Waterford Property Eyes Opportunity in Retail
WEST COVINA SITE COULD BE REWORKED INTO RENTALS
Newport Beach-based Waterford Property Co. is taking on a new acquisition strategy, as it plans further investment in multifamily development projects.
The company, which currently has north of 800 local apartment units in development, says it is looking to target the underutilized retail segment for multifamily conversion projects.
It kicked off its efforts earlier this month when it closed on the Marketplace at the Lakes, a 95,628-square-foot retail project in West Covina.
Waterford paid $18.6 million for the shopping center, which was built in 1994 and is 80% occupied by a Michaels craft store and Jerome’s Furniture.
The site, situated on 7 acres of land off the 10 freeway, is about 40 miles from Irvine. It is next to another Waterford property: The Lakes, a 174,000-square-foot office campus at 1000 and 1050 Lakes Drive.
Waterford bought the office complex in 2015, and recapitalized it earlier this year with Oaktree Capital of Los Angeles.
600-Unit Project Potential
In terms of acquisitions, this is the first “post-COVID deal” for Waterford, according to John Drachman, who heads the company along with Sean Rawson.
“It’s a great value-add buy that provides an upside as well as downside protection,” said Drachman, noting that there are no immediate plans for tenancy changes, though longer-term changes are in place to convert the site into a multifamily development.
“We are buying it at a great land basis with new zoning that allows for mixed-use,” Drachman said. “It’s the perfect bridge where we can continue to collect rent while maintaining the downside opportunity.”
The company will continue to target future retail sites for new opportunities.
“This is a platform we have been laser-focused on,” Rawson said. “COVID-19 has exacerbated ongoing issues for the retail segment, while housing needs have only grown.”
Potential redevelopment plans call for a 600-unit multifamily project in a five-story wrap building on the site.
“That’s the perfect scale for us,” said Rawson, noting that the sweet spot for Waterford multifamily projects is between 400 and 800 units.
Waterford is focusing on rental projects, though it could bring on a for-sale homebuilder for joint projects in the future.
In June, Waterford was part of a venture that sold Aliso Viejo’s Element office campus for $73.5 million. The campus will be the new home of Glaukos Corp.
3-Year Timeline
Waterford has three local multifamily projects in the development pipeline, with an 80-unit project in South OC, a 650-unit project in Santa Ana and an additional 100-units proposed for Pomona.
All three are in the entitlement process and are at least three years out from delivering.
That’s about when Waterford expects the market to recover from the COVID-19 pandemic, according to Drachman.
“We think it will be a two to three-correction in the marketplace, which is perfect for us to continue to grow our multifamily platform,” Drachman said.