ORANGE COUNTY, CA—LBG Real Estate, a value-add investor, has completed the acquisition of a 30,000-square-foot redevelopment retail property in Huntington Beach, CA, from US Bank. The developer entered into escrow nearly two years ago, and has been securing entitlements and permits for the redevelopment of the property. Having secured all of the necessary permits, the company was able to close on the purchase.

“This particular asset had been through quite a lot of distress, starting during the great recession,” Doug Beiswenger, managing partner at LBG Real Estate, tells GlobeSt.com. “The reason for that is that the fee interest in the property was owned by Downey Savings and Loan, which was taken over by US Bank. The property was also subject to a long-term ground lease in favor of the original builder of the shopping center, and the ground lease expired in December of 2013.” The expired ground lease and the shuttering of Downey Savings made this the “ultimate distress opportunity,” according to Beiswenger, which he says is why the property sat vacant for so many years.

The investor originally set out to purchase the property from US Bank in the middle of 2013, before the ground lease expired. Over the next two years, it began securing entitlements during a very slow escrow that ensured US Bank security throughout the process. “US Bank has an extremely successful branch at that property, and did not want any risk of loosing the branch. So, they wanted us to have permits in place before we closed,” says Beiswenger. “We had to entitle and draw plans, and once we secured all of that, we closed.” In the end, LBG Real Estate paid $6.1 million for the property, and will spend an additional $4 million on renovations.

Construction began on the property one week after the closing. They have a two-phase renovation plan, and expect to complete construction and re-tenanting by the end of the year, which shouldn't be difficult. The property is located on a high-traffic intersection near major national chain stores, including Target and Kohl's, and is already 81% pre-leased to US Bank, Petsmart, Phenix Salon and Tenet Healthcare. The remaining space will be marketed to daily services tenants, like a fitness center and dry cleaner.

The developer also recently sold a 42-acre development site in Upland, CA. The buyer plans to build 400 residential units and 100,000 square feet of commercial space.