Donahue Schriber Completes $1.2B Balance Sheet Recap

Donahue Schriber set out to recapitalize its balance sheet to the tune of $1.2 billion and the shopping-center developer has done just that.

July 25, 2011
By Barbra Murray, Contributing Editor

Donahue Schriber set out to recapitalize its balance sheet to the tune of $1.2 billion and the shopping-center developer has done just that. With the completion of a $365 million refinancing of a 31-property Donahue Schriber Realty Group shopping center portfolio, the last of several transactions, Donahue Schriber has reached its goal.

The group of assets encompasses grocery-anchored properties and power centers located in Arizona, California, Nevada and Oregon. Donahue Schriber’s financing consists of a new five-year loan, featuring a two-year extension option, through a Bank of America-led consortium that includes Wells Fargo Bank, U.S. Bank, PNC Bank, Union Bank and City National Bank. Preferred Capital Advisors advised the company on the deal, which provided a number of benefits. Donahue Schriber was able to secure a lower interest rate and an annual interest rate savings of over $6 million, and free itself of a series of restrictive covenants. With the assistance of Chatham Financial, the real estate company locked in a LIBOR swap of $255 million as a hedge against potential interest-rate increases.

The recapitalization through the Bank of America-led group comes on the heels of approximately $248.5 million refinancing of a 10-property cross-collateralized retail portfolio through Allstate Life Insurance Co. and Allstate Insurance Co., which provided a $204.7 million fixed-rate loan and a $43.8 million floating-rate loan respectively.

While the ironclad grip of the credit crunch has certainly loosened, the list of companies that can secure an aggregate $1.2 billion in financing is still not very long. “The banks we’re dealing with are top-tier financial institutions, they’re not local banks having trouble with their portfolio,” Lawrence P. Casey, president and COO of Donahue Schriber, told Commercial Property Executive. “These banks have money to lend. The lending environment has loosened up. Interests rates are low and with low interest rates, cash flows of properties can service the debt.”

Certainly, lenders are very much attracted to those high cash flows and high quality assets. “Lenders are willing to lend against quality assets,” he said. “It’s a combination of asset quality and how a quality property can recover. Our rates and occupancies are increasing. We’ve got back 50 percent of what we loss in occupancy, back up to 95 percent.”

There is another factor makes Donahue Schriber appealing to lenders. “Our properties are primarily on the West Coast, so they’re getting more attention than properties in the central U.S.,” Casey said.

In addition to the refinancings, Donahue’s major investors — the New York State Teachers’ Retirement System and the J.P. Morgan Chase Bank Strategic Property Fund — converted their preferred stock totaling $188 million and their accrued dividends into shares of common stock. Donahue also received a commitment from the investors to provide $100 million of additional capital to take advantage of future opportunities that would propel the company’s growth.

“We turned a very bad nightmare into a very pleasant dream,” Casey said. “The stars have aligned and are favorable for our portfolio, and our tenants are seeing positive sales growth as opposed to seeing sales dwindle in the Great Recession.”