Inside FWR's $3B Acquisition Of Donahue Schriber

In a testament to the attractiveness of grocery-anchored retail centers and the continued interest in markets where new retail centers are hard to build, East Coast retail firm First Washington Realty has acquired Costa Mesa-based Donahue Schriber Realty Group, a privately held REIT with nearly 50 centers along the West Coast. The deal was valued at roughly $3B.

First Washington Realty already had a presence on the West Coast, but buying Donahue Schriber furthered its foothold in these markets, CEO Alex Nyhan told Bisnow. 

The sale included 47 retail centers and one office property. Six of those properties, including the office building, are in Orange County. Three properties are in San Diego and one is in LA County. 

“Adding this piece really extended our exposure in markets like the Bay Area, San Diego, Seattle, Orange County, where there's so many other great economic drivers and such educated customers,” Nyhan said. 

He said FWR had been eyeing the Donahue Schriber portfolio for at least three years and was just waiting for it to become available. 

“For grocery-anchored retail, which is what we do, it's really a bet on the neighborhoods,” Nyhan said. “And so, for us, owning grocery-anchored product in neighborhoods that have high income, high education attainment, and where it's really hard to build new shopping centers is really the key.” 

Bloomberg reported that FWR had acquired the REIT with the California Public Employees Retirement System, or CalPERS, in a deal valued at $3B. Nyhan declined to discuss FWR's partners on the deal or financial details of the transaction, but when discussing the acquisition, did say that “what the interest in Donahue Schreiber shows is, generally speaking, a high level of interest from institutional investors in necessity-based retail.”

There has been a voracious appetite for the asset type for years, but it accelerated over the last year. Grocery-anchored retail made up the largest chunk of retail property acquisitions in 2021, according to JLL’s Grocery Tracker report, with $13.3B worth of sales.

Nyhan said that any next steps for the centers, such as renovations, are still a work in progress. But he said he didn’t think many “dramatic changes” would need to happen at the properties, which are already very well-occupied. 

When asked if FWR was looking at any other Southern California or West Coast acquisition opportunities, Nyhan said his company is always on the lookout for these opportunities but did not offer specifics. 

“We will continue to selectively look to expand in markets on the West Coast and particularly Southern California, as the fundamentals in those markets remain strong,” he said. 

Donahue Schriber has been busy for the last two years. In late 2020, retail executive Michael Glimcher was hired as CEO of the company, replacing its then-Chairman and CEO Patrick Donahue, the son of the company’s co-founder, and then-President and Chief Operating Officer Lawrence Casey, who were both retiring. Donahue and Casey had been with Donahue Schriber for four and two decades, respectively. Glimcher had previously been the CEO of Chicago’s Starwood Retail Partners.

The private REIT’s biggest investors are JPMorgan Chase and the New York State Teachers' Retirement System, the OCBJ reported.

The company has made a few notable sell-offs over the last two years, including the sale of the 722K SF Countryside Marketplace in the Inland Empire city of Menifee, the largest shopping center in its portfolio at the time. It sold to an undisclosed buyer, reportedly a local, Chino-based real estate investor, for $121.2M, or roughly $168 per SF, the OCBJ reported at the time. 

The company appears to have been downsizing. In 2020’s announcement of its new CEO, Donahue Schriber described itself as operating 60 shopping centers and over 11M SF of retail space. In 2021, at the time of the Menifee sale, DSRG’s website said it had 50 centers in its portfolio, the OCBJ reported. This month, Washington D.C.-based retail owner, operator and developer Edens announced it had purchased eight West Coast shopping centers, all grocery-anchored; though it did not announce who the seller was, the properties had previously been listed in Donahue Schriber’s portfolio. 

The last acquisition Donahue Schriber announced was in 2019. That year it bought two San Francisco Bay-area shopping centers for almost $132M.