The Nineteen, a luxury office-and-apartment project planned for downtown Kennewick, will break ground in June.

The project, first announced in 2019, was delayed by the Covid-19 pandemic as the developers pursued construction loans.

Andrew Klein and Brian Griffith, who formed Klein Griffith Properties Group LLC to pursue the project, secured the final piece of the financial puzzle in April, when the Hanford Area Economic Investment Fund (HAEIF) board approved a $1.1 million loan to support the $13 million project.

They previously secured a $9.7 million agreement with New York-based ICON Realty Capital.

The five-story brick-and-steel building will have 40 apartment units above ground-floor office space at 19 S. Auburn St.

The Nineteen will be the first new private construction in the heart of old Kennewick in recent memory and the neighborhood’s first commercial live-work building.

HAEIF first reviewed The Nineteen project about two years ago but rejected the application because it was too expensive. The board spent the past 18 months working with Klein and Griffith to refine the vision into a plan it could finance.

The duo shaved $4 million from the original project budget by choosing lower-cost approaches to the building’s infrastructure, such as how the roof is fixed to the structure. The changes will not affect the living spaces, said Klein, an engineer.

Skip Novakovich, spokesman for the HAEIF board, praised the developers for their vision for downtown and for working through cost concerns.

“They did it. They became competitive with the rates they’re going to charge,” he said. He also applauded the addition of a live-work project to downtown, saying it will be good for business and for public safety.

Klein and Griffith said they’re grateful for the loan. The pandemic slowed them down but gave them time to rethink how residents will occupy apartments in the era of working from home.

They removed interior walls to open up the living areas. Daytime work areas can covert to personal spaces where residents can live and entertain, Griffith said.

“There’s lots of open space. It blends from the kitchen into entertaining space into views out to the (Columbia) river and the mountains. That intentional planning is where we spent our time,” he said.

Klein and Griffith intend to hold The Nineteen as a long-term investment. Klein, principal of AS Klein Engineering, will retain his business. Griffith, a marketing executive, will be the onsite property manager.

The city of Kennewick is reviewing the building permit application, which was submitted in January. Yost Gallagher Construction of Spokane is the contractor. The final budget will depend on locking in construction materials in a climate marked by rising prices for wood, steel and other supplies.

If the schedule holds, apartments will be available in late 2022 or early 2023, with rents starting at $1,635 to $2,085 for one- and two-bedroom units.

There is reason to be optimistic The Nineteen will succeed in attracting tenants for its apartments as well as the office space.

Klein and Griffith began soliciting rental applications in late 2020 with a website that touts its pet-friendly amenities – waste stations and a private outdoor space for Fido.

Hundreds signed up for notifications about the project. No leases have been signed, which they attribute to pandemic jitters.

“People were not signing their names on any dotted lines,” Griffith said.

Vacant apartments are rare in the Tri-Cities, where the vacancy rates for one- and two-bedroom units was 1% and 1.3%, respectively, in the fall survey conducted by the University of Washington’s Center for Real Estate Studies. The spring survey is pending but the supply-demand gap is not expected to close.

Jenny Benson, an independent appraiser with Value Logic, scrutinized The Nineteen’s appeal to tenants and investors and concluded the shortage of housing bodes well for leasing, according to her report, which was included in the loan application submitted to HAEIF.

Citing Costar research, Benson noted that local rents were rising at an annual rate of 4.7% in the first quarter of 2021, with asking rents of $1,252 a month for top tier properties.

“Housing continues to be in short supply and continual price increases (in the for-sale market) correlate with the shortage of supply and will continue until increased supply releases some of this pressure,” Benson said in the appraisal.

Tri-Citians are showing a willingness to pay for amenity-rich apartments.

Park Place, at the entrance to Howard Amon Park in Richland, charges $1,375 for a one-bedroom, one-bathroom unit. Columbia River Walk, newly open on the Pasco waterfront, charges $1,699 for a three-bedroom.

The ground floor office space has already drawn interest. BlockChyp Inc., a Kennewick firm that created an integrated payment platform for merchants, signed a nonbinding letter of intent to lease 6,560 square feet, which is about half of what is available, in February.

The Nineteen will have a market value of $15 million when it is fully leased, Benson predicted.

HAEIF is a public entity created by the state Legislature to invest money from fees paid to deposit toxic waste at the Hanford site into projects that build the local economy. To date, it has issued 48 loans totaling about $25 million.

The fund is almost fully invested after a recent round of commitments that also put money into the future Crumbl Cookies in Kennewick and Iconic Brewery in Richland. A reserve fund is available to support unexpected opportunities.

Go to the-nineteen.com for updates.