Management of shopping-center owner Donahue Schriber has long said the company would expand outside of its portfolio base in Arizona, California and Nevada. That was accomplished last month when the firm bought the 650,000-sf Keizer (OR) Station, as part of a $190-million portfolio deal. Additionally, the company promoted Jack Steinhauer to the new post of director of acquisitions and developments, and he is charged with leading a push into Washington, Oregon, Idaho, Montana and Wyoming. In its core states, the company has 19 development projects underway totaling 3.7 million sf, and the firm owns 93 retail assets. Dave Mossman, EVP of developments and acquisitions, recently spoke with about the firm’s expansion into other states and the general retail climate. Why did you decide to start expanding into other states now?

Mossman: It’s been part of our strategic plan to be Denver and West for some time now. Really, it’s opportunity specific. That is the reason for why it happened now. We looked at several things up in the Pacific Northwest, and when you’re going to make a move into a new area, you either have to do it either as a portfolio or by size, just to make it efficient. One couldn’t run one small center in Oregon or Washington out of our current offices. This opportunity presented itself, and we were able to check the box on the size. What is attractive about the Pacific Northwest?

Mossman: Barrier to entry is probably number one. And the relative stability to housing compared to some of the other growth markets we’re in. It also provides diversity for our overall company, and we like the market’s long term. What are the differences between a market like that and Southern California?

Mossman: A lot of it is predicated on housing. You’re going to have a lot of new retail popping up in Southern California in a normal market just from a factor of new homes. As you have new homes, it creates an opportunity for new retail. In the Pacific Northwest, obviously, the housing growth isn’t the same, so the velocity of new retail isn’t the same. In Oregon, you’re dealing with a state that doesn’t have sales tax. You go from California where most jurisdictions like seeing you come because you’re generating sales tax, to an area that could care less. That’s another difference that you’ve got to be aware of. Are you buying any different types of different centers as a result of this expansion than you were before?

Mossman: It’s the same mantra. We are neighborhood, grocery, drug-anchored based. That’s the sweet spot of what we do. We like that daily needs trip, and we believe that having that as the focus of our portfolio is what we like to call recession resilient. We then, under the guise of diversification, have developed and purchased community and big-box centers. That’s the case in Kaiser, OR. You have a Target and a Lowe’s. Has the current economic climate given you pause when planning developments or acquisitions?

Mossman: The market has clearly changed. With every decision, you’re taking a fresher, harder look at given the climate we’re in today. By no means does it mean we’re closed for business, though. We have a strong capital structure, and in December, we had a record closing in one month. But we’re being smart about it. In the deals we bought, we feel like we got good prices now and in the future. Grocers seemed to have fared well in this environment. What would you attribute to that?

Mossman: They were smart. They were smart several years ago to focus on their own shop and figure out what’s going to draw and keep the customer, rather than just throwing out a generic footprint and believe the customer was going to continue to come. Over the last several years they have been doing very few new deals and spending the majority of their time on remodels. They have seen a good return from that investment. In addition, they have positioned themselves well. Now, when you have a tougher economy, fewer and fewer people are going out to eat. They’re utilizing the grocery store more. Most of these stores, as part of their remodels, have a lot of products that are already cooked. That’s more affordable than going and sitting down somewhere. The timing of looking inside at how they were doing business probably came at a pretty good time. Do you think the store closings we have heard about so far this year will continue?

Mossman: We predicted that we would have fallout right after the holidays. We’ve had some fallout. It’s not catastrophic. I wish I had a crystal ball, but I wouldn’t expect the climate to improve any time soon. When it’s going to turn, I wish I knew. We all wish we knew.

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