Ted Gunning

Gunning For Success
You would think that Northwood, the sprawling high-end neighborhood overlooking the Valley,  would  be the crowning achievement  for  the man  who developed it, Ted Gunning. Instead, he views the project as something that held him back in other, more profitable, areas of his business.
“If I had to do it all over again, I wouldn’t have done it because timing is everything,” he said recently during an interview at his office on Montgomery.
“Anything to do with development is usually a long ways out.” he said, “We had a lot of upfront costs that caused me problems because of the cash it took. It took away from other projects we could have done.”
From anyone else’s perspective, Ted Gunning got plenty done in spite of Northwood.
Shortly after getting out of the service, Ted decided in 1953 he wanted to take the winter off and collect unemployment but did not get the chance to draw even one check.
“The very next day after I signed up they called me in and said there was a
job available with a small home builder named Ed Blackstone,” he said, adding that it was there that he worked for the next two years learning to build houses from the ground up. But after two years, the union began trying to unionize small residential builders, which didn’t sit well with the 24-year old carpenter.
“I didn’t like the idea much and so I decided I’d quit and be my own builder,” he said. So in 1955, Ted sold his car and boat and bought a lot on the South Hill and built a spec home which didn’t sell right away.
” It was one of those dips in the market like we’re having now. And I had to go get a job framing,” he said, ” But I watched my Dad’s old partner buy a piece of property in the Valley and divide it into lots and I thought that was a pretty good idea.” He soon found 15 acres on Upriver Drive priced at $1000 acre and borrowed the down payment from his father.
“I gave them $3,000 and they gave me the deed for the lower 7.4 acres. With that I was able to go to the bank and get financing,” he said, adding that development costs were next to nothing back in 1957.” I just had Pete Baseda
come in and cut in a few roads and dig the water ditches. I put in the lines myself and  the power company  brought  in the  electricity,  and that was about it.”  He  did not  have to worry  about  pavement,  curbing, drainage  or sewers.
“That’s what got me rolling, I had my own lots. I got $1200 for the lower ones and $2400 for the ones on top,” he said, “So you see, my $3,000 went a long ways”
But after 10 years of house building and building large projects for other people like Grant Grossbeck, Ted decided to switch to multi-family and  industrial  development.
” I just thought apartment houses had to be the way to go,” he said , adding that in 1968 he built his first two 4-plexes on the river by WWP, which led to a 17-unit which led to a 20-unit which led to 45-unit and so on.
“The key to the whole thing, which it still is today is leveraging your money,”
he explained, “Say you do a million-dollar project with a $100,000 down and borrow the rest. You are making money on the inflation of the entire million,
not just your $100,000 and there were years when inflation hit 10 percent. And that’s what we were doing, parlaying the proceeds into bigger and bigger projects.”
For the next several years Gunning and his crew went from one project to the next, perfecting their operation to a science. “We built  the Villa 90, a 90-unit off the freeway near Argonne in four and a half months,” he said, “You know, I just figured time is money.”
One employee who worked with Gunning during this time was Bill Lawson of A&A Construction and Development, which now builds hotels, apartments, retirement homes, ect., all over the nation. “You know the funny thing is that compared to Bill Lawson, I’m small potatoes,” Ted said, “That guy is building like crazy all over the country.”
When I told Bill about Ted’s comment he laughed and said, ” All I can say is that everything I’m doing now is because of what I learned from Ted, he was a great teacher. He really did a good job.”
Beyond building multi-family, Ted was also a study in timing. For example,
he was the first one to seize on the new opportunity that was created when Montgomery was rezoned from agricultural to industrial in 1968. The first pieces he bought for $4000 an acre, the standard price for the time. But as soon as he put up the first industrial complexes, the land was valued at $43,000 an acre. “That was a stroke,” he said.
Another stroke came around 1991 when things were slow in Spokane but hot in Seattle. ” Mike Kinney called me up and said you’ve got to come over here and take a look around, this place is going crazy,” he said, ” So we bought a  120-lot piece with a preliminary plat and before we ever got started they pre-sold it and we made a million before we broke ground.”
Around that same time, Ted decided the hotel business looked attractive and so he built the Quality Inn on Sullivan and then the one off Argonne which  his wife Diane operated for ten years. ” That turned out to be a good deal,” he said, ” We built it for 4 million and sold it for 7.5 million.”
And that is why Northwood was not the best investment of Gunning’s time and money, he simply knew how to invest more wisely. But still he had the vision of Northwood since 1957 when he bought the first 15 acres below and kept buying a piece at a time until he had put together enough to make it happen.
“Northwood didn’t really take off until 1975 when I finally got the 40 acre piece I needed to get us up on the hill,” he said, explaining that he joint-ventured on that portion of the development with the neighbor who owned the property.
For the next 27 years, Ted and his company, Northwood Properties, continued punching in new roads further up hill, even after he and Diane began to slow down in 2001 and took up residence in Phoenix. Five years ago, Ted joined with Brian Walker, who is now the managing partner in the final phases of Northwood.
“The profits are coming in now,” Ted said, adding that it would still be years before they saw the final return of their 50 year investment. “But until then we’ll struggle along somehow,” he said with a grin.

Gunning’s Biggest Mistake
One of the first complexes Ted built on Montgomery was the 80,000 square foot industrial park at Woodruff which was  designed to be an incubator for new businesses. One  business that started there was ISC, which was developing software for savings and loans institutions.
“When they came in they didn’t even have the money to make the improvements on their 3,000 square foot unit and so I loaned them the money,” he said, ” Well, within a few years they were up to 30,000 feet and they came to me and said they were going public and wanted to buy the entire building.”
Ted did not want to sell right then for tax reasons, but he did not want 30,000 square feet empty and so he said they would have to give him a non-refundable $200,000 option to buy the building at the first of the next year. They agreed, but they preferred to give Ted stock in their initial offering for the $200,000 option instead of cash.
” I thought, just a few years earlier these guys couldn’t afford the improvements on their space, why would I take a chance on an outfit like that,” he said, ” I’m a dirt and board guy, I didn’t know anything about stocks. I wanted my money.”
And so the deal went through like Ted wanted. “A few years later I was at a block party in Northwood and I asked an employee of ISC what my $200,000 would have been worth today and he said, $168 million,” Ted said shaking his head, ” that was the biggest mistake I ever made.”
Bill Lawson and Gunning University
“I first met Ted when I was pumping gas at a service station on Trent,” Bill said, ” He would come in ocassionally and I would pump his gas and wash his windows. He told me if I ever needed a job to come see him.”
So in 1970 Bill went to see Ted. ” I didn’t have an appointment and I ended up waiting an hour and a half because Ted was building some condominiums up at Schwietzer at the time. When he finally showed up, he said, your hired.”
Bill worked for Ted until 1984, when he started his own business and began applying what he had learned working with Gunning. “I call it Gunning U,” Bill said, “Everything I know about the business I learned from Ted.”
Apparently he was an astute student. “The funny thing is,” Bill said, “I did concrete work on that building that Ted sold to ISC and when they got ready to sell it, me and my partner, Steve Smautz bought it and have had it for several years. It’s a small world.”
Two Frugal Men in One Bed
The reason I was fortunate enough to do interview Ted and get these stories is because my father did all Ted’s foundation work since about 1962. Recently, Elaine and I attended Tomlison Black Valley’s Christmas party which Ted and Diane also went to. While I recognized them, I didn’t think I knew them well enough to go up and chat. But Ted and Diane are more than approachable and soon they were sitting with us and Ted wanted to hear how Dad was doing.
   “You know your dad was always a tightwad,” he said with a smirk and I replied that I had seen some evidence to that affect through the years.
   But when I later told Dad what Ted had said, he laughed and told me a funny story that suggested Ted knew the value of a dollar as well.
   “Ted and I flew up to Alaska together in the late 80’s to check things out and Ted wanted to stay with Carl Kappen at his cabin up there,” Dad said, ” I told Ted we could stay at a hotel but Ted insisted. It turned out Kappen only had one spare bedroom with one bed and so we ended up sleeping together in the same bed.”
   When I reminded Ted of Dad’s story and how Dad thought Ted was the frugal one, Ted laughed and said, “Yeah that’s probably right.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s