Yesterday I went to a luncheon sponsored by Liberty Road Foundation a local nonprofit in Washington that partners with businesses in Northwest. Kemper Freeman was the speaker of the day. To be honest, I didn’t have high expectations, as I didn’t know what to expect. I ended up really enjoying it and learned a gold nugget I thought worth sharing.
For those who live in the Northwest but haven’t heard of Kemper Freeman, you’ve probably “partnered” with him by visiting Bellevue Square, Lincoln Square and Bellevue Place (aka The Bellevue Collection). Just eat at The Cheesecake Factory or buy shoes from Nordstrom and you can call yourself a proud partner of Kemper’s. He owns four million square feet of retail space at the intersection of NE 8th and Bellevue Way.
The Freeman Folly
Kemper’s genetic makeup in real estate dates back to his grandfather who initially started buying real estate and culminated when Kemper and his father bought what is known today as Downtown Bellevue in the 1940s. At the time the corner of NE 8th and Bellevue Way were strawberry farms and the Freemans bought four acres at 10 cents per square feet. It was considered a steep price and local newspapers reported it as the “Freeman Folly”. Shortly after they closed on the land, the bank appraised it for $10 per square feet (100x more). Today land in downtown Bellevue sells for $300-$500 per square feet.
If folly brought him that kind of success, I’d sure welcome it.
What’s so awesome about Seattle, Bellevue and the Northwest?
Kemper started to talk about why the Northwest is such an awesome place. We have Microsoft which spends over $7 billion per year in wage costs. This equates to $177k total annual salary with benefits, bonuses, etc. – and 40,000 Microsoft employees are located here. Next, Boeing spends about $6 billion in compensation per year, employs tens of thousands of people. They’re currently sold out of the 747 and the 787 for six years. We complain that Boeing moved headquarters, but they only moved a couple hundred people. Costco is headquartered in Issaquah, Washington. These are just a few businesses out of hundreds of businesses in the Northwest that drive the local economy.
I didn’t confirm that stats, but I assume Kemper knows what he’s talking about.
The Golden Egg in Real Estate
The main nugget I took away is what he said near the latter part of his speech:
Great retail is the catalyst of all real estate.
Years ago, Tacoma was the “Seattle” of Washington. At the time Bellevue wasn’t even on the map. Over the years the dominance shifted from Tacoma to Seattle. Today Seattle is a major port and metro known worldwide. He attributes the tremendous success of Seattle (and now Bellevue) to retail. For years the city of Tacoma has spent over $1 billion in taxpayer subsidies to revive Tacoma to what it once was. Today Tacoma Mall is still in a lull and the solution for them is to focus on good retail.
In the 1940’s when Kemper and his dad were developing downtown Bellevue they were in a meeting with other business gurus that had a vested stake in Downtown Bellevue, a man in the audience said, “What the Freemans are trying to do with the Bellevue Square will benefit everyone in Bellevue. You need them to succeed so you can succeed. And, if he succeeds, you’ll make a lot more money than him.” Needless to say, the Freemans weren’t so excited about the last statement. Retail is necessary, but not necessarily the most lucrative.
While seemingly elementary, many commercial real estate people still don’t get it. Retail drives the high density urban areas and local businesses like restaurants, condos, and hotels all hinge on retail.
Why Real Estate Development will stall in the Near Future
To end, Kemper has 2 million square feet to develop but won’t touch permits until he gets more certainty from Washington (D.C.). The vilification of businesses across the country will continue to cast a shadow over banking which is crucial to real estate development. Until then, Kemper will stay on the “sidelines” and continue to “partner” with the multitudes that flock to the nation’s most successful mall.