1939, when LeRoy Tochterman moved his family from Snohomish County onto the 15-acre Bellevue farm owned by his uncle and fellow Wisconsin transplant, John Raymer.

The relatives signed a contract that made Tochterman a sharecropper. Raymer, then living in California, would receive one-third of the revenue from sales of the farm's peas, corn, loganberries, boysenberries, filberts and other produce. Denis Tochterman and his mother took the ferry to Seattle and sold the produce at Pike Place Market.

Raymer left the farm to the Tochtermans when he died in the 1940s.

By then, there was a bridge to Seattle and some locals were scratching their heads over the strange Bellevue Shopping Square that Kemper Freeman Sr. was building just down Eighth Street from the Tochterman farm.

In the 1950s, when state highway engineers decided Highway 2A (later enlarged as Interstate 405) would run through the eastern side of the father's farm, retailers began knocking on his door offering to buy land. Denis recalls his father's response this way: " `If it's worth that much to you, it must be worth more to me.' Dad was just too stubborn to sell."

On the back of an envelope, LeRoy calculated that he could make money if he accepted a nurseryman's proposal to lease part of the property. Pacific Northwest Nursery opened in 1957. The next business, The Shutter Shop, sold unfinished furniture. In 1961, Dairy Queen moved into a structure Tochterman built with his own hands.

The property was almost fully developed, with a strip mall, motel, gas station and a small office building, when Denis retired from the Air Force and went to work for his father in 1974.

"That was going to be it for the next 100 years," Denis laughs. "His theory was if we could make enough on a lease to pay the mortgage, that's what we would do."

Sometimes they couldn't pay the mortgage without dipping into savings. LeRoy had put up an office building for Texaco, but the oil company backed out of the deal.

Complicating the family's financial difficulties, tenants were on long-term leases ranging from 10 to 49 years - without any provision for escalation of rents. The family was caught between increasing taxes and insufficient rents. But Denis Tochterman hung on to the land.

As leases were renewed at higher rates and as tenants filled empty office spaces, the financial crunch eased. LeRoy grumbled about government making life difficult for landowners, but when he died in 1980, the city was in the process of rezoning his land for high-rises.

"Old LeRoy was a character," says Bob Wallace, a downtown property owner and chairman of the Bellevue Convention Center Authority. "I used to kid Denis that his father was the only guy who did a good job of whining to the city while they made him a millionaire."

Denis Tochterman doesn't want people thinking he and his children are rich. "We don't own any boats or yachts or airplanes or condos in Mexico," he says. "There's that public perception that you own a superblock in downtown Bellevue you're rich. We're not."

Family comes on board

Getting rich has become a very real possibility, but it didn't seem so in the early 1980s, when Denis began thinking seriously about who would succeed him. The children had been raised without any expectation that they would be part of the business, and they had all launched independent careers.

"It certainly wasn't part of our plan growing up, thinking we would do this," recalls daughter Linda Gaskins. "It was, `What do you think you'll do when you grow up?' "

Sometime in the early 1980s, Denis received a brochure from Oregon State University about a small business program. "Transition. Succession. There were a couple key words that caught my eye," he says. Over the next several years, he and the children attended several OSU seminars on management and succession in family businesses.

Denis laid down his terms for succession. He wasn't going to designate one child who would have more authority than the others. Whoever wanted to join the company could become a managing director - but only if they were prepared to make it their career. And after they came up with a plan to run the company, he would get out of their way.

One by one, between 1986 and 1991, four of the children became managing directors: Linda Gaskins, Connie Grant, Tom B. Tochterman and Tom L. Tochterman. (Tom L. is Denis Tochterman's biological son. Denis adopted Tom B. after a divorce and remarriage.)

One son, Chris Tochterman, a Navy flight instructor in Mississippi, sits on the board but isn't involved in management.

Denis Tochterman is the nonvoting chairman of the board.

It's an unusual corporate structure, but so far it has worked.

Since Bellevue opened Meydenbauer Center in 1993, the Tochtermans have seen the facility as central to their development plans. And with the Bellevue Convention Center Authority calling for expansion of Meydenbauer Center to capture more regional and national conventions, redevelopment has taken on a new urgency.

Ironically, it isn't the idea of a multimillion-dollar public expenditure that has upset some folks in Bellevue. It's the prospect of losing the Dairy Queen that LeRoy built.

At a recent board meeting of the Bellevue Downtown Association, Connie Grant listened as one member after another mentioned their attachment to the fast-food restaurant. Grant gave a curt response: "Get over it."

Losing the little restaurant to make way for a 17-story hotel leaves Linda Gaskins a bit sad. She fondly remembers accompanying her grandparents on their regular Saturday nights out at the Dairy Queen.

Denis Tochterman, observing that "you can't eat sentimentality," prefers to hark back to farming days.

"This has always been our family farm," he says. "Now our crop is buildings. We're here for the long haul. We're not going to let somebody use the property unless they're in for the long haul."

Keith Ervin's phone message number is 206-515-5632. His e-mail address is: kerv-new@seatimes.com

Copyright (c) 1997 Seattle Times Company, All Rights Reserved.

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