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Feature Article, September 2008
Spanning The Golden State
Tallen & Keshen Holdings finds opportunity in different parts of the Golden State.
Brian A. Lee
Having extensive retailer relationships in the West’s biggest retail economy, knowing markets and municipalities, and having the wherewithal to negotiate difficult entitlements and navigate through high barriers to entry mean a great deal to a retail developer. Not only a tremendous resume, it’s a surefire way to ensure your ship comes in despite the often-choppy economic seas these days.
This is how Tallen & Keshen Holdings distinguishes itself while spanning the state of California for successful projects and deals.
Fields of Gold
Seeking to acquire and redevelop dark retail boxes in strategic markets, Tallen & Keshen Holdings (TKH) acquired from Smart & Final Stores in an off-market transaction a property in Fairfield, California, located approximately 40 miles from San Francisco near the highly trafficked confluence of interstates 80 and 680. After re-entitling and redeveloping the location, TKH negotiated, through its internal brokerage group Retail Enterprise Group Inc., one of the first Fresh & Easy Neighborhood Market deals in Northern California. In order to acquire this property, TKH worked with Smart & Final to achieve the termination of its synthetic lease on the property and its disposition.
“This is a property that they had slated to close anyway because they had changed their prototypical footprint and are now going with much larger stores,” says Terrence Tallen, TKH co-founder and co-owner. “As far as they were concerned, this was an antiquated footprint, and we thought it was an outstanding piece of real estate. Persistent tenacity and the proper transactional structuring allowed us to acquire this property.”
TKH’s strong retailer ties across the state — it was up to date on Tesco’s rollout of the Fresh & Easy brand — and its multidisciplinary approach allowed this to become “an example of an expeditious value-creation play,” according to Anne Keshen, company co-founder and co-owner.
Says Tallen, “It was a situation where it was a market that we liked, where we had long-term city relationships, 10 years worth of experience and then we were able to ultimately close on a property we’d been tracking for 5 years.”
“Working with and watching the manner in which Keshen and Tallen conduct themselves in this very competitive world has been refreshing,” says Sandie Martin-Dix, national director of asset management for Smart & Final Stores LLC. “They are extremely effective and reputable developers.”
The Fresh & Easy deal in Fairfield reflects TKH’s strategy established in early 2007 to, among other things, focus on tenants primarily in the food and drug category, a retail segment that tends to maintain continued consumer demand during recessionary periods.
North to South
With its 160,000-square-foot Ukiah Gateway Plaza slated to break ground next year, Tallen & Keshen Holdings will be addressing a significant leakage — retail, that is — in Northern California’s Wine Country. A 2-hour drive north of San Francisco, Ukiah loses $169 million in annual retail sales to nearby Sonoma County, Santa Rosa and surrounding markets, according to independent economic analyses.
Recognizing the retail void and having the ability to achieve critical zoning entitlements, TKH is poised to make Ukiah Gateway Plaza a big retailer and consumer draw in the city’s well-established Airport Business Park, which is already home to the state’s reputed highest-producing Wal-Mart per capita.
“TKH has proven to be a resourceful and capable development company to work with and has demonstrated their strong industry relationships, market knowledge and experience,” says Charley Stump, director of planning and community development for the city of Ukiah. “The city of Ukiah has tremendous potential and is like a bottle of champagne with the cork about to pop off.”
Located in Mendocino County, Ukiah’s presence as a relatively small local market within a big regional market only serves to boost the appeal of the development opportunity.
“Anytime you can work on a project in an area with incredibly high barriers to entry, there is an opportunity to make a lasting impression on the retail environment for a long period of time,” says Matt Holmes, principal at San Francisco-based Retail West, the project’s leasing brokerage firm.
In June, TKH, through its services arm Retail Enterprise Group, wrapped up a 5-year engagement for the repositioning of the Gateway Marin Retail Center, a 182,000-square-foot power center located in scenic Marin County, California, just 3 miles north of the Golden Gate Bridge. TKH initiated the high-profile project by facilitating a partnership between Marin City Community Land Corporation and Pacific Coast Capital Partners and teaming with co-developer Blake Hunt Ventures, a value-creation strategy resulting in an above pro forma return on investment and 14 new local and major tenant leases.
“We have enjoyed a wonderful collaboration on the Gateway Retail Center over the last 5 years with Blake Hunt Ventures and Pacific Coast Capital Partners,” says Tallen. “We all worked together in an engaged and strategic manner to successfully reposition this property and to serve the needs of the local community as well as the regional shopping needs of the greater North Bay Area.”
TKH’s aggressive leasing/repositioning program produced a strategic new anchor tenant — the only Babies R Us in Marin, Sonoma and Napa counties — and key specialty retailers such as Starbucks Coffee, Panda Express, Little Gym and Styles For Less.
After achieving a critical set of entitlements to bring Wal-Mart to the Monterey Peninsula in 2006, TKH is busy pre-leasing the second phase of Marina Landing in Marina, California, located 40 miles from San Jose. Retailers occupying the approximately 71,000 square feet of space on the 6.5 acres of land adjacent to the Wal-Mart will benefit from a city posting impressive growth numbers.
Marina’s location and role as a more affordable alternative to living in Monterey, Pebble Beach and Carmel are big reasons for its growth. According to the Marina Chamber of Commerce, that expansion comprises 12,400 jobs, 11,000 new residents, 4,500 housing units, 4.3 million square feet of commercial space, 1,400 acres of redevelopment and 850 hotel rooms.
“It is important to be responsive to the current and future shopping needs of local communities like Marina, the Monterey Peninsula and the surrounding area,” says Keshen. “In redeveloping the former K-mart site [for Wal-Mart’s arrival] and developing the land in Phase II of the project that had been designated for retail use for more than 20 years, we are working to complete the revitalization of the Marina Landings project. The project is an exceptionally well located and strategic location for both local residents and visitors.”
Says Tallen, “The new retail phase will serve to complement Wal-Mart’s success and to provide more viable shopping options to the residents of the City of Marina.”
“Land-use constraints in California are generally brought on by two things: entitlements or lack thereof and geographic barriers to entry,” says Keshen. “Markets like Monterrey and Ukiah have both, and just by the nature of the intense density of development Hollywood has both. The good news is that when you get something entitled there’s always a taker.”
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Madrone Hollywood, an urban lifestyle collaboration between Tallen & Keshen Holdings and John Laing Homes, will feature 13,700 square feet of upscale retail space and 180 luxury condo residences.
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Madrone Hollywood, TKH’s marquee mixed-use, urban lifestyle project featuring 13,700 square feet of upscale retail space and 180 luxury condo residences, will continue in fine form the resurgence of Tinsel Town. Located at Hollywood Boulevard and La Brea Avenue at the beginning of the historic Hollywood Walk of Fame, the dynamic development is a collaboration between TKH and John Laing Homes, the residential owner.
“This particular project will set the standard for a lot of mixed-use urban projects, not only in Hollywood but in L.A. County,” says Keshen.
The project is slated to launch at the beginning of second quarter 2009. A vibrant neighborhood-serving tenant mix will occupy the prime retail space fronting La Brea. Consumers and visitors will enjoy the convenience of the property’s multilevel, subterranean parking garage, which will have a parking ratio of approximately 8.5 per 1,000 square feet of gross leasable area.
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Consumers and visitors to Madrone Hollywood will be able to access a vibrant retail tenant mix through the mixed-use property’s multilevel, subterranean parking garage.
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“We have worked diligently for several years to assure the highest standards for the retail component for Madrone,” says John Napier, TKH’s project director. “Mixed-use projects present both unique challenges and opportunities for quality retail space and we are pleased to be at the forefront of bringing a world-class retail location to a mixed-use project of the quality and aesthetic of Madrone.”
TKH was drawn not only to the Hollywood limelight but also the redevelopment momentum of one of the most well known areas in the world. Keshen, a member of The American Cinematheque Board of Directors, points to the renowned entertainment film charity’s renovation and reopening of the historic Egyptian Theatre on Hollywood Boulevard, home of the first movie premiere, as the move that sparked Hollywood’s latest resurgence.
“The restoration and successful reopening of The Egyptian Theatre 10 years ago kicked off a long overdue Hollywood renaissance of new and redeveloping residential, retail and office projects,” she says. “Madrone is really one of the first new developments in the renaissance of Hollywood in the 21st century.”
Formerly a two-acre parking lot, Madrone is located less than 1 mile from iconic Hollywood attractions like the Kodak Theatre, where the Oscar ceremonies are held, and the Hollywood Bowl.
Selling the Sizzle, Too
If TKH’s product is in such high demand, it stands to reason that the company’s development strategy would garner quite a bit of interest, too. That’s where Retail Enterprise Group, a wholly owned subsidiary of TKH, comes into play.
“We work with institutional investors, private-equity firms, private investors, etc. to really bring an owner’s perspective to advising them how to best reposition and redevelop larger commercial properties,” says Tallen of the service provider arm with built-in partnership potential. “This is a way to stay very active and to share our expertise with others that may be upside-down in properties and to help get them whole again in these challenging times in our industry.”
“This is an important value-added resource,” says Keshen, also an attorney. “With the softening of the economy, retailers closing stores and others slowing their expansion, many assets are suffering. We want to be responsive to both opportunities and challenges and provide a comprehensive resource to asset owners. We operate transparently between the creative, financial and land-use aspects of value creation and successfully navigating the legal issues that drive leasing and important business decisions.”
©2008 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.
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