Until this month, William Shopoff’s most noteworthy local real estate deal in recent years was a personal one—when he sold his Emerald Bay home in Laguna Beach for more than $34 million in 2008.
At the time, the home sale was reported to be the second most expensive in Orange County.
Now Shopoff, chief executive of Irvine-based real estate investment company Shopoff Group LP, is part of a land buy that could end up having a much bigger impact on the local housing market.
Shopoff Group is the local partner in Uptown Newport LP, a newly formed group that’s paying $23.5 million for a 25-acre parcel of land along Jamboree Road, near the Newport Beach and Irvine city line.
It’s one of Newport Beach’s largest sites zoned for housing development.
The parcel is being sold by Conexant Systems Inc. and is next to the Newport Beach-based chipmaker’s headquarters.
“It’s the last site that’s likely to get this level of development in Newport Beach,” Shopoff said.
The deal is one of the largest land sales seen here this year and is expected to close soon.
Don’t expect an immediate groundbreaking on the Jamboree Road property, Shopoff said.
The site currently has about 450,000 square feet of mostly full buildings, including a silicon wafer plant used by Israel’s Tower Semiconductor Ltd.
“We’re going to pursue development,” Shopoff said. “But I wouldn’t expect to see anything happen (right away).”
Tower Semiconductor, whose U.S. subsidiary is Conexant spinoff Jazz Semiconductor, has a lease for two buildings on the land that runs at least through 2017. The company has made no indication that it’s looking to move its plant, which makes wafers used to produce chips.
“Worse-Case Scenario”
In a “worse-case” scenario, Tower could extend its lease for an additional 10 years beyond 2017 at the 320,000-square-foot plant there, said Baker Morphy, vice president in the capital markets group for real estate brokerage Jones Lang LaSalle Inc.
Shopoff “sees this as a long-term investment,” said Morphy, who brokered the sale. “He doesn’t need to turn this around (right now).”
The deal was penciled out from the point of view of a commercial landlord, not a housing developer, Shopoff said.
“We bought this looking at its cash flow,” he said. “We have no idea what the market will be like in five or 10 years.”
There is potential for some development work in the near term.
Jazz leases about 68,000 square feet of office space at the site. If an agreement with the tenant were reached, that space could be vacated and torn down to allow a first phase of development to begin a few years from now.
“There’s a lot of moving pieces—it’s a complex transaction,” Morphy said.
Conexant, which plans to use money from the sale to shore up its balance sheet, will keep a $2.2 million stake in the land.
Second Time Around
The deal is the chipmaker’s second attempt to sell the property this year.
A $26 million deal struck earlier this year between Conexant and Santa Ana-based developer City Ventures LLC reportedly fell apart over the existing leases at the site.
Shopoff is working with New York-based private equity firm DRA Advisors LLC on its cash bid, which is being run under the Uptown Newport name. It’s the first venture between the two companies.
DRA Advisors counts more than 500 properties in its national portfolio, but only has two commercial buildings in California, according to the company’s website.
Shopoff Group started up a $15 million land fund this year, according to filings with the Securities and Exchange Commission. The Conexant deal would be funded in part through the fund, according to Shopoff.
City Approval
Shopoff also said he’s been working with Conexant to shepherd the site’s development plans though Newport Beach’s City Council.
In September, the council approved a conceptual mixed-use development plan for the site. It calls for 1,244 homes, including ground-level townhouses, podium midrise buildings and as many as six apartment or condominium high-rises that likely would be about 13 stories tall.
The plan is being pursued with Newport Beach’s Koll Co., which owns another 75 acres of commercial space nearby. Koll is looking to build as many as 260 homes on a 12.7-acre portion that borders Conexant’s land, primarily along Birch Street.
September’s approval was the first step in obtaining the city’s final entitlement. An exact date for when the entitlements will be completed still is unclear, according to Conexant officials.
A few modifications to the plan still are possible, according to Shopoff.
“There’s some significant upside” to the land when the development plans move ahead, he said.
It’s likely the company would bring on other developers for parts of the project, especially any high-rises, he said.
