Cafaro’s Next Generation
The next generation of Cafaro family leadership is working its way to the top at one of the nation’s largest privately held developers.
Randall Shearin

Passing the baton from one generation to the next is happening at one of the nation’s oldest mall developers. While Anthony Cafaro, Sr. is still president and CEO at The Cafaro Company, his sons, Anthony Cafaro, Jr., and William A. Cafaro, are both serving as vice presidents, overseeing most of the company’s operations. Anthony Jr. and William are the company’s third-generation of family leadership (current president and CEO Anthony Cafaro, Sr. is the son of the company’s co-founder, William M. Cafaro).

Shopping Center Business recently traveled to Cafaro’s headquarters in Youngstown, Ohio, to meet with Anthony Cafaro, Jr. and William A. Cafaro, to see how they are involved in the company’s business.

History

William M. Cafaro co-founded The Cafaro Company with his brother, John, in the late 1940s. The two began developing grocery stores for Kroger Co., and moved into developing strip shopping centers, owning, leasing and managing the non-grocery tenants. Cafaro developed its first regional mall in 1965. In the 1970s and ‘80s, the company continued to develop new centers, most of which it still owns today. The company, throughout its history, has remained privately held, and — amazingly — today finances all of its projects from its own balance sheet.

“We’ve always gone by the philosophy that we’re in business to be effective and make money,” says Anthony Cafaro, Jr. “We strive for success at each of our properties.”

Today, The Cafaro Company owns 16 enclosed regional malls and more than 30 power centers. It is the largest privately held retail development company in the U.S. The company’s first regional malls were in Ohio, Indiana, Pennsylvania and West Virginia, and the company continued to develop nearby in the ‘70s and ‘80s. In the late 1980s, Target asked the company to develop centers for the retailer in the Pacific Northwest, so Cafaro developed and still owns four centers in Washington and Oregon.

Family has always been involved at Cafaro. J.J. Cafaro, Anthony Sr.’s brother, has a lead role in supervising much of the company’s development efforts.  Flora Cafaro, Anthony Sr.’s sister, holds the title of assistant treasurer. As well, Phyllis Cafaro, Anthony Sr.’s wife and mother of Anthony Jr. and William, heads the company’s marketing efforts. Several other members of the family are also involved.

Next Generation

Today, William and Anthony Jr. are extremely involved in the company’s day-to-day operations. William runs the asset management, accounting, operations, marketing and financial side of the business. Anthony Jr. runs the real estate, leasing, information technology, architecture/engineering, legal and construction side of the company. Both brothers started in the business at age 12, scrubbing toilets and cleaning parking lots at the company’s local strip plazas and the Eastwood Mall in Niles, Ohio.

“We learned the business from the ground up,” says Anthony Cafaro, Jr. “My grandfather had my father start the same way: working with the maintenance crews at the ground up. I believe that’s a very important part not only for understanding the business, but to gain respect of the people I work with. Starting here at age 22 was somewhat difficult.”

At 31, Anthony Jr. says that a lot of people who report to him have worked at the company for 20 to 40 years. While this is a challenge, he believes that a lot of the training he has gone through over the years — he attended the company’s mall management training course, for example — has taught him a lot about the business. He has also spent a great deal of time at some of the company’s malls, learning how they operate from the ground up. He also credits his father and grandfather for exposing him to the leasing side of the business at a very early age having attended virtually every ICSC Las Vegas convention since age 14.  At the company full-time for 10 years now, he has worked his way through the ranks at the corporate level.

William, 36, holds an MBA and has a knack for the numbers side of the business. The two brothers complement each other in this way, says Anthony Jr. As where Anthony Jr. prefers the negotiations and outside dealings, William likes the financial and reporting side of the business. William has risen through the real estate, financial and accounting departments at the company.

“My father has been very successful for many years in overseeing everything,” says Anthony Cafaro, Jr. “But as we have grown it is a little overwhelming. We’re glad that we work well together and can divide the duties to fit our strengths.”

The Road Ahead

One of the biggest challenges that Cafaro faces is its own mall portfolio. Both William and Anthony Jr. are taking control of a portfolio of regional malls that was built in the 1970s and ‘80s. While Cafaro built the majority of its malls in secondary and tertiary markets with high barriers to entry, the brothers want to make sure that their properties are kept up-to-date. As a result, they spend a lot of time creating, reinvesting and remerchandising the centers.

“We’re not content just having the dominant center in the market,” says Anthony Cafaro, Jr. “We want to ensure our success for the next decade or two by recreating the shopping experience and adding the amenities and the stores that people expect to see in today’s retail environment. For us, this means adding a lot of things that weren’t even considered when a lot of our centers were built so it is a major investment.”

Cafaro has spent a lot of its recent efforts on the renovation of Spotsylvania Towne Centre in Fredericksburg, Virginia. As part of the renovation, many new upscale tenants will be introduced to the center.

Cafaro is completely redeveloping Spotsylvania Mall into Spotsylvania Towne Centre. The company is adding a 280,000-square-foot outdoor lifestyle component to the center, as well as performing a complete remodel on the existing areas of the center so that a uniform, effectively new, center is developed. The total redevelopment effort is estimated at $100 million, which includes significant offsite roadway improvements. As part of the renovation, many new upscale tenants will be introduced to the center.

Rendering of Spotsylvania Towne Centre, in Fredericksburg, Virginia. The center, originally developed by Cafaro as Spotsylvania Mall, is being completely renovated and expanded. As part of that, a 250,000-square-foot lifestyle component will be added.

Cafaro has always made sure its centers stay current with times and with shopping trends. Its Eastwood Mall, located in Niles, Ohio, was about 700,000 square feet when it opened in 1969. Today, the center is more than 1.5 million square feet with about 1.5 million square feet of peripheral retail surrounding it. Cafaro recently started a complete renovation of Eastwood Mall. As part of the renovation, the company will add big boxes to the mall as junior anchors as well as a new food court.

An aerial of Eastwood Mall in Niles, Ohio, shortly after the center was built in the 1970s. The center was about 700,000 square feet when it opened.

“What has made this company successful is our attention to detail,” says Anthony Cafaro, Jr. “Our lease documents reflect that. We have probably the most complete lease. And some retailers feel it is the most landlord-friendly lease document in the industry. But it is a combination of 55 years of looking at problems and having the document reflect situations or issues that we’ve encountered.”

An aerial of the Eastwood Mall area in 2004. The center has1.5 million square feet today, and has 1.5 million square feet of retail around its peripheral property.

“Sometimes in today’s world where everything is papered 10 times over with attorneys and financial analysis, that handshake and our word means more than anything else,” says Anthony Cafaro, Jr. “The retailers appreciate the personal attention and the consistency in management that we offer. At our company, a retailer knows if he has an issue he can pick up the phone and call the same person who he signed the lease with and that person will handle the issue.”

Slow And Steady

Eastwood Mall’s Center Court in the 1980s, featuring the original “umbrella” ceiling design by Andrew Burin.

“We don’t necessarily need to be out in the forefront to garner the accolades of Wall Street,” says Anthony Cafaro, Jr. 

When other companies its size went public in the 1990s, Cafaro didn’t even consider it. “We enjoy controlling our own destiny,” says William A. Cafaro. “We’ve always been a conservative company from a development and financing point of view. We plan to continue that slow, steady growth. We don’t have to be the Number 1 company out there. I don’t ever see us being the largest or the biggest company with the brightest bulbs on the marquee. What we do, we do well. We have our niche in the middle markets. I want to continue doing what we are doing so I can pass the reins to my two children. I want them to sit in my chair one day.”

Proposed rendering of the Eastwood Mall Food Court. The renovated area will feature six tenants and seating for approximately 350 customers.

“We are always going to be looking at opportunities where we can be the dominant player in a middle market environment,” says Anthony Cafaro, Jr. “We’re staying with what we know. We feel we have the competency to do what we do best. We have relationships with the retailers who serve our markets best.”

Cafaro has the luxury of being in a position where it doesn’t have to worry about finding outside money to develop new projects or redevelop existing ones. As a result, the only pressure it has to redevelop is from its consumers. Since the early 1990s, the company has been able to do all new construction and renovation work through its own cash flow. The company is co-developing Millcreek Marketplace, a 500,000-square-foot power center in Erie, Pennsylvania, for example, out of its cash flow. It is an envious position that few other developers in the industry share.

Rendering of Eastwood Mall’s Center Court after the renovation that the center will undergo this year. A substantial increase in natural lighting and customer amenities are planned.

William A. Cafaro says the future opportunities for the company will lie predominantly in the open-air center category as well as the redevelopment of existing properties.

“Right now, I don’t see the opportunity to develop regional malls like there was in the 1970s and early ‘80s,” he says.

Anthony Cafaro, Jr. says he foresees a rebalancing of some REIT portfolios, and several may sell off centers that Cafaro may be interested in purchasing. Many REITs, for instance, like the top centers in the U.S. with the exception of a few other players, are not interested in the middle markets. Some of those centers would be good for Cafaro, he adds. At Cafaro’s size, adding one or two centers every few years would be a significant acquisition to its portfolio.

Millcreek Marketplace is the type of center in which the brothers see a lot of opportunity. Located next to its 2 million-square-foot Millcreek Mall Complex, which Cafaro began developing in Erie in 1975, the 500,000-square-foot open-air center is being co-developed with a local developer. Cafaro and co-developer Baldwin Bros. are courting some lifestyle tenants for the projects, though Millcreek Marketplace will predominantly be a big box center. Since there are no lifestyle centers in Erie, Cafaro has created Millcreek Marketplace to have a more upscale design and feel to appeal to those retailers who don’t want to locate in the mall, but can’t afford to be away from the dominant retail area of town.

Anthony Jr. runs the real estate, leasing, information technology, architecture/engineering, legal and construction side of The Cafaro Company.

Cafaro also has some partnerships with other developers that extend back to the 1980s. Then, when development was hot and heavy, it was common for two developers to be in the same town at once and have options on two different parcels of land to build two centers. In secondary markets, there isn’t room for two regional malls, so in most cases developers would partner to build a single center in a compromise deal. Cafaro co-owns Governor’s Square Mall in Clarksville, Tennessee, and Kentucky Oaks Mall in Paducah, Kentucky, with CBL & Associates and Charleston Town Center with Forest City Enterprises in Charleston, West Virginia.

Long Term Holder

William A. Cafaro runs the asset management, accounting, operations, marketing and financial side of The Cafaro Company.

In some cases, Cafaro has owned centers for so long that they have been redeveloped several times, or their markets have disappeared and returned. In St. Clairsville, Ohio, a suburb of Wheeling, West Virginia, the company developed Ohio Valley Mall along Interstate 70 in 1978. Successful until the early 1990s, the center developed issues after the population in the area waned due to steel mill closures. Cafaro considered de-malling the center or turning it into an outlet center to take advantage of its interstate location. Instead, Cafaro decided to stick with what it knew best. The company repositioned some of the anchors, made some aggressive deals with new inline tenants. Around the same time, the local economy began to recover. Today, the center, anchored by Sears, JCPenney, Macy’s, Elder-Beerman, Kmart and Steve and Barry’s University Sportswear, remains 98 percent leased and is one of Cafaro’s top properties.

Jerry France with Anthony Cafaro, Jr.

“A lot of owners in those situations would have tried to sell the centers,” says Anthony Cafaro, Jr. “We’ve stayed very committed to our properties and the communities they serve.”

Cafaro feels that its size gives it a distinct advantage with its centers. Since the company has 16 malls, it is able to concentrate its efforts wholly on those centers. It won’t consider expanding if it feels it is something that its senior staff can’t give its full efforts to. The company believes that the proof is in the details, and they are more able to watch over the details of 16 malls than 100. The Cafaro brothers also do not want to increase the size of their company exponentially over the next 10 years. They want to do as their father and grandfather did before them — grow the company at a slow and steady pace, one that existing staff can grow with.

The turnover at The Cafaro Company is extremely low. The company has employees that have been with it for more than 40 years. Vince Morgione, the company’s treasurer, has been with the company for 47 years, for example.

The company and the Cafaro family have been extremely philanthropic throughout the years. Through The Cafaro Foundation, the family is active locally and nationally by contributing money to worthwhile causes. It is another tradition that the Cafaro brothers hope to uphold as they create their legacy at the company.