Bill Shopoff’s largest local acquisition in over five years—a former oil storage facility in Huntington Beach—could prove to be the most challenging entitlement project yet for the Irvine-based real estate investor and developer.
Shopoff Realty Investments this month closed on the buy of a nearly 29-acre site on Magnolia Street about a block from Pacific Coast Highway and 2 miles south of the Huntington Beach pier.
The land sold for $26.5 million, or roughly $925,000 per acre. Property records show it was sold by Houston-based Plains All American Pipeline.
The relatively low price per acre—developable coastal land in Orange County can trade hands for three times that price, if not much more—gives an indication of some of the challenges facing the site’s new owner.
The property holds three large, above-ground oil tanks, which were developed by Southern California Edison in the early 1970s and last used about five years ago.
The 500,000-barrel tanks have capacity to hold a total of about 63 million gallons.
Shopoff plans to demolish the tanks and turn the land into a mixed-used property with homes, a hotel and possibly other commercial uses.
Early plans suggest a development in the $500 million range is possible, according to Bill Shopoff, the real estate company’s founder and chief executive.
Approval of a residential project for all or part of the site would likely lead to for-sale homes rather than rentals, given the current preferences of Huntington Beach’s city council, he said.
Early testing shows the land is clean enough to support residential development, without too much environmental remediation needed, he said.
But don’t expect a groundbreaking announcement any time soon, he said, citing numerous local entitlement issues facing the project, not the least being approvals needed from the California Coastal Commission, that bring “an extra level of complexity.”
“This is a long-term effort,” he said. “We understand it’s going to be a lot of work.”
Optimistically, the developer could get through the entitlement process in three or four years, he said.
Plans are for Shopoff Realty to present its initial proposal to the city this year. The company already has had some early-stage talks with the Huntington Beach Wetlands Conservancy, which manages the wetlands that border a portion of the site, according to the developer.
Shopoff also plans to bring in a joint venture partner for the project by the end of the year, he said.
Uptown Going Up
The land buy comes as Shopoff is getting ready to move ahead with ground-up construction at the company’s other big area development, the Uptown Newport mixed-use project near John Wayne Airport.
The 25-acre site on Jamboree Road near the Newport Beach and Irvine city line is entitled for more than 1,200 homes and apartments.
The first phase—an apartment project being co-developed by Shopoff and San Juan Capistrano-based Picerne Group—is scheduled to start construction in October.
Shopoff paid a reported $23.5 million for the land in late 2010 and got city approval for the project after extensive entitlement reviews in 2013.
Complex projects such as Uptown Newport—being built on a site that previously held offices and land owned by chipmaker Conexant Systems Inc.—and the new Surf City buy are par for the course for developers looking to build in OC these days, Shopoff said.
“There’s not many projects in the easy category,’” Shopoff said. “You have to dig deep and look hard to find sites,” he said.
Shopoff said he’d been preparing to buy the Huntington Beach site for close to two years. The land was marketed by the local capital markets and multifamily divisions of CBRE Group Inc.
Shopoff Realty has looked at a number of other area sites that haven’t gone as initially hoped. It was part of a group looking to buy the Santa Ana land that surrounds the Orange County Register’s headquarters but wasn’t able to complete the bankruptcy-driven deal.
That land is now owned by Mike Harrah’s Caribou Industries, which is exploring a variety of residential and other development types for it.
Shopoff also was one of several companies that expressed interest last year in redeveloping the 127-acre Santa Ana Country Club into a residential project. The golf course, next to the Costa Mesa (55) Freeway, straddles the Costa Mesa and Newport Beach city line.
That project appears unlikely after a portion of the golf club’s members opted against a sale.
Shopoff nonetheless has managed to make a number of investments outside OC this year, its more prominent deals including a 22-acre development site in La Quinta and a pair of retail buys in Reno, Nev., topping $50 million.
“It’s been one of our more active years,” Shopoff said.
