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February 28, 2019
The city of Bremerton has a proud history as a blue-collar town, with one of the largest naval shipyards in the country.
When German immigrant William Bremer founded Bremerton in the late 19th century, he recognized the unique physical characteristics of the harbor, including a glacial cut resulting in a 600-foot drop in depth at the edge of the shore. That deep shelf would later enable aircraft carriers and battleships to moor along the waterfront at Puget Sound Naval Shipyard.
The water connection has been essential throughout history, from Native Americans’ reliance on fish for sustenance, to trade, recreation and transportation, including the many foot ferries known as the Mosquito Fleet that connected Bremerton and the Kitsap Peninsula to Seattle, Everett, Tacoma and other ports of call.
A stock of dated, cheap housing (also known as “war boxes”) was built overnight on miniature lots to serve the burgeoning demand of the Puget Sound Naval Shipyard during World War II. This was a time when population boomed from 15,000 in 1940 to 75,000 in 1944. Rosie the Riveter was a national heroine and Quincy Jones, whose father moved his family from Chicago to be employed in the shipyard, was growing up in Bremerton’s West Hills and discovering his passion for music.
As was the case with cities throughout the nation, the flight to the suburbs in the 1970s and 80s resulted in a hollowing out of this great city, as apartment buildings and retail were vacated for subdivisions and malls in Silverdale, and once busy streets were left vacant and buildings abandoned.
What was once an active waterfront with hotels, apartments, retail, bars and restaurants gave way to parking lots.
Bremerton, as was the case with many urban centers, became a city in decay and a poster child for urban revitalization. A beautifully situated waterfront community, this city has been challenged by blight.
In the early 2000s, led by Mayor Cary Bozeman, the city began to crawl out from its demise and rebuild its waterfront, reclaiming and redeveloping parking lots into housing, a conference center, restaurants and a hotel. This effort stalled, unfortunately, with the Great Recession.
Now, due in part to a new law in 2018 initiated by a uniquely bipartisan effort creating Opportunity Zones throughout the country, and the engagement by hometown developer Sound West Group, redevelopment and revitalization of downtown Bremerton is back on track. Sound West Group, through its real estate securities sponsor affiliate Sound West Realty Capital, is capitalizing Marina Square as a project specific Opportunity Zone fund.
Opportunity Zones are meant to incentivize investment in revitalizing areas like Bremerton that are economically challenged.
By investing in qualified Opportunity Zone projects, investors can defer capital gains taxes realized on proceeds from sale of an asset. The program is like a 1031 exchange. It differs in that the investor can reinvest the gain from the sale of any asset, not just real estate, into an Opportunity Zone project.
The investor also need only reinvest the capital gain, and not the entire proceeds from sale. Additionally, the investor can realize a partial step up in basis on the investment in the qualified Opportunity Zone project. Most significantly, any capital gain from the investment in the project will never be subject to capital gains tax, provided the investment is held for at least 10 years.
Marina Square, one of the last waterfront properties in the Puget Sound region, is now the site of a $129 million Opportunity Zone development by Sound West Group in cooperation with the Port of Bremerton, city of Bremerton and other public partners. The project is on 2.2 acres overlooking Bremerton Marina, about 100 feet from the Kitsap Transit passenger-only fast ferry (with a 28-minute crossing to Seattle) and Washington state auto ferry, as well as the downtown conference center.
Puget Sound Naval Shipyard, employing 15,000 civilian workers in addition to 8,000 active duty military, is just four blocks away from Marina Square. Around the corner is Quincy Square (named for Quincy Jones), featuring the restored Roxy Theater and the repurposed Sears and Ford buildings now called the B Flats apartments, plus restaurant and retail. Planned for the second phase of Quincy Square are more multifamily and retail, as well as an arts, exhibition and entertainment center.
Starting construction in May, Marina Square will have two towers over a 365-stall parking garage podium. The towers will contain 145 apartments and a 125-room Cambria Hotel (the luxury brand of Choice Hotel Group), plus extended-stay units, a restaurant and retail. The three-tier garage will also serve the marina and provide some overflow parking for ferry commuters.
Key to Marina Square is the public square and plaza between the hotel and apartments, which will connect the public from Washington Avenue to the waterfront via a grand staircase to the beach and an adjacent pier. The open space along the shoreline will be ideal for weddings, picnics, concerts, wine tastings and other events. Access to the shoreline will also open opportunities for water-based activities such as kayaking and jigging.
Compass Construction and Encore Architects are leading the Marina Square project team. Cambria/Choice Hotels is joint venturing in the hotel.
Efforts are underway to coordinate with tribes regarding restoration of the shoreline to its natural state.
This project is the “buzz” in Kitsap County and the Opportunity Zone world, where it has been highlighted at securities conferences in Chicago and Las Vegas.
Borrowing the title from Jones’ 1989 Grammy Award-winning album: Bremerton is “Back on the Block.”
Wes Larson is principal and CEO for Bremerton-based Sound West Group, an integrated real estate company with over $300 million of assets under management and over $300 million under development. Larson is a native of Bremerton and an attorney experienced in international banking and finance.