Eastside real-estate developer Kemper Freeman said Monday he’ll begin construction next year on a massive, $1.2 billion expansion of his shopping and dining complex in downtown Bellevue.
Freeman’s Kemper Development plans 2 million square feet of additional retail, office, hotel and residential space covering more than a block of prime real estate at Northeast Fourth Street and Bellevue Way Northeast.
Freeman, who is pitching the project in Las Vegas at a gathering of the International Council of Shopping Centers, said construction is expected to begin in early 2014 and be done by fall 2016 — a quick turnaround for a development of its size.
But Freeman’s announcement comes with a few asterisks: Financing and tenants are yet to be determined, and Freeman still must seek regulatory approval.
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Freeman said he’s talking with lenders and expects to secure financing soon. He said he also believes he can pre-lease much of the space over the next few months and has no plans to build on speculation.
“We won’t be able to fill the demand even with what we’re building,” Freeman said in a phone interview Monday. “We’ll have all the tenants we need to be able to start by the first quarter of next year.”
Freeman has been building public support for the expansion in recent appearances before local business and civic groups, so his announcement was not a surprise.
Several months ago, he paid Khorram Family Investments about $3.13 million for a 0.3-acre property at the northwest corner of Bellevue Way Northeast and Northeast Fourth Street, paving the way for a pair of planned, 17-story apartment buildings and a boutique hotel next to Bellevue Square.
Freeman will have to demolish a parking ramp and the Khorram family’s rug store to build out the corner.
On the other side of Bellevue Way, Freeman plans a 31-story office tower and a second, 42-story tower with apartments and a 250-room luxury hotel. Both buildings will sit atop a retail “podium” next to the Bellevue Arts Museum, replacing an old Safeway store. A sky bridge over Bellevue Way would connect both properties.
In all, the project would add 375,000 square feet of new retail, dining and entertainment space; 700,000 square feet of offices; 500 apartment units; and 3,700 free parking stalls in two underground garages, Freeman said.
City officials signed off on Freeman’s design proposal for the 31- and 42-story towers more than a year ago. That portion of the project is an extension of Lincoln Square, which includes condominiums, a Westin hotel, movie theater, Eddie Bauer’s headquarters and Microsoft offices.
Freeman is awaiting building-permit approval for the underground portion of the project, said Liz Stead, manager of urban design planning for the city of Bellevue.
Meanwhile, Freeman submitted his planned Bellevue Square expansion for design review on May 6, and a public hearing will be held in late July, she said.
The project is part of a 50-acre development, called the Bellevue Collection, which also includes a 732-room Hyatt Regency hotel.
Freeman is proposing to increase the Bellevue Collection’s total square footage by 50 percent.
The boutique hotel, with 120 to 140 rooms, will be comparable to a Park Hyatt, while the larger hotel will be on the level of a “W,” Freeman said.
He said he’ll start with the expansion of Lincoln Square before Bellevue Square, but both additions will open at the same time. He also said he’ll try to minimize disruptions from construction by prohibiting contractors’ use of streets during peak business hours.
Track record praised
Freeman’s plans come amid rapid change in Bellevue. Developer Wright Runstad soon will begin groundwork on The Spring District, a 36-acre project with more than 4 million square feet of office space and up to 1,000 apartments just east of Interstate 405.
Brokers say Freeman’s edge in attracting investment capital is his long track record.
“If anybody can pull it off, he can,” said Kidder Mathews broker Gary Guenther. “It’s a great site. He’s a proven developer. He has a critical mass of great retail. He has protected views. All of those things add up to a potentially very successful expansion.”
The office and apartment markets in downtown Bellevue are tight, and Bellevue Square is at near capacity.
The office vacancy rate is about 9 percent, a landlord’s market, local brokers say. Downtown is especially popular with tech companies on the Eastside, including Microsoft and Expedia. Concur Technologies, a travel and expense software maker, recently moved its headquarters to Bellevue’s Key Center from Redmond.
As for apartments, the vacancy rate in West Bellevue — an area that encompasses downtown and the Bellevue Collection — is about 3 percent, according to Dupre+Scott, a local apartment-research firm.
More than 1,800 apartments are in the construction pipeline in West Bellevue, said Tom Cain, of Apartment Insights Washington, a research firm.
Still, there’s enough market demand to support Freeman’s 500 new apartments, as long as job growth continues at its current pace and there aren’t more apartment projects added to the pipeline, Cain said.
Freeman also proposed last year to add another floor on top of Bellevue Square for a large new store, but that tenant — J.C. Penney — backed out after the recent departure of Ron Johnson as the Penney CEO.
Freeman said he no longer plans another floor at Bellevue Square and is talking with J.C. Penney instead about remodeling its current store.
Rival developer Dan Ivanoff, managing investment partner at Schnitzer West, said Freeman’s plans for the Bellevue Collection are just that — plans.
Schnitzer West, which developed The Bravern in Bellevue, is proposing a new, 360,000-square-foot office building downtown.
“It’s fine to announce you’re going to build something. The question is, will it get financed, and will it get leased?” Ivanoff said of Freeman’s expansion. “I’d say it’s speculative at this point, just like everyone else’s project.”
But Susie Detmer, a broker focused on the local retail sector for Cushman & Wakefield-Commerce, said she expects Freeman to carry though with his plan.
“Historically, they do not overpromise and underdeliver,” she said. “I think we can count on it being very close to the timetable he’s talking about.”
Seattle Times news researcher Gene Balk contributed to this story. Amy Martinez: 206-464-2923 or firstname.lastname@example.org. On Twitter: @amyemartinez