Bellevue's stalled Lincoln Square project at a crossroads
Instead, the $360 million project being developed by Lend Lease is in worse financial shape than it was in June, when crews packed up their tools and left. The garage is essentially complete for the two-tower office, hotel, condo and retail development across the street from Bellevue Square, but that's the good news:
• Two major investors have pulled out of the project: Starwood Hotels & Resorts and original developer Ian Gillespie, according to sources and public records.
• All but one of the commercial tenants have left, most recently ArcLight Cinema, which was to operate a 12-screen movie theater.
• Owner Lend Lease is preparing to sell all or part of the project to a short list of developers — including Bellevue Square developer Kemper Freeman Jr. — who see a chance to pick up the project for a virtual song.
• Speculation has grown that Lend Lease, an Australian company and one of the world's largest real-estate firms, is considering selling its troubled U.S. arm after recently replacing top managers.
But the company's local executive remains upbeat about the project. Richard Leider said turmoil at the top of the company isn't affecting his efforts to find new financing and tenants for Lincoln Square.
"We are working with a number of retailers and operators, which we hope to announce with the project's recommencement and refinancing," Leider said.
Leider declined to discuss details of project financing. He said Gillespie and Starwood remain involved in the project, but he would not say to what extent. Neither Starwood nor Gillespie returned calls yesterday.
Sources familiar with Lincoln Square said Starwood had scrapped its agreement to pay for 25 percent of the 300-room hotel. But the company said it would be willing to discuss a deal once the project gets back on track.
The hotel was to take up 18 floors of the planned 44-story south tower, sitting between stores at the bottom and condominiums on the top 22 floors. A shopping mall would have separated the hotel and condos from a second tower of office space to the north.
Gillespie — whose Vancouver, B.C., company, Westbank Properties, originally proposed Lincoln Square in 1997 and later partnered with Lend Lease — sold his share of the project for an undisclosed amount to Lend Lease in November, King County records show. Lincoln Square was a black mark for Gillespie, an otherwise successful developer of retail and high-rise residential projects in Canada.
Lend Lease, meanwhile, has pushed forward with a plan to build the project in phases instead of all at once, starting with the hotel tower and leaving the proposed office high-rise for last.
Plunging demand for new office space in the wake of the dot-com bust and the recession is one of the main reasons the project was halted in the first place.
Drugstore.com started the trouble in 2001, when it pulled out of a deal to become the office tower's anchor tenant.
Bellevue will issue revised building permits this week, said Matt Terry, city development director. That will start the clock ticking for Lend Lease, which will have 60 days to pick up the permits and then about six months to start construction.
Leider wouldn't say when construction might start again. And Terry said he was in the dark about Lend Leases' plans.
"It seems to be slipping," Terry said. "It was February, then April, and now they are saying after April."
Before works starts, Lend Lease must find new financial partners. The company is considering at least five bids from about $30 million to $50 million, sources familiar with the proposals say. Some developers would buy the project outright, but others would keep Lend Lease as a partner.
"People are so interested ... because they think they can get it for an incredible deal," said Sue Baugh, a real-estate broker specializing in the Eastside for The Staubach Co.
Freeman is looking closely at the project and is considered a strong candidate to take it over.
"That project is a very interesting and challenging one, and we are a very interested neighbor," said Jim Meldy, president of Kemper Development.
But Meldy declined to say whether the company was in the running to buy into Lincoln Square. Observers find Kemper Development's interest intriguing.
"He (Freeman) is real interested, but he is not going to make a stupid decision," said John Black, a principal at the real estate firm The Broderick Group. "He is really logical because of (Bellevue) Square and because he understands retail."
Whoever takes on the project will make finding tenants a top priority. U.S. Bank, which plans to open a branch in Lincoln Square, is the only company still signed up for the project.
ArcLight's deal to operate Lincoln Square's upscale movie theater was scrapped in August, Leider said. The departure of the cinema, hotel, an anchor for the office tower and stores for the mall means the project has commitments for only some of the condominiums. And those deals could fall through, leaving Lend Lease with little to count on.
"Everybody is out," Black said.
J. Martin McOmber: 206-464-2022 or mmcomber@seattletimes.com