DJM Capital Partners Inc. is under contract to buy land that would hold the commercial and hotel portions of Huntington Beach’s long-stalled Pacific City development.
An affiliate of DJM Capital, a San Jose-based private equity real estate group that owns the Bella Terra shopping center in Huntington Beach, has an agreement with Pacific City’s current owners, Miami-based Crescent Heights, to buy the land.
Terms of the proposed sale haven’t been disclosed. The deal should close later this year, according to Lindsay Parton, president of DJM Capital.
DJM Capital plans to break ground on its portion of Pacific City next year, Parton said.
A deal between DJM and Crescent Heights has been in the works for several months, according to sources. DJM was first mentioned as a possible buyer in Huntington Beach city filings late last month.
Pacific City, a 31-acre mixed-use project located south of the Huntington Beach Pier along Pacific Coast Highway, calls for 516 housing units, 191,000 square feet of shops, restaurants and offices, and an eight-story, 250-room hotel, along with a small park.
DJM would buy a nearly 6.1-acre portion of land slated to hold the retail and commercial portion of the project, as well as a 4.4-acre parcel of land that’s slated for hotel use.
The two parcels would be bought through an affiliate of DJM called PC Group Retail LLC, according to planning commission documents filed last month.
Crescent Heights, a developer of condo towers, apartments, offices and hotels, is expected to remain in charge of the 17.2-acre residential component of the project.
DJM already has a high-profile real estate presence in Huntington Beach.
In addition to the 775,000-square-foot Bella Terra mall—situated next to the San Diego (405) Freeway—it also owns the nearby Village at Bella Terra, an under-construction apartment complex with 467 units.
The company also opened a 154,000-square-foot Costco in the city earlier this year at the northwest portion of the 44-acre Bella Terra property.
Huntington Beach has been “a great place for us to do development,” Parton said.
Hotel Branding
News of DJM’s involvement comes a few weeks after Crescent Heights officials said they were in talks with Huntington Beach-based Quiksilver Inc. about working together for the hotel portion of the Pacific City project.
The apparel maker is being “strongly considered” to lend its name to an action-sports-branded hotel at the Surf City development, Boruch “Brian” Duchman, the marketing director for Crescent Heights, said last month.
Any agreement with Quiksilver would apparently be a licensing deal, calling for a third company to own and operate a hotel at the 31.5-acre project.
DJM’s ownership role in the hotel—which sources said also could involve other local development groups—should not impact Quiksilver’s potential involvement in the project.
Parton said Quiksilver is still “a possibility” for the hotel site, but he noted that the company also is in talks with other potential partners for the property.
Talk of a deal with DJM also comes as Crescent Heights has been working with city planners to update and revise development plans for Pacific City, which it acquired last year through foreclosure after buying a construction loan tied to the project at a steep discount.
Plans for Pacific City, initially billed as a mix of “SoHo hip, South Beach cool and Rodeo Drive luxury,” have been in the works for close to a decade. The city of Huntington Beach signed off on the project in 2004.
Construction had been expected to begin in earnest around 2008 but stalled amid the recession.
So far development at the site has primarily consisted of early work for an underground parking structure.
Newport Beach-based Makar Properties LLC, the project’s original developer, transferred ownership of the project and its $129 million construction loan to Farallon Capital Management LLC of San Francisco in 2010.
The project traded hands again late last year with the loan’s discounted sale to Crescent Heights.
Apartments, Not Condos
The housing component of Pacific City was initially expected to be for-sale condominiums but now is envisioned as an apartment development.
Officials for Crescent Heights have said they would like to break ground at the apartment portion of the project next summer, with an opening planned for early 2015.
Revised plans for the project, which got approval from the city’s planning commission late last month, allow for the apartment portion of Pacific City to move ahead of the site’s retail and hotel development.
The city had previously wanted the entire project to be built simultaneously by one master developer.
“The project really was too big for any one company,” said Parton, who said DJM Capital’s plans are to use the site’s existing entitlements, although changes in architecture from the project’s original plans are likely.
The revised development agreement specifies that any future sale of the property by Crescent Heights is subject to city approval.
The city said it has given the OK for the sale of the two land parcels to DJM Capital to proceed.
