LBG Real Estate to Breathe New Life and $1B into Distressed Richmond Mall

LBG Real Estate Companies, Shops at Hilltop, Richmond’s Hilltop Mall, Aviva Investors, Bay Area, San Francisco, Richmond, 99 Ranch Market, Macy’s, Walmart, Sears, 24-Hour Fitness,
Image Credit: LBG Real Estate Companies

By Meghan Hall

The traditional American mall has changed dramatically over the past decade as brick and mortar stores have learned to compete where e-commerce has become increasingly common and online retailers are thriving. In order to remain relevant, property owners are rebranding malls as not just places to shop, but creating full entertainment centers complete with movie theaters, events and eateries. For Los Angeles Based-based LBG Real Estate Companies, LLC, who recently purchased the Shops at Hilltop — formerly known as Richmond’s Hilltop Mall — this strategy holds true.

LBG and Aviva Investors closed in July 2018 on the 1.1 million square foot regional shopping center, four years after the property went into foreclosure. According to public records the investors paid $23,750,000, or roughly $21.59 per square foot, for the shopping mall. The 77-acre property is in the preliminary phases of a massive transformation that will not only revitalize the retail portion of the development, but will also add a significant amount of housing, commercial and retail space to an area long considered by real estate experts as a less ideal location for redevelopment.

According to LBG Co-Founder Leslie Lundin, even though the property was widely marketed, the mall’s status and location both intimidated and stumped a number of potential investors.

“If this was anywhere else in the Bay Area, people would have jumped at it,” said Lundin. “We were the only people that came in and said ‘We could make this work again.’”

Lundin is a strong believer that the location of the site has its merits. Its proximity to Interstate 80 and the addition of the ferry service from San Francisco to Richmond will only serve to make the mall more accessible in the future. Lundin also emphasized that despite the perceived distress in the retail market, there is huge demand in Richmond for a centralized mall. The property owner estimated that there was roughly $3 billion in unmet demand for services and shopping in the city.

“There’s definitely a lot of distress in the retail market, but that change is constant in retail,” said Lundin. “If you actually look at how much businesses online platforms are taking away from retail venues, it’s not nearly as great as people think it is. It’s just certain types of tenants that don’t do well.”

LBG will reposition and redevelop the site over several phases. For now, the first phase involves minor property renovations to the existing mall and establishing new leasing agreements with a wide variety of tenants that will appeal to Richmond’s diverse community.

Image Credit: LBG Real Estate Companies

“The first phase of what we’re doing is creating something that is not anywhere in the Bay Area, which is a very culturally sensitive, culturally-based, tenant mix,” explained Lundin. “We’re looking at what the demographic is for the market.”

So far, LBG has announced Taiwanese grocery chain 99 Ranch Market as one of the anchor tenants. Macy’s, Walmart, Sears and 24-Hour Fitness will also continue to anchor the mall. According to Lundin, LBG is in the process of securing numerous other tenants, including a dim sum restaurant and a hot pot restaurant, which would lease 8,000 square feet of space. A Korean spa, a message tenant, and numerous other restaurants are planned for the first phase of the mall’s repositioning.

“If you can put a critical mass of restaurants together, there just isn’t anywhere in the East Bay that has 20 great restaurants,” explained Lundin. “It’s going to be this one-stop shopping center if you want to go out; there’s always something going on.”

LBG hopes that the wide variety of restaurants and service-based tenants will attract consumers to the mall and bolster the existing retail operations, as well. The preliminary phase of redevelopment, which also includes renovations to the mall’s exterior, interior common areas and signage, will be completed by the end of 2019 or beginning of 2020.

The city of Richmond has re-entitled the 77-ares that the mall currently sits on, allowing for the development of residential and office space to be developed on the property. While the site is entitled for up to 9,600 units and 16.7 million square feet of retail, residential, hotel and medical uses. LBG will likely create between 3,000 and 3,500 residential units and is currently working to develop two hotels on the site in addition to offices to create a live-walk-play community. The first hotel will be a Marriott, and negotiations with other hotel brands for the second are ongoing. The first phase of redevelopment is expected to cost around $150 million, although that price tag could increase depending on whether or not LBG will pursue build-to-suit offices.

“Right now it’s very fluid,” said Lundin of the project’s cost. “This whole development is probably about a $1 billion deal.”

Build-out will depend on market conditions, but Lundin hopes the second phase of redevelopment will begin at the end of 2020 or beginning of 2021. The residential portion of Hilltop by the Bay will be built slowly over time.

“It’s something that continues to evolve, because it is so much land,” said Lundin of the project’s timeline. “It never really ends.”