New, Improved South Lake Union

photographed by Mike Siegel

James Schmidt is planted right in the path of Paul Allen's plans for South Lake Union.

As CEO of Taco Del Mar, Schmidt sits at a desk just a few feet from Mercer Street, a four-lane freeway entrance punished by 40,000 cars a day heading onto Interstate 5.

His office would be flattened — and Taco Del Mar's headquarters forced to move — if Allen and Mayor Greg Nickels have their way and tranquilize Mercer Street by turning it into a tree-lined, two-way boulevard.

"I'm depressed about moving," Schmidt says of leaving the neighborhood where his homegrown company has thrived for 13 years.

But he'll likely get over it.

He owns a stake in three new restaurants in the upwardly mobile South Lake Union neighborhood, which is starting to bustle with workers from Microsoft, Group Health and the University of Washington, not to mention 4,000 more coming from Amazon.com.

"All of those changes are very exciting for their bottom line," he says of the three restaurants.

Schmidt, 45, is one of many people who are changing — and being changed by — South Lake Union as it evolves from single-story storefronts and cheap apartments to a vertical urban village of cubicle farms and lofty condos.

Some say the area's location is dictating its destiny. In Seattle's hourglass shape, South Lake Union is a touch below the waistline, hemmed in by two major roadways, Aurora Avenue to the west and Interstate 5 to the east. Close to downtown but not quite part of it, South Lake Union has long done downtown's dirty work, first by providing coal and timber, then by installing laundries, printers and mattress factories to supply business towers and hotels.

Now, major employers such as Amazon are migrating north in their search for space, overwhelming South Lake Union's small merchants and funky warehouses with biotech researchers, architects and others.

The changes represent Seattle's most dramatic neighborhood face-lift since Belltown rose from the sluiced hills of the Denny Regrade a century ago.

With nearly 20,000 workers and 10,000 residents expected to move in over 20 years, South Lake Union has gone from a forgotten industrial area to a political powerhouse, leapfrogging other neighborhoods' needs and plans. It has gotten a new streetcar line, two renovated parks and zoning allowing taller buildings. At the same time, city officials have restricted office development in Sodo on downtown's southern edge, all but ensuring that expansion will be toward Lake Union.

What makes South Lake Union unique, though, is the sway of one man, Allen, who owns 60 acres — about a third of its privately held land — and aims to build the equivalent of six 76-story Columbia Centers in the area. That plan is about one-quarter complete, enough to glimpse the shape of things to come.

Allen's people have been shrewd, Schmidt says, in enticing him and a partner to open a restaurant beneath their first apartment building. They gave them a sweet deal on the rent for Paddy Coyne's Irish pub, he says, and they didn't need to make money on the lease — a speck of budget dust in their sweeping plans.

"They wanted a picture. They wanted a postcard." They needed a place to illustrate their marketing pitch that South Lake Union is "equal parts amber ale and black Labs."

Schmidt plans to move his headquarters — with its decorative surfboards, in-house bar and full-sized restaurant for training franchises — to Georgetown.

He expects that neighborhood near Boeing Field to be the next South Lake Union in 15 years.

"I'll be OK. I'll have a lot of fun helping develop Georgetown." But this time, he says, "I'll own the property."

KELLY GOODEJOHN steps onto her balcony 100 feet above Seattle's new streetcar line and sees seven construction cranes.

None were in sight a year ago when she made one of the most significant moves in her life since she changed careers from archaeology ("it was mostly scooping dirt at minimum wage") to retail.

She moved into a condo at 2200 Westlake, the three-tower project that Vulcan — Allen's development firm — markets as a gateway to South Lake Union. Since prices there range from $300,000 to several million, Goodejohn and her neighbors are contributing to South Lake Union's growing affluence.

Nine stories below Goodejohn is a mini-village, with a luxe supermarket, a five-star hotel, two restaurants, Starbucks and shops including a dry cleaner.

Goodejohn, 36, grew up in Sammamish and graduated from the University of Washington. She sold her house in West Seattle and moved to South Lake Union because she was ready to walk her talk. In charge of procuring sustainable products for Starbucks, Goodejohn wanted to live within strolling distance of downtown restaurants and stores, "to do something better for the planet."

Goodejohn also wanted to be part of an emerging neighborhood. And to her surprise, she says, the 261 condos at 2200 Westlake feel more like a community than parts of West Seattle, Phinney Ridge and Mount Baker where she'd lived.

"Maybe there's this camaraderie because we all feel like pioneers who put some risk into a common bucket," she says.

With their 24-hour concierge service and after-work wine tastings, Goodejohn and her neighbors are much wealthier than an earlier generation of artists and political activists who shaped the Cascade community, the easternmost slice of South Lake Union where essentially all of its 900 residents lived before Vulcan started its building spree in 2003.

Two years ago, city officials considered about half of South Lake Union's housing affordable to someone making slightly less than the median wage, or about $43,000.

By the time 2,300 new apartments and condos are filled, only a third of the area's housing will be affordable.

"I worry about things growing so fast," Goodejohn says. "I don't want to see some of the diversity going away. I don't want it to turn into Bellevue. I like a little bit of city grit."

MONTY HOLMES has been known to sling a few stones at Paul Allen's big ideas.

Holmes helped defeat the Allen-backed Commons proposal, which would have carved a 61-acre grand central park out of South Lake Union's core business district. Holmes also opposed the new streetcar, because it taxed nearby property owners for half of the line's $50 million construction cost.

Now, Holmes — and the company he took over from his father — appear under siege. Athletic Awards, a bright yellow shop touting the world's largest trophy on its roof, is across the street from a new UW complex soon to be teeming with 900 researchers. At the other end of the block Vulcan is building loft condos with a bocce-ball court on the roof.

But Holmes, 52, who went to work at Athletic Awards right out of Ballard High School in 1974, sees nothing negative about his new neighbors.

It's as if pathogens escaped the UW labs across the street and wiped away his feisty past.

"We're really, really happy. We're seeing the area flourish with more and more activity. It's helping us," says Holmes, a prime example of how neighborhood orneriness has dissipated as Allen's vision has sprung to life.

Holmes' business, it turns out, is changing, too. Athletic Awards still makes old reliables: high-school-championship and Seafair-hydroplane trophies. But now the company is thriving on corporate customers who want everything from retirement plaques and crystal bowls to branded fleece vests and seat cushions.

As one-time critics like Holmes become converts, dissent is evaporating. Some neighborhood watchdogs were bought out. Others have been overwhelmed by Vulcan's clout and sophistication. Still others, such as Seattle City Councilman Nick Licata, have been outvoted time and again.

"It's difficult to appear reasonable and critical because you come across as a Luddite," says Licata, the only council member to vote consistently against what he calls unnecessary subsidies for Vulcan.

"The voices of resistance are becoming weaker and weaker."

From the start, Vulcan held a strong a political hand. Environmentalists lauded the company's vision of dense development close to downtown, while labor leaders liked the boom in construction jobs. Nickels, looking at a slumping regional economy in 2002, quickly threw his support behind Vulcan. He blasted those who didn't jump aboard as anti-jobs, and the council soon agreed.

Vulcan tightened its grip by making campaign contributions, employing former City Hall staffers as lobbyists, and assigning a former Department of Neighborhoods official, Phil Fujii, to the full-time job of smoothing community relations.

Holmes now says he couldn't find a better location for his company's 14 employees.

"I think we'll be here a long time," he says.

BUY MORE DIRT.

That's the first advice real-estate broker Jim Klinger offered Vulcan.

Klinger had just spent Christmas week 1997 driving around South Lake Union with his brother, taking photos of properties and assembling tax, ownership and building records for every last parcel. He put it all into three large binders he called "the bible."

Vulcan was interested in the gospel according to Klinger because Allen had bought 11 acres he wanted to donate to the Commons project. After voters rejected the Commons in 1995 and 1996, Vulcan was weighing its options: sell, hold or develop.

Klinger told Vulcan to buy more land and start building because "everyone in the world would want to co-locate with Paul Allen."

Vulcan told Klinger to go forth and start calling owners.

He did. If they liked his pitch, he had a simple message: "I have an offer in my briefcase, and I'll be over in 20 minutes."

He closed deal after deal until Vulcan had spent $200 million gobbling up 53 acres by 2001.

It was heady stuff for Klinger, a former Xerox salesman in Iowa, and one of the most unsung figures in South Lake Union's redevelopment. But to him, you didn't need an urban-planning degree to see the wisdom of investing there. With its proximity to downtown and Seattle's barriers to commercial development — water, slopes, cranky single-family neighborhoods — Klinger believed the city had to grow in the area once called Westlake Valley.

The area had seen spurts of growth ever since David Denny and Thomas Mercer staked claims to its forested slopes in 1853. It was a booming industrial district, dotted with modest homes and a public school that couldn't expand fast enough for its swelling population of immigrants. Then the Depression of 1929 struck, bankrupting merchants and driving residents away in search of jobs. It started to rebound in the 1930s when Aurora Avenue was built, the Ship Canal was completed, and The Seattle Times moved in. But then an earthquake closed the school. I-5 gouged a seven-block hole in the neighborhood, cutting it off from Capitol Hill. And The Times purchased old homesteads and razed them for parking lots, according to HistoryLink.org. South Lake Union's population dropped to 500 residents by some estimates.

What Vulcan has done since "is beyond my imagination," Klinger says. Vulcan hadn't even developed a building when it started that buying spree, he notes. Only two people worked in its real-estate division then. Now it has 40.

The key to Vulcan's success?

"A very simple chain of command," Klinger says. It went from Allen to his sister, Jody Patton, who heads Vulcan, to Ada Healey, who was hired in 2002 to turn the firm's real-estate holdings into profits.

"Paul talked to Jody, Jody hired Ada, and Ada put together one helluva team," Klinger recalls. "They just said, 'This is what we want to accomplish.' "

Healey wouldn't take any credit in a recent interview. Nor would she discuss Vulcan's returns on its investments or grade Vulcan's progress. All she would say is, "We prefer not to rest on any success to date and will continue to challenge ourselves to do more, better, faster."

Klinger recently got a firsthand view of Vulcan's success. He brokered the sale of a South Lake Union parcel to a biotech developer for $500 a square foot. For the 53 acres he bought, Allen paid an average of just one-fifth of that.

"It's an amazing story," Klinger says. And yes, he still has the bible, explaining: "I thought somebody should write a book about the project some day."

MARY GUIBERSON was living on the street and owned nothing but a heroin habit when she got dropped off at a women's shelter in the Cascade community.

I must be in the wrong place, she thought, seeing the tidy, three-story building in cheery shades of green, red and purple. "It looked too nice."

That was 1999, when Guiberson started her recovery with help from a nurturing community. Across the street from the shelter was the Cascade People's Center, a converted city building that offered services such as free yoga classes — "important for women not making Microsoft wages," she says — and sponsored community gatherings including an annual tree-lighting ceremony.

A food bank was in the next block, along with treatment programs for homeless men at the Immanuel Lutheran Church. On the other side of Cascade Playground almost 200 apartments housed low-income and mentally ill residents.

All of which reminds Guiberson today why South Lake Union's location is prized by more than condo developers.

For Guiberson and other recovering women, the shelter was an easy bus ride to downtown, First Hill and Harborview for medical and mental-health services. Just as important, she says, it was removed from drug activity downtown and on Broadway that might tempt those in recovery.

But as property values soar and rents go up, it's tougher for nonprofits to locate in South Lake Union and help turns lives around.

Guiberson says she became an amphetamine addict at 16 to numb the pain of childhood sex abuse. Her dreams of becoming a teacher were snuffed out by her affairs with a pipe, needle and spoon.

Her stint at the shelter, though, helped her return to college, where she eventually earned a master's degree from Seattle University. Guiberson, now 47, also returned to the shelter, a project run by the Lutheran Compass Center. She's worked there the past three years as a chemical-dependency specialist, counseling the 32 residents.

Neighborhood newcomers who rent $1,200 studio apartments and sip $7 drinks don't add much value to women living on disability checks and struggling with substance abuse. "But," Guiberson says, "I haven't heard that any of the women feel uncomfortable about the changes."

She hopes the newcomers see the value of neighborhood history and traditions. "Change is happening and we're here. We might as well work together."

MATRIA O'HORA wants to die in the Cascade community.

Not anytime soon, but she hopes to spend her last days in the place where she has invested so much energy and idealism.

O'Hora has lived in a 12-apartment co-op since 1979, and she's seen by other longtime activists as a pioneer who helped give Cascade a distinct personality.

Tucked between a day-care center and the women's shelter, the co-op looks like a two-story duplex from the outside. It's actually two buildings separated by a courtyard decorated with barrels of rain water, worm bins for composting food scraps and a walkway made of bricks scavenged from the Nisqually earthquake of 2001.

Founded in 1975 by political activists, the co-op offers tenants low rent in exchange for community involvement. Residents are expected to meet monthly, work on the co-op one day a month and support the co-op's mission, O'Hora says, of creating a "sustainable, affordable neighborhood and embracing all walks of life and all economics."

O'Hora has always expected Cascade to grow. "It's too good. It's quiet, very safe and from here you can walk anywhere."

Its neighborhood council anticipated the same, and endorsed city plans to designate Cascade an urban village, where city growth would be funneled.

At first, O'Hora wasn't keen on that vision. "But I got my mind expanded," she says. "Someone in the neighborhood council said, 'Don't you think everyone deserves to live in a place like this?' "

In Cascade, when local activists say "everyone," they mean it. The group has welcomed almost 200 new apartments for the homeless, low-income and mentally ill. Another 133 are in the pipeline.

"I'm really proud of that," says O'Hora, 61, an accounting supervisor at a medical lab and owner of a women's spa on Capitol Hill.

Cascade activists also came up with sustainability guidelines they hoped developers would adopt. Reusing buildings, recycling water and making alleys walkable are top priorities, O'Hora says. She thinks the Cascade principles influenced Vulcan. Its first apartment building, Alcyone, has a rooftop garden irrigated by recycled rain and charging stations for electric cars. Alcyone and its ground-floor pub, Paddy Coyne's, are kitty-corner from the co-op, close enough for O'Hora to hear noisy bar-goers spilling out onto the sidewalk.

O'Hora isn't happy about all the development. She thinks the streetcar is frivolous. She also says Cascade has lost some of its camaraderie. "Some of these new people can go from their secure underground garage to their secure condo without interacting with anyone."

But she has no plans to leave.

The co-op gets queries from interested buyers every month, O'Hora says. But there's no financial incentive for its members to sell. Co-op bylaws require that all proceeds go to building affordable housing somewhere in Washington state. "We're a hot commodity, but we're not interested in being one," she says.

The scale of development in the past four years has felt overwhelming at times to O'Hora. "We have this little courtyard," she says, explaining how she copes with the change. "And I look up in the sky, at the clouds and sun and moon and stars, and say, 'You will always be ours.' "

Bob Young is a Seattle Times staff reporter. Mike Siegel is a Times staff photographer.