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DJM CAPITAL PARTNERS
Reading The Market
DJM Capital Partners maximizes the potential of complex retail estate opportunities.
Randall Shearin and Jaime Lackey
D
JM Capital Partners specializes in
special properties. The company,
which has a knack for acquiring
and repositioning undervalued assets, has
most recently focused on two oceanfront
Orange County, California, retail properties that encountered difficulties under
previous owners.
“We don’t do a lot of deals, but the
deals we do typically have incredible value. The locations are irreplaceable,” says
John Miller, founder and CEO of DJM
Capital Partners, which has a current portfolio of more than 2 million square feet.
“We have the ability to look carefully
and intelligently — and work diligently
— to find these opportunities. The common denominator among our properties
is the quality of the real estate,” he adds.
His team sees redevelopment potential
in complex real estate and works with
stakeholders, including cities, communities and investors, to bring challenging
visions to life.
PACIFIC CITY
DJM Capital Partners spent nearly four
years conceptualizing and building the
11-acre retail portion of the Pacific City
development, a beachfront project in
Huntington Beach, California. Retailers
began opening at the 191-000-square-foot
property on November 5, 2015, and the
project will be fully open by Fall 2016.
Another 20 acres of the 31-acre site will
contain multifamily and hotel components. UDR is developing The Residences at Pacific, with 516 apartment homes,
slated to come on line in 2017 and R.D.
Olson is developing the eight-story, 250room Pasea hotel, which will open in early
summer.
DJM’s reputation earned the company
the opportunity to develop the Pacific
City retail property. “It started with our
great relationship with the city of Huntington Beach, after we developed Bella
264 • SHOPPING CENTER BUSINESS • May 2016
Pacifc City in Huntington Beach, California, is a 191,000-square-foot retail center just across
the Pacifc Coast Highway from the ocean.
Terra,” says Miller, referring to the 1 million-square-foot mixed-used project that
DJM developed 7 miles from the Pacific
City property and launched in 2006.
He notes that the previous owners of
the Pacific City property invested about
$275 million into the site over 12 years
before the lender foreclosed and hired
Eastdil to sell the note in 2011. DJM bid
on the property — but couldn’t close in a
week whereas New York-based Crescent
Heights could.
After closing on the property, Crescent
Heights met with the city, which recommended they call DJM based on its success with Bella Terra, Miller says. “They
closed in November 2011 and by February 2012, we had a purchase agreement
to purchase the frontage on Pacific Coast
Highway.”
He adds, “Pacific City is an irreplaceable beachfront site that is valued by
everyone: by the community, by the city,
by locals, by tourists, by people coming
down from L.A., and by the investor.”
The local area also offers demographics
attractive to many retailers. “Where lots
of beach cities tend to have younger populations, Huntington Beach has a much
broader swath of age groups,” says Linda
Berman, chief marketing officer at DJM.
“There are lots of young people — twenty-somethings and young marrieds — but
also a lot of retired folks and a lot of
still-working mid-range folks in their 30s,
40s, 50s. That is one of the things that
appealed to us about Huntington Beach
and something we saw every day at Bella Terra. You have young people, young
families and retirees shopping at the same
time. That gives a very solid foundation in
your ability to cover product categories,
price points and events.”
Income levels are surprisingly high
in Huntington Beach, she adds. In fact,
Huntington Beach is ranked third in the
U.S. in terms of cities with the highest percentage of millennial households earning
DJM CAPITAL PARTNERS
We committed early on to not pursuing
any chain restaurants. We do have a few
tenants that have multiple locations, but
none that are a chain in the conventional sense. Chains are well-represented in
Huntington Beach and Orange County in
general. So we really wanted restaurateurs
rather than restaurant chains, just like we
looked for merchants rather than conventional retailers whenever possible. We’ve
been pretty successful with that, and the
restaurants are killing it. We see long waits
at all restaurants, across all categories,
across all price points. And we have more
restaurants opening at higher price soon.
We know the appetite — both literally and
figuratively — is there and they will all be
successful.”
DJM recently announced Bluegold,
a new restaurant concept from Jed Sanford (of Blackhouse Hospitality Management), who has several restaurants in the
South Bay area of L.A. He understands
the beach city mentality and has developed a higher-end gourmet food offering, Berman says. “We’ve been working
with Jed for over a year putting this concept together. We’re thrilled he’s chosen
Pacific City. He’s got a breath-taking location with killer views of the coastline
and is doing a very exciting concept of a
restaurant within a restaurant. A high-end
interpretation of the American steak and
seafood house.”
Miller agrees that both the views and
the food come together to create great experiences. “If you go to Simmzy’s on the
ground level and then Ola on the second
level, facing the beach and the surf, you’ll
understand the importance of creating an
experience. A big part of that experience
comes from food and conversation. We
spent an enormous amount of energy to
understand how you create that. We are
spending more money on the restaurants
and the culinary chef-driven menus to
fully embrace this notion about the experience. When you incorporate the views,
the blue sky, the warm breeze, great food
and conversation, it is amazing.”
Simmzy’s, which offers pub-style fare,
burgers and local beer, is a Southern California favorite with locations in Manhattan Beach, Venice and Long Beach; the
Pacific City location represents the restaurant’s first Orange County location. Ola
Mexican Cuisine is a new concept by the
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Lido Marina Village is a 116,000-square-foot center on Newport Harbor in Newport Beach,
California. DJM is targeting local and regional tenants for the project.
folks behind the Mahé restaurants in Seal
Beach and Dana Point.
Saint Marc Pub-Café Bakery & Cheese
Affinage is another new concept, offering American fare, as well as 32 wines on
draught, craft beer, 100 cheese selections,
and bacon flights.
Old Crow Smokehouse is bringing its
barbecue to Orange County, after expanding from its sole location in Chicago’s
Wrigleyville neighborhood. San Francisco-based Philz Coffee is opening its first
OC location at Pacific City.
Meanwhile, local favorites opening
Pacific City locations include Backhouse
Yakitori + Sushi, Bungalow, Gelateria Zomolo, Lemonade, Portola Coffee Lab,
and Ways & Means Oyster House.
Pacific City’s Lot 579, a branded artisanal market and California culinary experience named after nearby lifeguard towers, will feature American Dream, which
offers burgers along with more than 60
beers on tap; Bear Flag Fish Co., an OC
favorite featuring fish tacos, burritos,
sushi and a full bar; Burnt Crumbs, the
first gourmet sandwich shop by the folks
behind Burnt Truck and Burntzilla; Hans’
Homemade Ice Cream’s third location
(the original location, which opened in
Santa Ana in 1972, is still open); Il Barone
Sicilian Street Food, a new Italian concept
by the team behind Newport Beach’s Il
Barone Ristorante; Pie-Not, the second
Orange County location by this Australian
meat and vegetarian pie, pastry and dessert shop; as well as PopBar, a local favorite offering handcrafted gelato on a stick.
Rounding out Lot 579 will be Petals & Pop;
the Seal Beach flower shop is opening its
second location at the artisanal market.
LIDO MARINA VILLAGE
DJM is also redeveloping Lido Marina
Village, a 116,000-square foot center on
Newport Harbor that was originally developed in 1971. “The project is shaping
up from a leasing standpoint to be a very
sophisticated, fashion-focused property
that is so different from anything else in
Orange County,” Berman says.
“We have this hidden jewel that is sitting on an amazing piece of real estate
in Orange County that previous ownership had let languish for many years,” she
notes. “The idea we can polish it up and
bring it back to what it was is an exciting
opportunity. This project has come together very differently than Pacific City,
though equally as exciting.”
According to Miller, Lido’s New Yorkbased owner was contemplating building
high-rise condos on the site. “They completely misread the market. They misread the neighborhood, they misread the
community and they misread the city,” he
says. “That is one of the things that DJM
does really well. We listen. We listen to