After 31 years in the business and 5 million square feet of GLA developed, Newport Beach, Calif.-based Hopkins Real Estate Group is ready to become less of a boutique and more of a major player, competing with the mega-REITs for acquisitions andprojects and tackling multiple assignments. A new equity partner and several high-profile redevelopments are helping the company thrive rather than survive, says founder and president Steve Hopkins.
The firm is in escrow to pay $30 million for one of Los Angeles County' largest undeveloped tracts of land — a 157-acre former landfill in Carson, Calif., that will require between $30 and $50 million to clean up. “It's a very high profile property that's been in and out of escrow and has a checkered past. Nobody's been able to pull it off,” Hopkins says. But Hopkins has a reputation for taking on projects where other developers have failed, including white L.A. elephants La Mirada Mall and La Habra Mall, and demalling them.
Several developers have tried their hand at the site, which was most recently set to become a huge outlet center. Before that it was, at varying times, slated to be a mobile home park, an auto dealership or a high-rise hotel and condominiums. Hopkins, which is planning a mixed-use development including a significant retail component, is hoping the National Football League will choose the site for a new stadium. Costco, Wal-Mart and movie theater chains are also reportedly interested in the site. Hopkins is partnering with Genesis L.A./Shamrock Holdings to redevelop South Bay Pavilion across the street from the landfill site. “We decided to go with Hopkins because of the company's well-known development expertise and because they are currently involved with Carson's new Southbay Pavilion,” says Ron Azad, CB Richard Ellis Investorsmanager, who represented the site's seller, a craftsman's pension fund.
This is no overnight boom. Four years ago, Hopkins realized that he needed to rethink his business plan. “When you have several different equity partners and several different banks, you're at the mercy of whomever you're dealing with and whether they want to put capital into the,” he explains. “You find yourself tying up a property but then having to go out and figure out if you can make it work.”
BOLIVIAN TIN MINERS?
A tortuous search for the ideal partner ensued, with Hopkins traveling as far as Germany to meet potential equity sources. “I had a lot of people calling me with advice and with institutional partners and capital and it seemed like every other day I was meeting with somebody,” he remembers. But none of the leads panned out.
“It got to the point where I thought, ‘Jeez, I'm going to end up in a partnership with a Bolivian Tin Miners Pension Fund.’” The answer lay closer to home. Over lunch with a colleague, Hopkins heard that San Francisco-based Rockwood Capital Investment Partners might be interested. The opportunity fund, whose backers are mostly high-net-worth-individuals, invests primarily in office properties on the East and West Coasts, though it does allocate about 10 percent of its funds for retail.
Hopkins met with Robert Gray, Rockwood executive vice president, at an Urban Land Institute conference on Halloween in San Francisco. Within 15 minutes, Hopkins knew his search was over. The courting period, meshing of business plans and agreement arrangements progressed quickly. Hopkins and Gray signed the final deal to create a new joint venture called Rock/Hop on Feb. 2. Rockwood has set aside a $50 million fund to invest in Hopkins Real Estate Group Projects. In return, Hopkins will bring all deals to Rockwood first. But Hopkins retains the right to seek out other equity sources if Rockwell isn't interested in a deal. “One of the good things about the Rockwood association we that we can bring in another institutional partner and then the RockHop partnership can make a co-equity investment,” Hopkins adds.
The partnership's first project is redeveloping a 10-acre South Orange County site it acquired from Talega Partnership into a neighborhood center. “There were a number of retail developers looking at this. In a typical case, you're competing against REITs and companies that are well capitalized,” Hopkins says. “Since Rockwood has the cash to quickly close a deal, we were in a great position. I didn't have to go out and find third-party financing.” Rock/Hop is also in escrow on 30 acres for a destination retail center in Riverside County.
Before the Rockwood agreement, Hopkins purchased Redlands, Calif.'s Redlands mall with General Growth Properties, and plans to redevelop the center into a mixed-use project with residential space. The company is also renovating Whittier, Calif.'s 50-year-old Whittwood Mall into a 65-acre retail and residential village called New Whittwood Town Center.
To meet the demands of a reinvigorated project pipeline, Hopkins had to shore up his staff from the overhead-conscious crew it had been operating with. “For the first time in a while, we're staffed properly,” Hopkins says. “We'd always been able to make it work. But getting involved in two or three of these demalling opportunities requires really good people to take the projects through the system.”
To find new people, Hopkins put the word out in the Southerndevelopment community. He ended up hiring Dennis Reyling as director of development, a position that hadn't existed before. He also hired Gerald Sappington as CFO/COO to help on the operations side with respect to debt and equity. Two new project managers, Todd Girrante and Eli Wendell, also joined the team.