Could SD Be Growing More Open to Density?

Chiles: “You do focus groups and find out what local residents do want and what they will support—you don’t try to cram it down their throats.”

SAN DIEGO—Working with residents to build what they want in a project is the key to success in markets that are density shy, CBRE ‘s SVP Bill Chiles tells GlobeSt.com. As we recently reported , Chiles, along with Scott Peterson and Brian Cruz of CBRE’s San Diego office, arranged a $65-million loan for the refinance of the Village at Pacific Highlands Ranch on behalf of Coast Income Properties . The team secured the aggressively priced, 11-year, fixed-rate loan to take out the existing construction loan. The class-A, 147,718-square-foot retail project in the master-planned Pacific Highlands Ranch community is part of a greater mixed-use property that will feature premier retail , a community library , a regional park and multifamily units. We spoke exclusively with Chiles about the transaction and whether the region, which is notoriously averse to density, is becoming more open to it in the form of mixed-use projects like this. GlobeSt.com: Do you think San Diego is becoming more accepting of mixed-use projects and densification? Chiles: I think certain markets dictate more density. The closest example to the Village at Pacific Highlands Ranch is the Forum shops in Carlsbad: two-story retail with a high-end component to it. Second-story retail has had a bit of a struggle historically, but this center was unique from the standpoint of its location and the demographics surrounding it. The Carmel Valley marketplace is considered probably one of the best bedroom communities in San Diego County; the average price of a single-family home there is probably $1.3 million and up. So, the location drove a lot of the economics on this project. The price and rents per square foot on this project are higher than in most locations. the city wanted to have a mixed-use component because they want to have more residential units built—330 units are being built there, and about 290 units are being built just to the south of us, separated by a street. There’s lots of density busing built in and around there. The city has chosen certain nodes of development . On the other hand, there has been massive opposition to One Paseo , so this is a tough question to answer. Our sponsor, Coast Income Properties, went out and did a large focus group with the surrounding community to find out what they wanted. They didn’t want a movie theater; they tried to build what local residents want. You do focus groups and find out what local residents do want and what they will support—you don’t try to cram it down their throats. Our guys did a good job of that. But also, the City was very much for density, mainly multifamily, and destination tenants: a day spa, pediatric dentistry, college prep. There’s a large amount of students and schools within a block or two of the center— Cathedral Catholic , a charter school, etc.—there are lots of students, which drives the economics of that center as well. GlobeSt.com: What trends do you think the Village at Pacific Highlands Ranch represents? Chiles: The trend is that you can make a shopping center part of people’s everyday life. The center has become kind of a local gathering place for the residents who live in and around it. It faces off into the community fountain area. They were able to get a fair amount of density in the center, including a two-story health club—the residents requested that. This center has an urban pedestrian type of layout; there’s a casual-dining component to it, more of a sit-down, high-rent component to it. It has a high level of success because people want to be there—it’s part of their daily routine.

The Village at Pacific Highlands Ranch is part of a greater mixed-use property that will feature premier retail, a community library, a regional park and multifamily units.

GlobeSt.com: What retail-financing trends are you noticing? Chiles: We don’t do as much as I would like. A lot of the higher-end retail centers are institutionally owned and done come to market very much in terms of trades. They have credit facilities and are not asset financed as much as the other product types. A lot of centers are held by large pension-fund advisors. They don’t come to market as often, so we don’t do as much of it. GlobeSt.com: What else should our readers know about this transaction? Chiles: It’s all about the high-end demographics of the area. The owners built what the community residents wanted, and that will be the success of the project.