Growing Hold On The Market
Tallen & Keshen Holdings has a firm grip on California retail mixed-use development.
Brian A. Lee

Located at Hollywood Boulevard and La Brea, Madrone Hollywood will feature 13,700 square feet of upscale retail tenants and 180 luxury condo residences. “Madrone is going to become the Rodeo Drive of Hollywood,” says Terrence Tallen of the project that is currently in the construction and leasing stage.

Combining extensive and complementary real estate backgrounds and strong retail industry relationships with a speedy approach to the market that creates value for all parties involved, Tallen & Keshen Holdings is poised to expand its dynamic retail footprint in the state of California. In short, the company, founded by Terrence Tallen and Anne Keshen, has already come a long way in nearly 7 years as an entrepreneurial, privately owned development and investment group.

Range describes the firm’s geographic coverage, its ability to negotiate the often-difficult entitlement and acquisition process in divergent markets, the retailer and municipal relationships that it can leverage, and the array of retail product it can deliver. Tallen & Keshen Holdings has offices in the San Francisco Bay area and Los Angeles, from which it nimbly penetrates the Golden State’s high-barriers-to-entry markets with its potent mix of development, investment and legal skills. Whether retail or mixed-use projects, value-added reposition or ground-up development, the company succeeds in creating outstanding locations for its valued tenants, meeting the needs of the community and generating strong returns on investments.

“I think that a critical sensibility that we have is that we approach this from a community-relationship standpoint,” says Keshen, co-founder and co-owner of Tallen & Keshen Holdings. “What has been our focus is working with our longstanding national retailer relationships and very importantly with communities, the municipalities, to develop a win-win scenario for projects.”

Golden State Gamut

Three ongoing Tallen & Keshen projects in varying markets from Northern to Southern California illustrate the company’s unique focus and ability. The firm is now pre-leasing its 150,000-square-foot Ukiah Redwoods Plaza, a regional power center fronting Highway 101 in Ukiah, California, Phase I of which is slated to open in fall 2008. Situated north of high-growth Santa Rosa and adjacent to Northern California’s wine country, the property sat on the market for years before Tallen & Keshen swooped in, achieving difficult entitlements and now using its extensive retailer ties to lease up the well-positioned 13-acre phase.

Terrence Tallen

“No one else had stepped up to buy it,” says Tallen, company co-founder, co-owner and a former REIT executive with a background in national retail development and value creation. “Within 2 weeks after we closed on the property, we obtained a key entitlement that opened the property up for a variety of retail uses. We’ve done that in a period of, say, 60 days when this property had been on the market for 3 years. It’s a testament to the longstanding relationships that we have.”

Ukiah is unique in that it’s a relatively small local market, but it’s a big regional market, according to Tallen. The city’s retailers draw consumers from 40 to 50 miles away, including Mendocino, Humbolt, Napa and Sonoma counties. There are a number of retailers that aren’t yet in the Ukiah market.

“For example, you have a Wal-Mart but you don’t have a Target,” says Tallen, whose company took on the closing risk before the project was fully entitled. “You have The Home Depot but you don’t have a Lowe’s Home Improvement Warehouse. You don’t have a T.J. Maxx but you have a Ross Dress For Less. A lot of the retail categories have two or three major competitors, but the market in Ukiah has only one tenant in each major category. It’s the Noah’s Ark approach to retail competition. We think there’s a huge opportunity for these other retailers to come into the market and compete. For those retailers already in the marketplace that have changed their prototype or their prototype has morphed over the years, they can come and relocate and get their current prototype [at Ukiah Redwoods Plaza].”

The property is located next to area hotels, Staples, Michaels, Wal-Mart and Starbucks Coffee. Phase II of Ukiah Redwoods Plaza is scheduled to follow in 2009.

South of the San Francisco Bay area, on the Monterey Peninsula, Tallen & Keshen is developing the second phase of Marina Landing in Marina, California, one of the state’s burgeoning coastal communities. It will offer approximately 71,000 square feet of retail space. The company made history in Marina Landing’s first phase, being the first developer to bring Wal-Mart to the Monterey Peninsula.

Anne Keshen

“We achieved a critical set of entitlements that allowed for a broad range of retail uses at the project,” says Keshen, an attorney by training with a development background. “One major obstacle for both institutional as well as entrepreneurial developers, particularly in California, is entitlements. We’ve been able to demonstrate a track record in working collaboratively and successfully with municipalities to obtain the necessary entitlements for our projects. This usually involves both time- and legally intensive processes that must be completed before we can begin to create any value through leasing and development.”

 According to Tallen, the property for the initial phase, a vacant K-Mart box, had been dark for 6 years. The long-lasting lack of interest in repositioning the property and other questions surrounding the deal didn’t deter Tallen & Keshen from taking the value-added opportunity and running with it. It yielded impressive returns in just 18 months.

“This was a project that had been shopped around for quite some time,” says Tallen. “Everyone had seen it; it had been fully exposed, but we came in and stepped up and closed on the property without having a tenant or entitlements in hand.”

Says Keshen, “The Monterey Peninsula is a unique and historic location and we were pleased to be the development company that was able to make sense of this long-dormant property.” 

Tallen & Keshen has proven it’s as comfortable doing mixed-use projects in high-density urban parts of Southern California as it is delivering much-needed retail product to tertiary markets in Northern California. In the heart of Hollywood, the company is the owner/joint developer of a retail and residential property that will certainly turn heads when it opens in late 2008. Located at Hollywood Boulevard and La Brea, Madrone Hollywood will feature 13,700 square feet of upscale retail tenants and 180 luxury condo residences by Lang Urban.

“Madrone is going to become the Rodeo Drive of Hollywood,” says Tallen of the project that is currently in the construction and leasing stage. “We have been able to successfully compete with the large national and multinational development firms to find these projects. We have been able to demonstrate expertise in development and entitlement in markets where entitlements are difficult to obtain by and large — Northern California as well as in urban sites like the Hollywood project.”

Speed to a Need

Tallen & Keshen is currently developing Phase II of Marina Landing in Marina, California. It will offer approximately 71,000 square feet of retail space. The company made history in Marina Landing’s first phase, being the first developer to bring Wal-Mart to the Monterey Peninsula.

Because of the company’s speed, ability and extensive relationships, Tallen & Keshen has found success taking on deals that other firms have passed on. The results are unique projects, happy clients and improved communities.

“We’re responsive to the individual circumstances of each project,” says Keshen. “We are involved in a variety of different opportunities [because of that]. We do like acquiring and redeveloping underperforming shopping centers in strategic locations as well as empty dark boxes for value-added opportunities because often the  entitlements are not as stringent.”

Says Tallen, “One of the things we’re known for and a reason why we’ve found some of these deals is that we have very little bureaucracy, we’re able to move very quickly and we’re highly liquid. That separates us because a lot of these sellers want you to close in 30 to 60 days and it’s sometimes harrowing for a lot of groups to underwrite a shopping center or development opportunity, understand the entitlements and put their financing together in that period of time. The market has made us very nimble in that regard.”

Tallen & Keshen’s range in delivering retail product means a range of opportunities for retailers. According to Tallen, the three “very, very different” projects mentioned above offer tenants a power center format in a tertiary market that draws regionally (Ukiah), entrée into a high-growth coastal California community (Marina) and high-end, luxury retail in a highly visible, urban market (Hollywood).

“We have spent considerable time and resources building relationships and a base of knowledge of the different markets, demographic trends and development opportunities in California,” says Keshen. “We are fortunate to negotiate and acquire off-market properties quite often. We feel our optimal focus is concentrating on markets that are underserved by retail uses, regardless of the size of the market.”

The company also recently led the charge in bringing the first Trader Joe’s store to Berkeley, California, and is currently in negotiations to purchase the historic Novato Theatre in Marin County, preserving its use as an entertainment and cultural arts venue.

The Big Picture

As one might expect, Tallen & Keshen’s experience and wherewithal to make different deals work successfully in California’s diverse retail sector have opened up even more opportunities for the fully integrated investment and development company.

“As we take on larger and more varied projects, we plan to work with more institutional capital groups,” says Keshen. “They’re drawn to us as sponsors because of our track record of development, not only with entitlements but also our ability to attract high-draw tenants that are both traditional retail stores as well as entertainment, lifestyle, fashion and new media concepts, successfully creating value and a strong asset base. It allows us to work on portfolios as well as projects exceeding $30 million, which has traditionally been our ceiling.”

Tallen & Keshen started out building its portfolio by using its own capital and dealing with traditional lenders. However, as the volume of quality retail projects grows, so does the interest level from potential capital partners.

“We’ve taken on a number of noteworthy projects, including the Wal-Mart redevelopment on the Monterey Peninsula,” says Tallen. “Based on the number of deals in the pipeline, we are now actively negotiating with prospective joint-venture partners and pension funds to fuel this next round of growth.”