Eddie Bauer Kick-Starts Lincoln Square Office With 200,000-SF Commitment

BELLEVUE, WA-Kemper Development has landed Eddie Bauer as the anchor tenant for the 28-story office component of its 1.4-million-sf Lincoln Square development Downtown. The newly independent long-time Northwest based retailer has committed to a long-term lease for 200,000 sf, or 40% of the building, which means the tower can start rising above its three-level retail base in January, only six months behind developer Kemper Freeman’s best-case scenario.As part of the Chapter 11 reorganization of Spiegel Inc., Eddie Bauer’s former parent, Eddie Bauer’s existing 232,000-sf headquarters campus was sold last year to its neighbor, Microsoft, for about $38 million. Eddie Bauer leased back the space for three years, which fits perfectly with the Lincoln Square office tower’s development schedule, which calls for completion in mid-2007.Located at the corner of Northeast 8th Street and Bellevue Way, Lincoln Square includes a 2,000-slip underground parking garage topped by a three-story, 300,000-sf retail podium that, in turn, is being topped by two opposing towers: the 27-story office building and a 42-story building with a 337-room Westin on the lower floors and 148 luxury condominiums on the upper floors. The hotel and retail, including several restaurants and a luxury theater, are on schedule to open for business this November and be connected to Kemper Development’s Bellevue Square Mall via a sky bridge. The condominiums, which will be ready for occupancy in early 2006, have been sold out for some time at prices ranging from $400 to $1,000 per sf. As for the retail, leases are signed for more than 75% of the space and under negotiation for the remainder. In March, Kemper Freeman told GlobeSt.com his goal was also to have the office tower topped out and clad by November, but that was assuming he could be under construction by late May or early June, which did not happen. In mid-July, through a spokesperson, he told GlobeSt.com that lease negotiations are under way and a groundbreaking for the 500,000-sf office component is “imminent.” The negotiated lease terms with Eddie Bauer is not being released by the parties involved and was not otherwise immediately available. However, Eddie Bauer is believed to have signed a long-term lease and will have its name on the building. The triple-net asking rental rate for office space in the tower is $24 to $28 per sf per year, which is about equal to the full-service rate for the rest of the class A office market in Downtown. In explaining his want to get under way with the office component, Freeman says most of the cost risk for the office tower has already been incurred–the parking is built and the columns and footings are in place because they had to come up through the underground parking garage and three-level retail podium on which the office tower will sit. “With the necessary permits in hand, the steel already purchased and contractor still on site, we can save millions of dollars by moving right ahead with the final phase,” he told GlobeSt.com in March. The project got under way in 2000 and was halted in mid-2002 after the dot-com meltdown and the ensuing recession shook the project–and the Downtown office market–to its core. The developer at that time was a group of investors led by Lend Lease Real Estate Investments’ Value Enhancement Fund IV. When Kemper Development purchased the stalled development in August 2003, he acquired not only the land, about 1,700 below-grade parking spaces and a half-completed hotel-condominium tower, but also the steel for the office building, which had been pre-purchased. “We bought at old steel prices, not the new ones,” Kemper told GlobeSt.com in March. “It’d be millions more now.” A syndicate of banks led by Bank of America and US Bank have provided $220 million in construction financing for the first four phases (parking, retail, hotel and residential) and the New York State Teachers Retirement System have made a $128-million forward commitment for a 10-year permanent financing that will pay off the portion not covered by the sale of the condominiums. Connecticut General Life Insurance Co., a subsidiary of Hartford-based Cigna Corp., has bought a $33-million equity stake in the project.Lincoln Square is part of a four-block area owned almost entirely by Kemper Development. Across Bellevue Way from Lincoln Square is Kemper’s one-million-sf Bellevue Square mall. Across Northeast 8th Avenue from Lincoln Square is Bellevue Place, Kemper’s 500,000-sf office and retail development that wraps around the Hyatt Regency Bellevue. “We’ve got about four million sf along about one-half mile of Bellevue Way where we’re looking back and forth at each other,” Freeman told GlobeSt.com in March. “We’re getting a really super street scene that has made sales at our shopping center increase dramatically.” Indeed, it was that vibrancy that attracted Eddie Bauer to Lincoln Square. “Being at the center of an area where people shop and live is a key importance as we work toward our mission of being a premium lifestyle brand,” said Eddie Bauer president/CEO Fabian Mansson.