Shopoff Realty Investments reports just having its most profitable year yet, defying current trends in commercial real estate.
Though 2023 proved to be difficult for the Irvine-based developer and others facing interest rate hikes, a rough office market and other challenges, the company ended the year with $477 million in dispositions and financing, including several lucrative sales of land and property.
By comparison, it reported six sales and financings totaling north of $160 million in 2022.
Officials also said the company posted its most profitable year ever in 2023, by a substantial margin.
“It’s been a very good year for us, in spite of a number of challenges,” founder and CEO Bill Shopoff told the Business Journal.
With a series of notable deals made through 2023, and with several major projects in planning and under construction in Orange County, Shopoff has been selected as the Business Journal’s 2023 Businessperson of the Year in the real estate category.
Shopoff led his company through a market wrought by rising financing costs and low transaction volume.
He also helped the company weather several development obstacles, including supply chain snags and labor shortages.
“It’s all put a pain on us, but we’ve been able to sustain it,” Shopoff said.
The company has owned and managed 30.7 million square feet in property since its inception in 1992; its portfolio totals $3 billion in aggregate value, according to its website.
Shopoff Realty Investments saw a high volume of sales this year, thanks in large part to a record industrial deal at the start of 2023.
The company’s largest disposition to date was its I-10 Logistics Center, a 1.8 million-square-foot industrial campus in Cherry Valley.
Through a joint venture with Artemis Real Estate Partners, Shopoff Realty Investments sold the complex in January for $329 million to a Brookfield Asset Management real estate fund, property records indicate.
The sale enabled the company to “get ahead of the market slowdown,” Shopoff said.
“I can’t say we outsmarted the market, I’m just glad we made the trade when we did.”
Other sales that contributed to Shopoff Realty Investments’ record year included a pair of local assets.
The company in October sold a roughly 10-acre lot in Fullerton that currently holds a shopping center to homebuilder Lennar Corp. (NYSE: LEN) for $49 million.
Shopoff last January won approvals for a 113-home project on the site, located on the corner of Euclid and Rosecrans.
Miami-based Lennar, which has its West Coast base in Irvine, is staying true to those entitlements with plans to build 49 single-family homes and 64 townhomes on the site, which is currently a 14-acre neighborhood shopping center called Sunrise Village.
Lennar’s revamp of the property is called The Pines.
The Pines’ trade followed Shopoff Realty Investments’ sale of another portion of Sunrise Village. Dream ERE: Real Estate, a real estate investment firm, bought a corner of the shopping center for $3.9 million in September. That sale included a ground lease for Del Taco and the three-tenant retail pad occupied by Papa John’s, Sunrise Optometry and Coffee Code.
The remaining acreage at Sunrise Village is currently under contract to be sold by Shopoff Realty Investments, officials said.
On the acquisition front, 2023 was “one of our slowest years ever,” Shopoff said.
The company only made one purchase last year—a lot formerly home to a Nordstrom, which spans 8.7 acres in Northern California’s Pleasanton. It paid $16 million for the building, according to property records.
Shopoff Realty Investments bought the lot through a joint venture with Irvine-based Praelium Commercial Real Estate and an affiliate of Singerman Real Estate LLC, which is based in Chicago.
The deal marked Shopoff Realty Investments’ fourth mall purchase in recent years.
The parcel is one of many retail to multifamily conversions for the company, which in 2022 paid $96 million for 26 acres of Westminster Mall in a mixed-use development play.
Plans for that project, dubbed Bolsa Pacific, call for 1,065 rental units across three multifamily apartment buildings, 102 for-sale townhomes, a 175-room hotel and 25,000 square feet of retail.
Shopoff Realty Investments expects to get approval for Bolsa Pacific later this year; the company aims to break ground on the project in 2025.
The developer also has a large mixed-use project in the works in Huntington Beach.
That 29-acre development, called Magnolia Tank Farm, is slated for review by the state Coastal Commission in the first half of this year.
Increased Acquisition Activity
Shopoff Realty Investments’ acquisition volume will be much higher this year, if interest rates drop, officials said.
“We’ve seen rates peak, and they seem to be stabilizing now,” Shopoff said.
That means more competition for the company, since “people will feel emboldened by lower rates,” he added.
Despite the anticipated tightening market, Shopoff remains bullish on industrial purchases, particularly on a host of industrial sites totaling 9 million square feet in the Inland Empire.
The firm anticipates to surpass its current record and make around $500 million to $600 million in dispositions this year.
Contributing to that will be sales at one phase of its closely watched Uptown Newport development near the Newport Beach and Irvine city line.
Condos at the development’s Parkhouse Residences are expected to sell out this year. Units for the luxury condominium development—comprised of 30 homes in Newport Beach—range from $2 million to $5 million. Each condo spans 2,000 to 3,000 square feet; the community runs 1.5 acres along Jamboree Road, just northeast of the Google Center office campus.
The complex, which will consist of five five-story buildings, will deliver in second quarter of this year.