Downtown Dealmaker -- Frederick & Nelson Heir Holds The Key To Revitalizing Seattle's Retail Core

With his corduroy sport coats, his rock 'n' roller's love of Neil Young, his slight build and unassuming ways, Don Padelford doesn't strike most people as an heir to a multimillion-dollar fortune.

He certainly doesn't come across as one of the key people to decide the future of downtown Seattle.

But as the only grandson of the late D.E. Frederick, co-founder of the Frederick & Nelson department-store chain, Padelford, 45, has the power to help remake this city's retail core and reverse a decline that has city officials and downtown business leaders worried.

Over the next few months, Padelford and a handful of others will negotiate a series of agreements that could not only save a dying corner, but create ripple effects all over the city. The sale and redevelopment of the vacant Frederick & Nelson building at Sixth Avenue and Pine Street would bring the city a fancy new Nordstrom store where Frederick's used to be and a whole new group of stores where Nordstrom is now.

The deal would, in the words of Mayor Norm Rice, revitalize all of downtown.

Observers have been waiting, and hoping, for such a deal for almost two years, since the 102-year-old department-store chain went bankrupt and the building was locked up.

Depending on who you ask, Padelford, who owns the building along with his four sisters, is a meek, indecisive, greedy holdout, or an astute player who is a pleasure to deal with.

About the only thing critics and fans agree on is that the man is extremely private. Few people seem to know him well - not his neighbors, not people who have served on committees with him, not the power brokers who have sat across from him during negotiations.

"He's definitely difficult to get to know, but it's worth the effort," said one of his four sisters, Fay Michener, who now lives in New York. "He's very smart and very special and does not conform to anybody's ideas."

Michener praised her brother's taste in rock 'n' roll and spoke warmly of his "loopy" sense of humor, which she said she couldn't really describe except to say when he employs it, "You either get it or you don't."

In a five-minute telephone conversation, Padelford laughed when asked if there was any truth to the rumor he was once a Hare Krishna on a street corner in the late 1960s. Not true, he said, still chuckling. Anything similar or related to that? He wouldn't answer.

Hours later, Padelford declined to be interviewed but communicated by fax, responding to a list of points sent to him. He wasn't a Hare Krishna, he wrote, but "I thrashed around as a `proto-hippie' in late '60s, early '70s for some time."

He's now settled down, raising a family in the seven-bedroom, million-dollar Washington Park home where he grew up. His neighbors include University of Washington President William Gerberding and lawyer Louis Pepper of Foster Pepper & Shefelman. He and his wife, a pediatrician, have a 5-year-old son and 1-year-old daughter. He works out of corporate offices on Western Avenue near Pike Place Market, managing the family's investments.

Padelford was born, in June 1948, into a family of educated, civic-minded movers and shakers.

His mother's side is the more famous of the two. Grandfather D.E. Frederick, founder of the department store, married late in life and had only one child, Fay. The daughter graduated from the Helen Bush School and Vassar College and served on the Children's Orthopedic Hospital guild. When D.E. died in 1937, Fay inherited half his estate. Her marriage to Philip Padelford, Don's father, ended in divorce.

The Padelfords date back two generations in Seattle. Don's grandfather, Frederick Padelford, was born in Massachusetts but became one of the most well-known educators in the history of the University of Washington. The former graduate school dean and English department head became the namesake for a campus hall.

Don's dad, Philip, was active in real estate, seafood businesses and broadcasting and served on the board of the Pacific Northwest Arts Center. He still lives in Seattle but is not involved in managing the Frederick estate.

Don kept to himself from the beginning.

A former classmate from McGilvra Elementary School remembers him as a good student and funny, but quiet. He skied even then and served on the Safety Patrol, considered an honor.

"Everybody liked him," said Stanley Kravitz, now a vice president with CB Commercial Real Estate Group in Seattle. "But he never did anything that made him stand out. I don't think anybody knew at that time, for instance, that he was an heir to Frederick & Nelson."

A few years ago, Kravitz ran into Padelford at a Madison Park grocery store and the two began reminiscing. The talk led the men to organize a 30th reunion of their grade-school classmates, an event that drew 45 out of a possible 60. The gathering took place at a restaurant, but Padelford offered his house for the event.

"He was always willing to do whatever it took," Kravitz said.

After McGilvra, Padelford attended Lakeside School, serving as school president and a staffer on the school newspaper. He then enrolled at Wesleyan University in Connecticut and - after the hippie stint - earned a master's degree in business administration back at the University of Washington.

Padelford's four sisters spread out around the country and became busy doing other things, leaving Don to manage the family's holdings - chiefly the department-store building downtown. Frederick sold the retail business to Marshall Field in 1929 but held onto the property thinking it a good investment.

As a real estate manager, Padelford's reputation is mixed.

He angered many people when he and his real estate adviser, Steve Wood, asked $37.5 million for the F&N building and land - nearly three times its assessed value and far more than private appraisers and real estate brokers say it's worth.

"The attitude he has conveyed in the last two to three years . . . it's almost as if he's trying to get even with the rest of Seattle because his ancestors made a stupid lease," one real estate source said.

For decades, the F&N lease was tied to an arcane index based on the gold standard. Until a court overturned the historical lease agreement in 1988, it limited the Padelford family's income on the property to about $100,000 a year instead of the $2.5 million a year they should have made.

Real estate critics described Padelford as difficult to deal with because he defers too much to advisers and waffles on decisions.

That isn't the impression he's made on one important family, though. Jim Nordstrom, co-chairman of the Nordstrom retail corporation, said his family has enjoyed dealing with Padelford despite disagreeing on the value of the store property. The Nordstroms have said they wouldn't take the building if Padelford gave it to them, but Jim Nordstrom said their concerns about downtown deterioration drove those remarks and have since lessened.

The Nordstroms are now negotiating with developers who hope to buy the Frederick's building and lease it to Nordstrom for a new, flagship store.

Padelford "certainly has the right to try to get as much as he can for the building," Nordstrom said. Shooting high on the price is the "same thing I would've done, probably."

Some have charged that Padelford should have accepted offers he received two years ago instead of holding the city hostage waiting for more money.

Padelford's response: The present deal with developers Thomas Klutznick and Jeffrey Rhodes, reportedly more than $20 million, far exceeds what was offered early on. It's "hard to know what could have been achieved when," he wrote by fax.

He also must satisfy the wishes of his sisters in managing the estate. There have been rumblings that dissension among the family members delayed a deal, but Michener said the siblings reach consensus about as easily as could be expected.

"Ask anybody who has five siblings, whether it's any decision - what you're having for Thanksgiving dinner. We all get along real well. I can't imagine it working better in any other family."

The sisters consented when Don wanted to change the name of the family corporation a few years ago, from The Fay Corp., named for his grandmother, Fay, to the DE Corp., named for grandfather Frederick. The agreement came despite the fact that the change was driven in part by Don's misgivings about "carrying on in a female name," Michener said.

While staying out of the public eye, Padelford has carried on his family's tradition of civic involvement in small ways. He served for years on the board of Hospice of Seattle and has fought diligently against plans for a third runway at Seattle-Tacoma International Airport.

He objected to jet noise over his home and other Seattle neighborhoods. But he approached the issue with a business perspective, favoring least-cost planning over huge capital projects and questioning the demand for a new runway, said King County Councilman Greg Nickels, who has taken part in the airport debate.

"He was fairly thoughtful in that process . . . emphatic when he did speak but didn't demand the floor all the time," Nickels said.

Padelford's strong feelings about the airport drove him to submit a guest editorial to The Seattle Times this month, a rare step for someone so private.

Maybe that's an indication of what the future holds for a man who's about to turn over the last visible treasure of the Frederick fortune to a pair of developers unknown to most of Seattle.

It could be Padelford will fill some new local role to carry on a family tradition. Or maybe he'll just ski more often and spend quiet time with his family.

For now, no one knows what will become of the millionaire heir. Padelford himself isn't saying.

FREDERICK & NELSON'S HISTORY

May 1890: Founded by Nels Nelson and Donald Edward Frederick.

1918: F&N opens present building between Fifth and Sixth avenues and Pine Street. It was dubbed "Frederick's Folly" because of the owner's move from a store on Second Avenue, an already well-established downtown retail area.

June 1929: Sold to Chicago-based Marshall Field & Co.

March 1982: Marshall Field & Co. acquired by Batus, a U.S. subsidiary of a British conglomerate, for $362 million.

1985: F&N reportedly lost $13 million.

September 1986: Batus sold F&N to Basil Vyzis, Herman Sarkowsky, G. Arthur Henkens and George Lobisser for an estimated $100 million to $250 million.

February 1989: David Sabey announces an agreement to purchase the chain for what internal documents later showed was $19 million, plus a $16.25 million cash contribution to the company. G. Arthur Henkens retains a minority interest and remains president.

August 1989: Henkens sells his minority interest to Sabey. Sabey announces that the chain's three senior vice presidents will assume Henkens' duties.

September 1991: F&N files for Chapter 11 protection from creditors. Receives short-term financing from Citibank, its principal lender.

Jan. 15, 1992: F&N files court papers saying it will liquidate starting Feb. 19 unless a new investor can be found.

May 31, 1992: Downtown flagship store closes.

August 1992: The store ownership reverts to the Padelford family after Meridian Trust, which held most of F&N's mortgages, tells bankruptcy court it will stop payments on the mortgage. Don Padelford, representing the heirs of D.E. Frederick, puts the building on the market soon afterward. But little serious interest is shown in 880,000-square-foot downtown flagship store.

Jan. 10, 1993: Developers Jeffrey Rhodes and Thomas Klutznick reach a preliminary agreement to buy the Frederick & Nelson building. The deal calls for the developers to come up with a financial plan and definitive agreement within four months that also includes striking a deal with Nordstrom to move its flagship store into the empty F&N building and redevelop its present store for other retailers.