Sticking Around
Cleveland-based United Commercial Property Group wants to develop close to home, developing within a 6-hour drive of its headquarters.
Randall Shearin

Mark Escaja has had a career that's led him all the way around the country and back. As chief financial officer of Developers Diversified Realty, he helped that company go public — and helped it grow from a regional developer into a national owner. After leaving DDR, he had stints at Heritage Development Company and most recently as executive vice president and director of development with DeBartolo Property Group before deciding that what he really wanted to do was stay at home. In his home area, that is. Escaja likes to develop in Northeast Ohio.

UCPG has acquired a 1 million-square-foot portfolio of vacant Kmart properties, which it plans to redevelop into shopping centers. UCPG transformed a vacant Kmart in Akron, Ohio, into a Kohl's-anchored center.

The company is starting with a strong base — UCPG has acquired a 1 million-square-foot portfolio of vacant Kmart centers. It plans to redevelop those centers into new centers anchored by Wal-Mart, Kohl's, Kroger and The Home Depot. Some of the centers will be anchored by those retailers and have peripheral retail, while others will be freestanding locations.

UCPG's first major development is The Shoppes at Diamond Center, a 400,000-square-foot power center in Mentor, Ohio. Two other centers in Northeast Ohio are also expected to be announced in the near future.

While there are other players, Escaja founded United Commercial on his reputation and ideals.

“We are going forward based on my relationships, reputation and track record,” says Escaja.

UCPG has a two-pronged approach to finding locations in its limited trade area. It maps where retailers are currently located and finds voids in the market. It then dispatches brokers out to locate sites for shopping centers within that area. Relationships with retailers also lead to development. A retailer may tell the company where within a trade area it would like to locate a store. The other avenue is a little simpler.

“People know what my specialty is — big box retail,” says Escaja. “A lot of projects present themselves to me by word of mouth.”

Controlling a prime piece of real estate within a market is the name of the game when luring retailers and customers. Finding the most attractive site, uncovering underserved markets and developing centers where consumers want to shop is the goal. UCPG has decided to concentrate solely on development to achieve this, and Escaja wants to keep his team lean and mean so it can be flexible enough to jump on an opportunity at a moment's notice.

UCPG has no plans to add management or leasing to its capabilities. It is strictly a developer. It has no plans to deviate from development. Small shop leasing and management is subcontracted to a third-party management firm. UCPG handles anchor leasing during development of the project. It is so good at landing big boxes that the company has been retained by three national owners to handle their anchor tenant needs.

Because of current cap rates, UCPG plans to sell the centers it develops as soon as it can to place capital into new projects. That may not be the case forever, says Escaja.

Mark Escaja, president of United Commercial Property Group

The company's Kmart real estate is a prime example of how Escaja wants to seize opportunities in growing areas. As one of the oldest retailers in the business, Kmart always had great real estate. Kmart was always one of the first retailers in a market in the 1960s and ‘70s. Since the markets have since grown up around the stores, closed Kmart locations now represent great infill opportunities for other retailers.

“The centers are primarily in urban markets, but they are fantastic locations,” says Escaja.

Escaja isn't sitting still with the Kmart locations UCPG has purchased. He estimates that the majority of the centers will be redeveloped by August 2005. Five of the centers are either under development or completed, and six others are in pre-development. Three of the locations are freestanding Kmarts, while three others are Kmart-anchored centers. Two of the locations will be repositioned to other retailers, while the other properties will be scraped. Those four locations will be developed into new centers.

UCPG is also entering the net-lease business by developing a number of freestanding stores for retailers. The company has four small net-lease centers under development currently in Northeast Ohio. These developments will be sold as soon as they are completed due to market conditions.

Escaja has a few philosophies on the real estate business. He believes that, with the exception of the REITs and other large owners, companies should remain lean and mean. There should be a dealmaker at the top.

Going forward, Escaja predicts that UCPG will have between 2 million and 2.5 million square feet under development at any given time. With a mix of power centers and freestanding net-lease retail, it's a lot for a small developer.

“But it will all be within a short drive,” says Escaja.