BETHESDA, MD-The California Public Employees’ Retirement System will buy First Washington Realty Trust, the nation’s largest owner of neighborhood shopping centers, for $800 million.

CalPERS will acquire 63 shopping centers in the Mid-Atlantic states and the Midwest. The price is $26 per common share, about 25% better than its closing price of $20.75 on Sept. 27. The sale is expected to close in January.

First Washington’s management will continue to manage the same properties, through a new company called U.S. Retail Partners LLC, which is essentially the same as the company they run now. They plan no layoffs and CalPERS wants them to expand their acquisitions, says William J. Wolfe, president.

Officials at the Bethesda real estate investment trust had long been frustrated that the company’s stock was not appreciating, and felt that Wall Street undervalued the small, independent real estate investment trust.

“There is a bit of a disconnect between prices of REITs and valuation that the private market has for real estate,” Wolfe said. “Yesterday we were trading at $20.75, today it’s $26. That should give you an idea of the disconnect.”

CalPERS, a pension fund of $177 billion, wanted to diversify geographically by acquiring more East Coast retail properties, says spokesman Brad Pacheco.

“It’s rare that you have an opportunity to buy so many properties in one transaction,” he says.

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