DJM Capital Partners Inc. has more than a big hole to fill along Pacific Coast Highway when it comes to its long-awaited Pacific City retail project in Huntington Beach.
There’s also a decade’s worth of unmet expectations to overcome.
“The market is still skeptical about the project,” said D. John Miller, founder and chief executive of San Jose-based DJM, which took over ownership of the retail portion of the 31-acre Pacific City development about 16 months ago.
“Coming Out”
“We need to show people that we are coming out of the ground,” Miller said.
That’s about to happen at the multiblock-long project just south of Huntington Pier, where the unfinished, fenced-off first phase of the project—an expansive underground parking lot—has for years been a stark reminder of the last recession.
DJM is moving ahead on the multilevel parking lot, and the developer expects steel to start coming out of the ground for the shopping center in the next two months.
Pasadena-based C.W. Driver is managing construction for the parking lot and retail project.
Privately held DJM is planning an “aggressive” construction timeline, according to Miller, whose company is expected to invest more than $100 million to build the 11 acres of retail space. The plan is to open the retail part of the mixed-use development in the second half of 2015.
An eight-story, 250-room hotel at Pacific City being developed by two Irvine-based companies—R.D. Olson Development and Pacific Hospitality Group—will start construction this June and is expected to open in 2016.
A 516-unit apartment complex built by Highlands Ranch, Colo.-based UDR Inc.—which recently paid $78 million for the 17 acres for its project—would likely come in 2017 and wrap up construction for the development.
DJM’s two-story shopping center is slated to hold about 191,000 square feet of shops and restaurants. One anchor tenant has been announced by DJM: fitness club operator Equinox, which will occupy a nearly 28,000-square-foot spot at the northern end of the center.
With its views of the beach, “the Pacific Ocean is the anchor,” DJM President Lindsay Parton said.
Pacific City is among the largest retail projects expected to move ahead this year in Orange County, along with The Source in Buena Park, The Outlets at San Clemente Plaza, and the redevelopment of Lido Marina Village in Newport Beach—a roughly 125,000-square-foot waterfront project that DJM bought in 2012 and recently began construction on.
Those four projects combine for about 1.3 million square feet of retail space—a huge step up in retail development for OC compared to recent years.
The last major ground-up shopping center to open in the county was the 467,000-square-foot Anaheim Gardenwalk, which opened in 2008 and soon found itself in financial distress.
The completed Pacific City development was expected to be valued at nearly $500 million by its prior owner, Newport Beach-based Makar Properties, which got approvals for the project in 2004 and began construction a few years later.
Makar halted early-stage work about six years ago amid the down economy and its own financial problems, leaving the Huntington Beach site in limbo for several years.
Miami-based mixed-use developer Crescent Heights took over ownership of the property in 2011 for a reported $52.5 million and sold the land to the individual developers now involved in the project.
Right Time
Market conditions are ripe for the right type of retail development in OC, said Miller, whose company’s largest local project is the Bella Terra shopping center, also in Huntington Beach.
“We’re absolutely hitting [the market] at the right time, especially with the low cost of capital,” Miller said.
DJM completed a nearly $250 million
financing deal for several of the properties in its portfolio in late 2012, including the La
Habra Marketplace shopping center. The refi helped free up cash for Pacific City and the Lido Village Marina, which are both being self-funded.
“We have patient capital,” Miller said.
One example of that patience can be seen in the time the developer is taking to lease up the project, said Linda Berman, senior vice president of strategic branding and corporate communications for DJM.
The company has been scouring hot spots in markets across the U.S., aiming to find
unique retailers and food vendors that will fit
the vibe of Pacific City, which is looking to honor Huntington Beach’s Surf City roots but wants more than a collection of beach apparel shops.
“This will be a must-see destination for a very broad audience, not a surf-themed attraction,” Berman said.
