Search Google Appliance Interview with John Russell

Date of Interview: October 17, 2000
Interview By: Ernie Bonner
Location: Portland, Oregon

JR = John Russell
EB = Ernie Bonner

EB: This is an interview with John Russell in his office in Portland, and I believe it's October 17th in the year 2000.
So why don't we start out, John, by you telling us about how you got to Portland, or how did you get to the '70s in Portland?

JR: Well, our family had moved here in 1960, when I started high school. My family's from Seattle. My father was a banker and was transferred down here.
I went to high school in Oswego, and then went to a crazy school called Webb Institute of Naval Architecture on Long Island. I had gotten into Stanford and turned them down because I thought Palo Alto was just a bigger version of Lake Oswego. And this crazy school was, among other things, a co-op program, so you actually worked each of the winters for three months.
I worked as a welder in a shipyard, and I shipped across the North Atlantic. But my senior winter, I worked in Switzerland for a company that made big marine diesels, and I was so enamored of the Swiss practices of land use, and the experience of living there was so remarkable, so different, that I thought, "This is what I want to do as a profession."
I lived in a town called Winterthur, that's about the size - the population of Eugene, and its center was a foundry - you've seen Gary, Indiana - but I walked to work from the edge of town through parks to this foundry at the center of the town, and it was pristine. And it was all done without government. It was just an ethic, a Swiss ethic that came from having lived with that kind of density for all these generations.
In fact, one of the most formative experiences was being driven around - this will all relate to Portland - driven to the German border by a guy who worked for Sulzer. I needed to get my shots, which I had forgotten to get, at the German border. You know, a three-piece-suited guy, and we're driving around in this beautiful Swiss countryside, and all of a sudden we come around a corner, he jams on the brakes of his little Fiat and points with tears in his eyes to this farmhouse, beautiful Swiss farmhouse, and he says, "I'm the first Hinter-mueller in seven generations not to live in this house."
And I thought, "Holy God. What a difference!" Every time my father got a promotion, we moved. We moved three times in Yakima. We moved two times in Portland. And so when I was 18, we'd lived in, I don't know, six or seven houses. And I thought, you know, what are the implications of that sort of Swiss permanence? Probably the first Hintermueller didn't cut corners on the quality of the construction, and did things more carefully, knowing that there would be that kind of permanence.
So anyway, I got a scholarship to go to Harvard Business School. Got an MBA, and there wasn't much in the way of real estate classes. There was one class, basically. Took that; didn't learn a whole lot.
Did my stint in the National Guard, and then started looking for jobs, and eventually ended up going to work for Pete Mark, who at the time was the second generation in a real estate family, and the largest owner of office space in the state. I didn't know office space particularly. But his company did every-thing, from leasing to construction to property management, and so I figured, "This is where I want to learn the business."
That was in 1970, early 1970, and I stayed with Pete until 1979, when the learning curve stopped going up, basically.

EB: Then you went and got your own company and struck out on your own?

JR: Yeah, formed my own company in 1979, with the express purpose of developing Pacwest Center.

EB: Do you remember when you first came on the Planning Commission? Do you remember anything about the dates? I looked that up. I don't have the date of your entering.

JR: There's a plaque on my wall; otherwise I probably wouldn't remember. I think it was '78, '78 to '81.

EB: Right. I remembered the end, the 1981. I had that in my records. '78 to '81.

JR: And actually, I think I was vice president, which is tantamount, I think, to being president elect, but had supported Connie McCready against Frank Ivancie. Frank won and didn't reappoint me.

EB: I see. That would make sense. You were lucky.

JR: Yeah. Terry Sandblast came on. He's aptly named.
But I'd been on the Landmark Commission, appointed by Neil, starting in '73, I think. Pretty early. The landmark community was small. I mean, it was George McMath really. George was a very talented guy, but we were - and I've forgotten who else was on the Commission, but it was a kind of a groupie thing, and we'd have these meetings debating about whether Building X, which was about to be demolished, was a landmark or not.
And I thought to myself, "God, this is not what we ought to be doing. I mean, who cares, really, whether a building that used to exist is a landmark or not? We've got to change the economics of this, or the city is just doomed."
So I came up with the idea of an historic property tax freeze, working with George, the theory being that you would exempt improvements from being taxed for 15 years. So in theory it wouldn't be of any value to anybody who wasn't going to do any improvements, but it would be of enormous value to somebody making the investment. So you reward not the existing owners, but the people doing the work.
So George enlisted Tom Vaughan and the three of us went down to Salem and had an appointment with the Chairman of House Revenue. And I had never been to the legislature, had no idea what went on. So we met with the head of House Revenue. It turns out - I think I was 26, and he was 24. It was Earl Blumenauer. And you know, he wore sandals, and had his bike in his office. He heard us out for about 15 minutes, sort of nodding. He called in a guy named Richard Munn, who I think was just a miracle worker for this state as staff head of House Revenue, and then Richard and Earl heard us out for another 15 minutes, at the end of which they said, "Sounds good to us. We'll do it."

EB: So this required a state enabling statute of some kind in order for the City to be able to do it?

JR: Yes. And they asked us to see Gratton Kerns on the way out, but they said, "If you get Gratton's endorsement, we'll do it."
So I thought, "So that's how Salem works."
I talked to Vera a couple weeks ago, and I told her the story, and I said, "Was my experience unique?" And she said, "No, that actually is how it used to work." But it's sort of ludicrous when you compare that to today.
But I'd had another formative experience. I'd gone to work for Pete Mark, and the Crown Plaza Building was just being constructed. It was one of the first buildings to go up in the South Auditorium urban renewal area. And I was enamored of this whole urban renewal process.
About a year or so later, a Harvard Business classmate and his wife came through town. They were moving from Los Angeles to Chicago. And he had been working for Real Estate Research Corporation, you know, the big think tank, on these kinds of issues, doing what became Bunker Hill, now basically downtown Los Angeles. All the big towers are in that urban renewal area. Phil grew up in Columbus, and his wife grew up in Philadelphia.
So anyway, they came to town, and I proudly showed them through the urban renewal area, and clearly they got, you know, sort of glazed eyes. You can just see that this is not making an impression. And I lived in Portland Center in the urban renewal area in a wonderful apartment.
But I happened to take them down to Dan & Louie's for dinner, the Oyster Bar. And they both said "Oh, my God, the city has a soul." They said, "Los Angeles would kill for Dan & Louie's. They'd kill for all these historic buildings" - that were then being boarded up.
And it just made an enormous impression on me, and so I just looked at these buildings with a new understanding of their importance. This was prior to being appointed to the Landmark Commission, but I went at it with a passion.
Starting about then I started looking around for a building to buy that I could renovate to live in, and that led to the purchase of the Dielschneider Building on Oak between Front and First, which I bought in '74 and moved into in '76, I think.

EB: Can you talk about the development of that, any kind of unusual issues you had with the City or with banks or whatever?

JR: I think I was the only person in the world who could have done it. The obstacles were enormous, and you really had to know the development business to even think about tackling them.
The City's seismic people thought the building ought to be torn down. I mean, it's unreinforced masonry, so right away there were seismic issues to be dealt with.

EB: This is in the Building Department of the City?

JR: Right. The Fire Marshall's Office in the Building Department thought that the building was unsafe because it had a 25-foot frontage and a 100-foot depth, and so all the rules about two exits being, you know, 55 percent of the diagonal and all that stuff, they don't apply to those kinds of buildings. You really have to treat them as exceptions to the rule. If you're not willing to do that, they're going to be demolished.
I actually think that the residential use wasn't even permitted, and of course a residential use imposes even more stringent fire code regulations, as they should. But even from the point of view of dealing with the Building Bureau permit department, I think when I finally went to the appeal process, we had - and Greg Baldwin was the architect - I think we had 29 separate counts on which we needed a variance. We got all 29, but for all I know some of those rules are still on the books.

EB: How do you think you got that approval?

JR: We deserved every one of them. I mean, it wasn't anything else other than approving it on the merits. It was a case really where the Code had been developed around new construction, and it just didn't apply. So there weren't any sort of miracles that needed to be wrought, you just...

EB: So the Appeals Board didn't see any real problems with it; once they saw the logic of it, they didn't really have any problems with it?

JR: No. No, they granted all 29 appeals. But I had to know that they would, because I had a ton of money in the design based on what I thought they would approve, and I just don't think too many people would have made that assumption. They would try to do it to code, even though the code was a joke, really, when it came to that kind of a building.

EB: Is the code any better that way today, do you think?

JR: No. I doubt it. But I just haven't been involved with these things recently, but at that time the Appeals Board was terrific. They were professional, knowledgeable, smart people. So in the end the system works, but it requires somebody really knowing what they're doing.

EB: What about banks? Did you have to finance it?

JR: Yeah. Yeah, I didn't have two nickels to rub together.
Louie Scherzer of Ben Franklin was the lender.

EB: Good old Louie.

JR: Yep. And Louie believed in me, believed in my expertise and my credit, working for Pete. He had lent Pete and me money on a couple buildings in which I was a partner, so it was just Louie's gut feel.

EB: And trust.

JR: Yeah. And then a guy named Pat Jordan working for Louie did the numbers, and so they were kind of a one-two combination; very, very smart, each of them.
But it was a real stretch. I think that loan in 1976 was $250,000. A gargantuan sum, because you could buy a house in the West Hills for thirty, maybe fifty.
But it just worked, and you know, the building has never had a vacancy.

EB: I remember that building from several events. It went into office use for Cogan...

JR: Cogan was the first tenant, yeah, on the second floor. And then the first floor tenant was a civil engineer, and then there were two apartments on the third floor, one for rent, and then one for me.

EB: How about some of your other development experiences in downtown Portland?

JR: Well, I had a bunch of them with Pete in the '70s. We were partners in the Hamilton Building, which is a gorgeous, gorgeous six-story...

EB: That is definitely a gorgeous building, you're right.

JR: ...on Third between Washington and Alder. The opportunity to buy it had come to us. A broker brought it to us. Kind of a broker not of any stature, I mean, just sort of this beaten-up old guy came and said, "Gosh, you ought to buy this building."
We owned five-eighths of the block, the Central Plaza garage and the Loyalty Building next door. Bill Naito owned the Dekum, and we would never buy that, but it was historic, so assembling the block wasn't of any value, but we did have the parking that would supply the Hamilton.
Pete didn't want to buy the Hamilton because it had a yellow front.

EB: What do you mean by a yellow front?

JR: An adult bookstore. An adult bookstore with six years to go on his lease.

EB: In the Hamilton?

JR: Yeah. The owner wanted to sell the building, but it was subject to that lease, and vacant upper stories, and Pete just didn't want to buy it because of it being a yellow front.
I finally convinced him that we had to buy it because it was a yellow front...

EB: Good point.

JR: ...because he owned the adjoining building. So we did, and paid 120,000 bucks for it, and I owned a third of it, and then set out to get the tenant out.
The guy lived in Sacramento. Just a schmuck. Just a schmuck. His business was pornography. So I talked to the City about possible code violations in the building. The Fire Bureau and the Health Division went in there and, of course, there were violations. Furthermore, once the District Attorney confiscated one of the tapes and viewed the contents, they filed a criminal suit against the porn shop owner, for violation of a recently-adopted obscenity law. To avoid prosecution on criminal charges, the owner got out of business in Oregon.
Anyway, having gotten the lease, we went on to develop the building, and it was leased by the time I finished with it. Uncle Chen's restaurant on the ground floor. Second floor was an expansion of the Loyalty Building second floor, and then three, four, five and six became the first headquarters of Nerco. Gerry Drummond's office was on the top floor. Very successful building.
Louie Scherzer financed that. We actually - the building was so successful that we financed it for more than it cost.

EB: Really? Now, that's the way to develop.

JR: Yes. Free money. Tax-free money. It was just a sweet deal.

EB: Now, that has an historic designation, as well?

JR: Oh, absolutely. Very important building.

EB: It's just a lovely building. Sometimes you wish it was by itself, but...

JR: It's too bad it's not a corner building.

EB: A corner building would have been great, yeah.

JR: It was named for the son of the Corbetts, Hamilton Corbett, developed by them. You know, no expense was spared. Just a beautiful building.

EB: Any other experiences developing? You had no bad experiences with codes or anything else on the Hamilton, or did that go pretty much like you had expected or...

JR: Well, the outcome turned out fine, but it was the very same issue as the Dielschneider: seismic issues, Fire Code issues. You can't meet the Code, which isn't to say that the buildings are unsafe; the Code's wrong, basically. It's just not flexible enough to deal with those things.
But I had enough experience to know what was do-able and what wasn't. And actually, there was a wonderful guy in the Fire Marshall's Office, a guy named Dick Durland, who would actually encourage you to go to an appeal for a part of the code that he disagreed with.
In the Dielschneider, for example, we wanted to put glass in the entry wall. We wanted the wall between the lobby and the office space to be glass. Otherwise, the spaces become dark tunnels.
Well, the code says that you can't have glass in a fire exit, and Durland said, "That's baloney. You want glass in a fire exit because you want people to understand where to go, both getting out of the office and getting out of the building." But it needed to be wire glass, you needed to have special fire sprinklers, but Durland freely said, "This is a ridiculous rule, and I'll support you, and you'll win."

EB: That's great.

JR: So good people. But it still takes time and money to go through that process. So as I say, amateurs just wouldn't do it. They wouldn't get that far.

EB: Right. Now, by that time the Historic District had been established there, right?

JR: Yes.

EB: I think it was established there in '76, maybe, or '77, something like that.

JR: I think that's right.

EB: What are some of the other - were you around when the Sherlock Building was being considered for demolition? That would have been in '73, maybe?

JR: No, I don't think I was. It was close, but that was sort of the poster child. And I remember - I'm not sure whether I was on the Landmark Commission or not, but I remember that it was a cause celebre.

EB: Oh, yeah. Right. When I see it there today, I think, "Oh, my god, it could have been lost, that beautiful building."

JR: Well, you look at the empty parking lots in that historic part of town, and each one of those housed a fabulous historic property, to be killed for today.
I did two other buildings in the '70s that were interesting. I got a call from Greg Baldwin saying that some friends of his had bought a building at Second and Yamhill called the Union Gospel Mission, which was a burned out - literally burned-out - old, awful, awful building. There were four attorneys, and they had bought this thing hoping to make their offices in it, and then realized that they had no idea what to do, so they called Baldwin, assuming that he could do all that for them. And he said, "I'm an architect, not a developer, but I can introduce you to somebody who can do it."
So I did, and became a partner in it. And after an enormous amount of hard work, enormous, that building opened in 1980. Hard work because - you know, some of the same issues of seismic and fire code, although it's a corner building, so it's easier. But also interest rates went from 9 percent (at the beginning of the process to 16 percent (at the end) So you know, you were just chasing your tail.
So what we ended up doing is something I'm really proud of. We added height to the building, added basically a two-story addition, and made those housing units. Added them in wood frame, which was controversial and...

EB: Code-wise, or...

JR: Yeah. Code-wise, right. Again because of the seismic issues. Wood frame is easily fire-proofed; it's not an issue from the point of view of the fire code. And did it in wood frame to reduce the weight, because you have this torsional movement in a seismic event, and you don't want the weight of it on top.
But it couldn't be done without a subsidy at 16 percent interest. So we applied for an Urban Development Action grant from HUD, and lo and behold, got it. The City was the recipient of a UDAC award. They lent us that money, 250,000, at three percent. So that's found money for the City. The City is getting the interest on money they get from the federal government, but then they also lent us another 250 of City funds at three percent, and with that 500,000 and what Louie Scherzer was willing to lend us, and everybody pledging every-thing they owned, dogs, cats and kids, we got it done.
And those housing units back in 1980 rented for a dollar a foot a month, and nobody said that was even remotely possible. People forget that you experience space not as square feet, the way it's measured, but as cubic feet, its volume, really, and these were two stories high, with bedroom lofts that looked out between the cornice brackets. I mean, they were early-day cool, extremely cool.

EB: Because they had the high ceilings of the old building?

JR: Yeah, even though it was new space. And God, they just rented - I just sold my interest in that this year, but the building's never had a vacancy.

EB: That was another one of those cases that those apartments on the top was a new venture, and I guess that was probably the first time I remember that being done.

JR: The only time prior was the single apartment unit in the Dielschneider.

EB: Oh, that's right. Well, that came to be kind of a routine way to handle some of those historic buildings, right, adding on to the top?

JR: Yes. We were one of the last buildings that were allowed to add onto the facade at the facade level. Almost immediately after that the federal government passed regulations that said that you had to set the new addition back, in order that it not be seen from the street. And while I understand that, I don't agree with it in all cases because it turns out, at least in Portland, and I think the same was true elsewhere, that vintage buildings were built to be added to.
The Dielschneider, for example, was built in 1859 as a two-story building. In 1871, after the fire, they added a third story, just added it onto the historic facade, and that's the way you did it. And you knew that that was the case because the roof structure in many cases was strong enough to be a floor structure, which is about twice as strong. So people went to the trouble of enabling an addition to be built with ease.
If we had had to set those units back, they never would have been built.

EB: The set-back was on behalf of preserving the historic character of the facades?

JR: Right. Right. We lucked out in the case of the Mann Building because there was no photograph of it. Many of the photographs of these buildings were based on PGE's photographs of their power lines, and somebody must have sat and taken pictures from that building. We have every other building, but not that. So we were able to say that we would do what somebody with class and money would have done in that time period, and build in, for example, beautiful Victorian storefronts, cast-iron grills, cast-iron steps and so on. I doubt that the building was that grand, but it could have been that grand, we just didn't know.

EB: Now, just as a little digression here, Bill Roberts had already by that time developed the - what did they call that building?

JR: Morgan's Alley?

EB: No, not Morgan's Alley, but the one down on Second...

JR: Mohawk Gallery.

EB: Mohawk Gallery, right. Those were two early examples of, you know, renovating the interior of these blocks into something sort of approximating a more modern concept of a mall or shopping area, where you can wind through.

JR: Yeah, and I wasn't as crazy - the Mohawk Gallery was a little kitschy for me. When he did Morgan's Alley, which came later, it was spectacular. I really, really liked that.

EB: I don't remember the Mohawk Gallery at all.

JR: Well, a little heavy on the fountains for my taste.

EB: What about some other - you said you had two. The Mann Building was the second one?

JR: The Mann Building was the first, and the other one was Pacwest Center. It was a project that was unlikely because it arose from the needs of a tiny little bank, First State Bank of Milwaukie. The only advantage they had is that they had a chairman with the balls of a brass monkey, Bob Franz. They had bought out of bankruptcy Great Western Bank, and Great Western Bank had a 25-year lease on the block that Pacwest was built on. But what good is a 25-year lease going to do you? If it's a 99-year lease, maybe you can do something. But Bob Franz wanted a building built with him being the major tenant. I had known him, and he hired me to cause this thing to happen. And it was just ludicrous - but we did it.
The first thing was to forge a relationship with Roger Meier, who owned the fee. And Roger's a very cautious guy. He was the volunteer head of the Oregon Investment Council. Silver-spooner, third generation, or fourth, I guess, member of the Meier, Meier & Frank, family. Difficult, because he was so cautious. But in the end he and Bob became absolute best bud-dies, and eventually Roger went on Bob's board. So I nurtured that relationship.
And then the two of them became convinced that something grand could happen. Bob enlisted his new attorney, John Schwabe, of the Schwabe Williamson law firm, who also needed space - they were next door in the Standard Plaza. So between the bank and the Schwabe firm eventually there was about 100,000 feet of space needs. Franz wanted 500,000 feet of building built for him.
So it's a long, long, long, long story, but it took basically every ounce of energy I had for about five years. It started with the architectural selection process. I had become convinced that we needed, at least for marketing purposes, the best architect in America, and had the chutzpa to actually think that we could do that. So the final three became Philip Johnson, Minuro Yamasaki, and Stubbins. All three had buildings in New York: World Trade Center by Yamasaki, the then-new AT&T corporate headquarters by Johnson, and Citicorp Center that Stubbins did.
Stubbins was my clear favorite, and actually was my favorite before the whole process began, because he believed in retail ground floors, and the other two would profess to, but they really didn't. Citicorp was a dramatic, dramatic building of its time. The buildings of that vintage, on Park Avenue, for example, would sit up on stilts, have an empty granite plaza on the front of them, and the only adornment on the ground floor of this huge block would be a sign that says "Union Carbide." I mean, it was just awful. Somebody should be shot for doing those. But Park Avenue was lined with those buildings.
And so a guy named Stubbins comes along as Dean of Architecture at Harvard, builds this building for Citicorp on top of the world's busiest subway station, and you could buy chocolate-covered strawberries and he somehow convinced Citicorp not to put a branch there. Banking is not retail. It was just a fantastic building. Very, very successful. So he was my man.
But the selection - I was a consultant at that point, so the selection was by Franz, Meier and Schwabe. We took a week and went around the country, talking to the finalists, and I prevailed. Although when you're taken to lunch by Philip Johnson in the Four Seasons, which he designed, in the Seagram's Tower, it's sort of intoxicating. But then all you have to do is walk across and see AT&T, which looked like a mausoleum on the ground floor.
But the public approval process was very difficult because the site had a height limitation, a very stringent one, based on the view from the amphitheater of Mt. Hood. Bud Oringdulph was helping us at that stage - this was prior to the selection of Stubbins - and he and I looked at that, and actually went up to the amphitheater, and it didn't look right. I think the height on that block was 275 feet. At that point the City had a 460 foot maximum everywhere in downtown, but 275 didn't look right. And oddly enough, the FAR was 12, and elsewhere downtown it was 15.
So I hired surveyors, and it turns out the survey data on which the City had made the decision about the height, the survey data were wrong. So we said to ourselves, what is the height of a building that could be built on that block, where over the top of the building you'd still see the city limits of Portland? And at about 400 feet, you could see Powell Butte over the top of the building. And so that became what we asked for from the City.
But the density was even harder. Fortunately, Mildred Schwab had been on the Planning Commission when the density and the height were tied together, and she knew that the 12-to-1 FAR was a function of the height restriction, which was wrong, so the density was wrong. So we got 125 feet of extra height, and a 2.2 increase in the density.
Part of the justification for the density, it's interesting - we said, "Density is good." This was the transit mall, but you've got City Hall, an historic building, that's going to be there forever, it's four stories. You've got the University Club and the Ambassador on the other side, historic buildings, they're going to be there forever. The average FAR of those two-and-a-half blocks, even with a 14.2 FAR, was still something like 8. And so, anyway, we won that. But that was a tough battle. It was a lengthy, tough battle. All unanimous votes, but still, those are hard cases to make.

EB: Now, there is an example where the Downtown Plan would have not in principle wanted to give you any trouble at all.

JR: Right.

EB: It's just that it did. When these general pronouncements of a plan come up against a specific project, often they cause more harm than good.

JR: Yes. The other thing that I want to talk about is design review. When I was on the Planning Commission, we were passing buildings - you know, it was a building boom, and we were passing buildings that met the height, density and parking, the only three things that we were allowed to rule on, and they were awful buildings. Orbanco, for example. The corner that I hate is the corner opposite the Hilton. If you walk across the corner, the first 20 or 30 feet is pink granite, and then when you do get to glass, you know, you're not even at grade. It's Niketown now, but at the time it was I. Magnin's, the San Francisco department store, gorgeous thing, and Orbanco puts this goddamned building next to it that is just an affront - not because of ill will or malice or anything; I think just ineptitude on the part of the architects, and ineptitude on the part of the developers. They just were not sensitive to retail design.

EB: At the ground floor, in a place like Portland, where you're sloping everywhere.

JR: Yes. But bear in mind, I think the architectural profession doesn't really like retail design because they can't control it. Tenants design their own spaces. But I think it's on a subconscious level.
Anyway, I promoted the idea of downtown design review, and prevailed. And Leo Williams, who I regard as a genius - people always thought Leo was lazy because he just had this sort of slow way about him, but when he got energized, he was a demon.

EB: He was not lazy about anything, I didn't think. He was a hell of a hard-working guy.

JR: He was, but he had this persona that sort of would - if you just met him at first, you'd think, you know, this guy couldn't get to first base. Leo was a tiger on that thing, and grabbed hold of it and made it happen in a very, very nice way. With goals, rather than stipulations. I think this had a profound effect on the design of downtown.

[End of Interview]