DSW Commercial Real Estate at 20

Motivation Meets Opportunity

By Rodney Campbell

The story of DSW Commercial Real Estate begins with the unlikely combination of grocery store equipment, a business plan written on a cocktail napkin and good cigars.

Principal, CEO & Designated Broker Michael Sarabia is celebrating 20 years in business with DSW this year. His road to success started when he met Mark Schnuck, DESCO Group’s chairman, in 1998. DESCO has acquired, developed and redeveloped more than $1 billion of property in its history.

Schnuck’s family also owns more than 100 grocery stores in the Midwest. Before starting DESCO’s Tucson office, Sarabia was part of a family business that sold refrigeration cases for storing meat and produce in grocery stores. Motivation, meet opportunity.

“We were chatting about real estate,” Sarabia said. “We shared a good cigar. We started a nice relationship.”

Mutual interests kept the two in touch. Eventually, talk about opening a DESCO office in Southern Arizona turned serious. It was an opportunity to take advantage of a growing market.

“I loved grocery stores and understood them,” Sarabia said. “I went to visit him in Missouri a couple of times, and we hatched a plan to open DESCO Southwest. We wrote a business plan on a cocktail napkin, and he sent me a check to open the office.”

Jim Gillespie was Sarabia’s first business partner in the Tucson office. Gillespie’s parents, Ann and Bruce, opened another DESCO office in Phoenix in 2003.

“Jim was a big influence on our office in the early days,” said Sarabia, who attended the University of Arizona with Gillespie. “Bruce and Ann were good teachers. The Gillespies are a big real estate family.”

Eventually, Jim Gillespie’s career took him in another direction and Sarabia was ready to go on his own. He first raised the topic of a buyout of DESCO while duck hunting with Schnuck in Missouri. Sarabia said he wanted to “grow and grow,” while Schnuck and his family preferred to hold back.

“They wanted to make sure their assets were doing OK,” Sarabia said. “They were not of the mentality to buy a bunch of other assets.”

After talking it over with his family, Schnuck agreed in 2016. Sarabia and his current business partner, James Hardman, negotiated the terms and DSW was born. “God has been walking with us over the years and helping to guide us,” Sarabia said.

Schnuck also took the extra step of giving Sarabia a year of further training and legal assistance. It was just another in a line of generous gestures – Schnuck helped finance the business for the first two years when Sarabia and Gillespie were partners in the early 2000s.

“We inherited a very good platform that had been running for 75 years,” Sarabia said. “Mark was a great mentor. He really helped us.”

Sarabia hired his sister, Sandra, as a property manager at DESCO in 2015, and when DSW was formed, it truly became a family business. She handles the company’s office and medical center accounts.

“It is great working with Sandy,” he said. “She loves helping people and is really a team player.”

Sandra Sarabia said her priority is to ensure that DSW’s clients are treated as well as her family. Sandra drew inspiration from her mother, Delia, whose many wise words of advice guide her actions today.

“One of my mom’s sayings was, ‘Always leave a place better than you found it,’ ” she said. “DSW Commercial has a relatively small staff for the portfolio we manage and own, so we are a family and treat our tenants and partners as such. When we are entrusted with our partners’ assets, our goal is to make sure that it progressively gets better than when it was placed in our care.

“Exceeding the needs and expectations of tenants creates loyalty and increases value. We want our company name to be synonymous with outstanding, responsive service.”

The Sarabias’ father, Jose Luis, also played a key role in establishing the family work ethic. He was an immigrant from Mexico who came to the United States to fulfill his dreams.

After serving in the Korean War, “Louie,” as friends called him, settled in Tucson and worked nights while studying at the UArizona. After graduating, he worked as an accountant for a grocery supply company that he eventually bought, turning it into a successful family business.

“When we were kids, he used to drive around to show us nice homes in the Foothills,” Michael said. “He would say we should set our sights on something like that. He said a house like that would be ours if we worked hard and stayed out of trouble. He influenced us to work hard and strive to be better.”

Louie was also active in the community, joining service organizations, including the Knights of Columbus and Rotary Club. Michael has followed in those footsteps as a member of Southern Arizona Leadership Council and numerous other regional organizations.

“He always said you have to give back to help the less fortunate,” Michael said. “He showed us by example. He helped a lot of people. The best way to help people is by leaning back and pulling them forward.”

DSW uses that approach when working with business partners. Michael Sarabia said no one wins when only one side benefits.

“We have vendors on our projects that tell us costs are going up,” he said. “If they’re doing a good job, we won’t stop working with them. Sometimes, the cheapest price isn’t the way to go. It will all work out longterm.”

Sarabia tries to use as many Tucson vendors as possible. DSW has eight full-time employees and almost 20 others who work on a contract basis. While Sarabia sometimes looks to the Phoenix market for talent, he aims to stick closer to home.

“We really believe ‘Tucson first’ is not just a business model. It helps all of us,” he said. “Our architects, engineers, legal counsel, accounting and roofing companies are all from Tucson.”

Sarabia and his team have been working with tenants to keep them going during the coronavirus pandemic. Many had to close at least temporarily, and all made major adjustments to the way they do business.

That required a delicate balance between helping tenants and ensuring that investors who work with DSW had their interests protected. A little compromise served both sides well.

“During COVID, our role was to advocate for our tenants’ needs while protecting our owners,” Sandra Sarabia said. “We were able to get rents abated or reduced for several tenants who then extended their leases for a comparable period to offset the reductions. This allowed us to help several businesses remain open and survive that challenging time yet minimally affect our investor’s returns.”

Looking back over the past 20 years, Michael Sarabia chalks up much of his success to the support he received from Schnuck and the DESCO team. 

What he learned along the way was the importance of setting up longterm goals and resisting the lure of the quick buck.

“He didn’t want to show me how to buy an apartment complex or a Starbucks and sell it,” Sarabia said of Schnuck. “He wanted to show me the business of owning a portfolio of assets. Mark taught me how to build a model that could sustain our business and families for another generation.”