Reading The Market DJM Capital Partners maximizes the potential of complex retail estate opportunities.

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1 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 square-foot property on November 5, 2015, and the project will be fully open by Fall 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 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 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.

4 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 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 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 270 SHOPPING CENTER BUSINESS May 2016

Reading The Market DJM Capital Partners maximizes the potential of complex retail estate opportunities.

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,