Tarragon
Specialty: Develops and manages retail, office, multifamily, mixed-use and industrial projects
Management: Joe Blattner, president and managing partner
Headquarters: Seattle
Year founded: 1995
Current projects: 2000 Third Avenue, Seattle; Sunrise Village, Puyallup; Junction 192, Bonney Lake; Cedar River Corporate Park, Renton; Kent Station, Kent; Centralia North Corporate Park Phase II, Centralia
Image courtesy of Tarragon The Port of Olympia selected Tarragon to develop the East Bay District in downtown Olympia. Miller Hull Partnership is the architect.
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Tarragon keeps moving forward on its ongoing projects — a diverse group ranging from rural industrial to urban residential — but it’s the public-private sector where company President Joe Blattner expects things to heat up for the firm.
In June, Port of Olympia officials announced they will negotiate with Tarragon to develop the East Bay District in downtown Olympia. Tarragon is proposing to develop nearly seven acres with residential, retail and hospitality uses.
Three months later, the Tukwila City Council selected Tarragon as the developer of Tukwila Village. Located near the new light-rail stop, the six-acre project that GGLO is designing is expected to have nearly 300 units of housing, retail, a King County Library branch and a police resource center.
Both projects are in their infancy, and Tarragon will have things to say about them “in the very near future,” Blattner said.
Kent Station fills up
Tarragon made a name for itself in the public-private arena with Kent Station, a 470,000-square-foot project. Tarragon is wrapping up the development’s third phase, which totals 80,000 square feet. Green River Community College is taking half the space. The remainder is half office and half retail, and a tenant is taking almost all of the office space, according to Blattner.
“Kent Station has been very strong,” he said, noting the project is nearly 95 percent occupied. The anchor, a 14-screen movie theater, drives retail traffic. Other amenities, such as Sound Transit’s commuter rail station, also help bring in shoppers and attract office tenants. Blattner isn’t sure when the final phase, an apartment project with probably around 150 units, will start.
NAIOP kudos
It’s been a banner year for Tarragon in spite of the economy. The Washington state chapter of NAIOP named the company developer of the year, and Tarragon’s 55-acre Centralia North Corporate Park Phase II and 550,000-square-foot Sunrise Village were named deal of the year and retail development of the year, respectively.
The company is moving forward on these and its other existing projects. “We are in various stages of lease up or build out on all of them,” said Blattner.
Despite remaining active, the company has reduced staff. Tarragon currently has about 20 staff members, excluding its construction arm, and that’s about 30 percent less than before the recession.
“We had to right-size the organization over the last 18 months,” said Blattner, who’s pursuing projects that “we believe are maybe more imminent.” These include public-private deals, such as Olympia’s East Bay and Tukwila Village.
What’s next?
Blattner anticipates that industrial and residential will be the first sectors to emerge from the recession.
Industrial “doesn’t get beat up or fly as high” as other sectors, said Blattner, whose company is building 150,000 square feet of space for Millard Refrigerated Services and 206,000 square feet for Lowe’s in the second phase of Centralia North.
Blattner is seeing some signs of demand in the industrial market, though it’s not as robust as it was in 2006 or 2007. He thinks that the supply eventually will contract enough to prompt the resumption of development.
“Like industrial, the for-rent (residential) market tends to have higher lows and lower highs,” said Blattner. “I think it’ll also benefit from the supply constraints that we will eventually get to. We are not there now, but we will be.”
At 43 stories, Tarragon’s 2000 Third Avenue in downtown Seattle will be the city’s tallest apartment tower. The project is moving ahead but the start of construction has not yet been scheduled. For now, Tarragon is working on getting the permits for the 431-unit tower that also will have 40 hotel rooms and 5,100 square feet of retail.
“Niche-oriented” office
Tarragon does not develop Class A office, but does build what Blattner calls “niche-oriented” office in mixed-use and flex projects, such as Kent Station and the company’s 143,000-square-foot Cedar River Corporate Park. “We are doing deals in those markets,” said Blattner. Typical tenants are small tech and equipment manufacturers.
As local retailers struggle and national chains pull back on expansion plans, retail continues to suffer. “It’s a lot tougher out there trying to find retail tenants,” said Blattner. Complicating matters is a lack of capital to fund new concepts. “Retail is always reinventing itself. There is no hot new thing right now because there’s no venture capital to fund it.” One relatively bright spot is that some service providers, such as medical clinics, are taking some space.
For the overall commercial real estate industry, he is seeing some investment but wonders how much of it is driven by government stimulus programs.
Construction capital “has to get out, banks have to lend,” said Blattner, who is unsure whether there will be much activity in 2010. Banks “are working through a lot of problems and I don’t know if they are going to get through those problems by the end of next year.”