H.I.G. Originates $185M Loan for Former Forever 21 LA HQs

3880 N. Mission Road, Los Angeles. Image via Google Street View

H.I.G. Capital’s affiliate, H.I.G. Realty Partners, has provided a joint venture of Blackstone and Worth Real Estate with a loan of $185 million secured by a 39-acre asset in Los Angeles. The partners will use the financing to lease up the sprawling property at 3880 N. Mission, a 1.5 million-square-foot office industrial and office property that has once been occupied in its entirety as the headquarters of fashion retailer Forever 21.

Blackstone acquired the Forever 21 property for $166 million in the fourth quarter of 2018, following the fashion retailer’s bankruptcy. Located near downtown Los Angeles in the Lincoln Heights neighborhood, 3880 N. Mission made its debut in 1955, but the property was in tip-top shape in 2012 when Forever 21 made the site its headquarters.

The asset features approximately 1.2 million square feet of distribution and warehouse space, in addition to roughly 300,000 square feet of creative office space with the option for expansion and 1,700 existing parking spaces.

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In a prepared statement, H.I.G. described 3880 N. Mission as an “attractive last-mile space in an infill location” and noted that Blackstone should have no problem attracting high-quality tenants to the property. And given that metropolitan Los Angeles is one of the tightest industrial markets in the U.S., it’s a fairly safe bet that Blackstone will be able to stabilize the property in short order.

“A historic 34.2 percent surge in e-commerce activity in 2020—an acceleration of a pre-pandemic trend as consumers were stuck at home—helped drive industrial space demand,” according to a first-quarter 2021 report by CBRE. In addition, strategically positioned distribution—and their limited availability—continue to contribute to record-high asking rates and shrinking vacancy. The overall vacancy rate was just 1.7 percent and gross activity exceeded 10 million square feet for the third consecutive quarter, the report noted.

Diverse originations

H.I.G. has been actively providing financing throughout the pandemic in a variety of sectors. Last fall, the firm’s H.I.G.Realty Partners affiliate originated a $48.7 million loan for the redevelopment of a 94,000-square-foot, pre-leased creative office complex in the Culver City submarket of Los Angeles. Earlier this year, the firm came through with financing for the redevelopment of Pegasus Park, a 23-acre biotech and office campus anchored by UT Southwestern in Dallas.

And H.I.G. hasn’t been afraid to delve into areas of which many investors are still wary. Just a few months ago, in March, one of the company’s European affiliates closed an investment in the 170-key Hotel Ullensvang, an upscale waterside resort in Norway.