Last Updated: October 12, 2015 12:40pm ET
Shopoff’s Plan: ‘Event-Driven’ Appreciation
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MISSION VIEJO, CA—GlobeSt.com has learned exclusively that Shopoff Realty Investments has purchased, through co-investments from two Shopoff-affiliated funds, Los Alisos Village, a 31,400-square-foot community retail property here, for $11.5 million from Los Angeles-based Sandstone Properties. Shopoff plans to add more than 1,500 square feet of leasable space to “further enhance property revenue and value,” according to David Placek, EVP of Shopoff’s commercial property division.
The firm says its renovation, which will cover the exterior of the property, is part of its value-add strategy to create “event-driven appreciation,” which should enhance visibility of the center and its tenants. When the improvements and repositioning are substantially completed, Shopoff intends to sell the asset to a buyer of stabilized real estate.
William Shopoff, CEO, tells GlobeSt.com, “With our event-driven strategy, we add value directly through our efforts with limited influence or reliance on external market factors. We sell our assets when we have executed our strategic plan, capturing appreciation generated by our direct efforts.”
Adds Placek, “This event-driven investment model includes hands-on, active management and repositioning of properties to maximize their value. Los Alisos Village is a great example of how we can improve value by repositioning an older property in a very infill, high-barrier location.”
Shopoff also says Los Alisos Village is located in a premier south Orange County location. “The renovation we have planned will allow us to improve the occupancy and rental rates at the property as well as attract a more regional and national tenant base, increasing the net income for the asset and the value of the property.”
Los Alisos Village, constructed in 1982 and situated on approximately 4.5 acres here, is currently 91% leased, with tenants including Auto Zone, Baskin Robbins, Taco Mesa and a number of other local businesses, some with leases dating back to the early 1990s. According to Placek, “This retail space has a a seasoned tenant base in the center of affluent Orange County—Mission Viejo is a market area with limited vacancy.”
In November 2014, GlobeSt.com spoke with William Shopoff about the research techniques his firm has used to find out which amenities tenants really want in their space, which will inform how the firm adds value to that space. We also asked him about the results of that research and how Shopoff approaches research as a tool for strategic planning in commercial real estate. Shopoff said, “There are two or three ways we go about it. It depends on how many tenants we are repositioning. If there’s little to no tenancy, it’s a little more difficult. If it’s a largely occupied property, then it’s a straightforward process: we go and talk to the tenants. More frequently, it’s a high-touch process, a sit-down interview with them. Sometimes it’s a questionnaire, asking them what they like, what would they want in their space.”
Shopoff added, “Another method is to look in the market—not necessarily our direct market, but markets that look like ours, and see what has been successful. Innovation is great, but imitation works pretty well, too. We see what others have had success with in similar markets. Then, if we’re going to try to do something a little more groundbreaking, we will do focus groups. You identify who your target audience is, refine a plan, define what you want to do and decide what the best product will be. You can either buy for less or deliver more. Sometimes you just have to deliver more in value and hopefully that will translate into tenants signing leases for it.”