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$50M Renovation In Store for Center

Twenty-five years after Del Mar Highlands Town Center’s opening, developer Donahue Schriber Realty Group has plans for more growth at the retail property in Carmel Valley.

A $50 million, three-phase renovation expected to get underway late next year — set for completion in mid-2017 — will include a new 800-space parking structure, a three-screen expansion of the center’s eight-screen Cinepolis Luxury Cinemas, and new buildings that will house a KinderCare Learning Center and other tenants to be announced.

Also planned, the center’s operators said, is a relocation and expansion of the Jimbo’s Naturally store there, which is the San Diego-based natural-foods grocer’s flagship store and the site of its corporate office.

Plans call for the center, at Del Mar Heights Road and El Camino Real, to remain open during construction. Like other developers, Donahue Schriber is aiming to serve a growing base of families coming to Carmel Valley and neighboring communities in northwestern San Diego, where 6,000 new homes were built during the past decade and more are under construction.

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Less than three miles away off Del Mar Heights Road, La Jolla-based Coast Income Properties Inc. recently broke ground on The Village at Pacific Highlands Ranch, with 150,000 square feet of retail set for completion in early 2015. Specialty grocer Trader Joe’s has been announced as a tenant, and future phases are planned to include 330 apartments, a transit center, a central plaza and other amenities. Coast has not divulged expected development costs for the 24-acre project.

Across the street from Donahue Schriber’s center, off El Camino Real in Carmel Valley, Kilroy Realty Corp. of Los Angeles has proposed One Paseo, a $650 million, mixed-used development that would include more than 470,000 square feet of office space, 600 residential units and 198,000 square feet of shops and restaurants, with public plazas.

That long-discussed project has encountered resistance from residents, and Kilroy is working with city planners to address traffic and other environmental concerns. Kilroy officials have said the company is aiming for a late 2014 or early 2015 construction start once it obtains city approvals.

Parking, Theater to Be Expanded

Costa Mesa-based Donahue Schriber is a privately held real estate investment trust that owns and operates 74 retail centers in five Western states, including four properties in San Diego County.

The company opened Del Mar Highlands Town Center in 1989 and completed a $20 million renovation in 2011, which brought in the luxury cinema and new eateries but did not significantly increase the overall retail space. Operators have generally taken a slow approach to the property’s growth.

“It was planned from the start that this center would be built out gradually,” said Elizabeth Schreiber, vice president and general manager with Donahue Schriber. “When we first opened, there was almost nothing out here; we were here before a lot of the housing that you see now.”

The center was originally entitled in the mid-1980s for 425,000 square feet of retail and a parking structure. The upcoming expansion will include that 800-space structure, boosting the center’s parking space count by a net 600 spaces, and will increase the center’s total retail space from 283,000 to 363,000 square feet.

The three-level parking structure will be built at a grade below the roadway behind the center, along Townsgate Drive, and the street-level rooftop will serve as a center access walkway, with landscaped trellises and three pedestrian entries to the parking area.

Schreiber said the parking structure will be part of a first phase of renovations, along with expanding Cinepolis Luxury Cinemas. The Mexico-headquartered movie theater chain, with its U.S. operations based in San Diego, plans to remove one of its eight auditoriums to expand its kitchen and lobby areas, while adding four new screens to bring its total to 11.

The first renovation phase will also include the building that houses KinderCare. Schreiber said the second phase is set to include an expansion of Jimbo’s, which is moving to the south end of the center and planning to expand from its current 14,000 square feet to about 22,000 square feet.

Bookstore Moving Out

In the third phase, once the Jimbo’s relocation is complete, the building currently housing the grocer will be razed and replaced with a new two-story building, to be filled with tenants yet to be finalized. Donahue Schriber was able to make arrangements with most center tenants to remain on board during construction, but it was unable to reach terms with Barnes & Noble, which will leave its longtime space at the center after its lease expires in July.

“We’re hoping to get another bookstore in there, if they are not able to come back after the renovation,” Schreiber said.

She said the center operator is gathering survey feedback from customers on retailers, eateries and other elements they’d like to see, with a link to be placed on the Del Mar Highlands Town Center website.

San Diego County’s overall retail vacancy rate was 4.4 percent at the end of the first quarter, CoStar Group reported, down from 4.7 percent a year ago and marking the fourth consecutive quarter of declining vacancy. And the vacancy rate for the northern San Diego market that includes Carmel Valley was even lower, at 3.4 percent at the end of the first quarter.

The countywide net retail space absorption — move-ins tracking ahead of move-outs — in the first quarter was just under 170,000 square feet, down slightly from the prior quarter but well above 2013’s quarterly average of 106,000 square feet, CBRE Group Inc. reported. The brokerage company said specialty grocers have been among the most active tenants in the San Diego retail market.

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