3rd Quarter, 2018

I’m sticking with the Sanity Defense:       The reports of my death have been greatly exaggerated!! Not my quote, however, the retail apocalypse is turning out to be short-lived and short sighted. After a few years of headlines blaring about devastation and the scourge of e-commerce for physical stores, retailers in recent quarters are posting healthy comps and increases in foot traffic. "The term 'retail apocalypse' has been misused for years," said Michael Brown, partner in the retail practice of global strategy and management consultancy A.T. Kearney and author of the report “The Future of Shopping Centers. "Throughout the whole shifting dynamic in retail, the one thing that has never changed is the need to have compelling goods and services offered with convenience and a price people are willing to pay. Retail, in general, is not a physical or digital world." Amen to that! Several of our capital partners have expressed reservation on the health of retail, particularly DJM’s multi-tenant, Bella Terra type anchor and sub-anchor tenants like REI, Kohls, Old Navy and even Whole Foods. The underlying premise of experiential and relevant retail are sales per foot and traffic. In 2018, sales per foot at Pacific City is roughly $900 psf, while Lido exceeds $1,200 psf; roughly 2.5 X the national average multi-tenant retail sales in the US! Consumer engagement drives successful retail strategies, which incorporate physical aesthetics, energy, unique offerings and a sense of place and belonging. Our retail customer has many choices, both in bricks & mortar and point of sale via e-commerce or casual browsing in a sensually-pleasing impactful property. DJM continues its focus on creating property value through its commitment to this tactile human experience known as shopping. Call me crazy.

 

Creativity, Credibility & Culture:      Based on a recent analysis from the global commercial real estate firm Cushman & Wakefield, “the e-commerce revolution and retail in general remains a mixed bag; well-located Class A properties continue to thrive, bolstered by a stronger economy and wealthier consumers, while retail properties in secondary markets continue to face challenges as e-commerce grabs an increasing share of the retail sale pie.” Pretty basic Real Estate 101; DJM is light years ahead of most developers/investors when activating and energizing its properties; this is a pre-requisite to driving traffic and creating value, all founded on DJM’s “Three C’s”. Not only has DJM consistently operated, acquired and re-positioned retail centers in premium locations, with high barriers to entry, strong socio-demographics, and other on-property amenities which touch the soul of our customer. That’s our Creativity and Credibility side. We consider this the minimum criteria for any acquisition, which explains the sales per foot, not only at Pacific City and Lido Marina Village, but Bella Terra and the balance of our multi-tenant portfolio. A shout out to DJM’s Creative Director, Chad Cress, who recently re-designed our DJM website, and created a new value metric called Culture, which supports DJM’s new mantra; “Where People Thrive”.

 

Cascade of the Terribles:      WOW!! Depending on one’s perspective, the constant and current blast of negativity is deafening; select media vibe suggest that we are, again, headed towards some crazy dystopian apocalyptic end to the Republic. Don’t believe everything you read or hear. The majority of economists suggest that the U.S. economy has maxed out and won’t get much better, that small business optimism is unlikely to go a lot higher, and consumer confidence is at an all-time high. We are definitely in the later innings, with the inevitable economic slowdown imminent. Considering that we are in the longest economic expansion in the history of the Republic, a recession should come as no surprise. Just enjoy the ride, but defensive investment strategies may be around the corner.

 

There’s Always a Silver Lining:       Not all is Lost! Based on a new airline policy that went into effect October 1st, many airlines have approved miniature horses, along with dogs and cats, as one of the three animals expressly allowed on board as service animals. Weighing in around 70-100 pounds, approximately three feet tall, miniature horses would most likely be able to stand only in front of passengers seated in the front row of the cabin. Cabin Corral, anyone? Much to the disappointment of many travelers, most airlines told travelers what they couldn’t bring; hedgehogs, ferrets, snakes, rodents, and sugar possums. As many of us at DJM find ourselves traveling quite often, I can’t decide if a flying zoo will enhance our business travel experience? Admittedly, we are in the business of creating experiences, just not sure how “experiential” I wanna be flying in a tube at 35,000 feet with a horse! Finally, in January, a woman tried unsuccessfully to board a flight with a peacock that she described as her emotional support animal. Gotta draw the line somewhere. As I quote Mark Twain frequently, “The secret of getting ahead is getting started!”, regardless of market conditions or flying peacocks, ferrets or miniature horses, DJM marches on! Check out our new website http://www.djmcapital.com/

 

 On to the Holidays!!

 

Take care,

 

 

DJM Capital Partners, Inc.

Asset Manager

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   D. John Miller, Founder & CEO

Chad Cress