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Tuesday, Jun 28, 2022

Retail’s Return: $160M For LB Exchange

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When Burnham Ward Properties LLC opened the Long Beach Exchange shopping center in 2018, the Newport Beach-based developer was aiming to create the retail property of the future.

Institutional investors have bought into their vision, paying top dollar for the multi-property retail center near the Long Beach Airport.

PGIM Real Estate, an asset management affiliate of insurance and investment giant Prudential Financial Inc., recently closed on the purchase of Long Beach Exchange, also known as LBX, the Business Journal has learned.

The 266,000-square-foot retail project—about 6 miles from Seal Beach and Orange County—sold for nearly $160 million, real estate sources tell the Business Journal.

It’s the biggest reported retail sale in the region since the start of the pandemic, according to brokerage data. In OC, the top reported retail sale over the same time was October’s $53 million sale of a Home Depot site in Anaheim.

Trading hands at nearly $600 per square foot, it is also one of the highest per-square-feet prices seen for a retail center sale of its size on record in either Los Angeles or Orange County.

The buyer couldn’t be reached for comment. Representatives of Burnham Ward, which developed the 26-acre complex along with its affiliate Burnham USA in a venture with frequent financial partner Rockwood Capital, declined to comment.

The initial development cost for LBX was reportedly in the $100 million range.

Bella Terra Owners

Sources tell the Business Journal that San Jose-based DJM Capital Partners Inc. will manage LBX for PGIM, which bills itself as one of the largest real estate managers in the world, with $201.3 billion in gross assets under management and administration as of September.

PGIM, which also counts an active apartment investment division (see story, page 13), has familiarity with the area’s retail centers.

In 2015, the company reported paying nearly $289 million for a 75% stake in the Bella Terra shopping center in Huntington Beach, which is about a dozen miles from LBX. That deal worked out to a price of about $500 per square foot for OC’s 16th largest shopping center, which has 840,909 gross leasable square feet.

Bella Terra has seen a heavy amount of renovations since the sale.

The center, which has a Whole Foods Market and Cheesecake Factory among its stores, reported $121 million in taxable sales for the 12 months ended June 30, according to the Business Journal’s annual list published on Nov. 8.

DJM—which along with Burnham Ward oversees much of the retail and restaurant space in the Lido Marina Village area—also has a stake in the Surf City project and continues to manage it for PGIM.

Active Developer

The LBX deal is the largest reported sale for Burnham Ward, which is also the developer of Costa Mesa’s OC Mix and South Coast Collection, Newport Beach’s Castaway Commons, and is working on the retail portion of the Dana Point Harbor renovation, among other projects.

The company is still in growth mode, despite the challenging market for many traditional retail centers.

Along with the Dana Point Harbor project, it has a newly revamped center in the works near the San Diego (5) Freeway and Crown Valley Road in Mission Viejo. Dubbed the Gateway at Mission Viejo, it is set to become home to the first Amazon Fresh grocery store in South Orange County.

Burnham Ward and its affiliates have been adding to its collection of properties along Westcliff Drive in Newport Beach, and the investors recently reacquired a retail site just off the Costa Mesa (55) Freeway in Tustin that holds the potential of redevelopment.

Ahead of Curve

At the time of LBX’s construction, Bryon Ward, a partner in Burnham Ward Properties, told the Business Journal that the developer’s aim was to create “one of the most exciting projects in Southern California. We hope it becomes a lot more than just a retail project.”

Changing trends in retail, exacerbated by the pandemic, soon bore out the developer’s thesis as to where customer demand was heading.

The center’s anchor is a Whole Foods Market, with a collection of tenants—a mix of traditional retailers, eateries, boutique fitness sites, and other service providers— in a collection of buildings whose design is largely tailored for drive-in, drive-out visits.

Other larger retailers at the center include an Ulta Beauty, Old Navy, PetSmart and TJ Maxx. A food hall also is on site.

The center, built on land at the Douglas Park development that Burnham Ward bought from Newport Beach’s Sares Regis, counts several local ties in its tenant base, with Grit Cycle, Wahoo’s, In-n-Out Burger, Schools First Federal Credit Union, Georgia’s Restaurant and Mix Mix Kitchen all currently at LBX.

It is the first sizeable retail project built in Long Beach since the Great Recession. 

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