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Feature Article, May 2006
Casto’s Road To Success
As Columbus, Ohio-based Casto turns 80 this year, SCB looks back on a company that has helped shape commercial real estate development in innovative ways — and continues to shape the industry today.
Katie Foxworth
Casto, a Columbus, Ohio-based full-service commercial real estate company, turns 80 years old this year. With this milestone, company executives look back on how far Casto has come since 1926 and look forward to where the company is headed beyond 2006. Today, the firm has more than 20 million square feet of commercial property and 5,500 residential units located primarily throughout the Midwest and Southeast. With so much accomplished and such a bright future ahead, it’s hard to believe that Casto started out with very humble beginnings — as the brainchild of one man from Ohio who began his real estate career selling single-family homes in the mid-1920s.
Humble Beginnings
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A grand opening parade and a Halloween contest for kids are two examples of early shopping center promotions by Don Casto, Sr., whose first shopping center opened near Columbus, Ohio, in 1928.
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Don M. Casto, Sr. was a creative, entrepreneurial man — one who could (and did) adapt to changing times, including the vacillating economic conditions brought on by the Great Depression, two world wars, and the postwar housing boom. It’s only fitting that his company has carried on his flexible, innovative legacy. His grandson, Don M. Casto III, who currently presides as a principal of Casto, has made strategic decisions in recent years to keep his company on the cutting-edge of new development trends, in step or ahead of the times, and always on the lookout for new opportunities to grow the company’s portfolio. This underlying core business model dates back three generations.
The elder Don Casto was an orphan from Columbus, Ohio, who briefly attended Ohio State University before enlisting in the French Army to fight in World War I, well in advance of America’s entry into the war. “He came back lucky to be alive, I guess,” says his grandson. “He started off in 1918 by selling single-family homes in a suburb of Columbus called Upper Arlington. After 2 or 3 years of selling homes, he decided he could do this himself, so he hired a mule team and a buckboard truck and starting building and selling homes. He basically started a small-scale single-family home development company, which is the genesis of our company and where we were 80 years ago.”
Business was not without its setbacks, however. For one, it was difficult to interest buyers in homes outside the central core of Columbus. After all, the shopping was all located downtown, so why would anyone move to the suburbs? So Casto tried a new approach. Having a bit of P.T. Barnum’s showmanship in him, he pushed hard with promotions and marketing, sometimes even setting up miniature carnivals outside a development to attract attention on opening day. Ladies diving off towers into rings of fire — nothing was too outlandish in these early days of PR.
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Casto Lifestyle Properties is also underway on the Daytona Speedplex project in Daytona Beach, Florida, which will include 250,000 square feet of retail and the world headquarter offices of NASCAR and International Speedway Corp.
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In order to overcome sales resistance from people who complained about the lack of nearby shopping, Casto built a string of shops on Grandview Avenue in 1928. The development consisted of two supermarkets 8,000 square feet each, three banks, a hair salon and a barbershop. The result was heralded by many as the first true shopping center in the United States, in the sense that it was one single gathering of shops under common management.
“Much to his surprise, it was a roaring success,” Casto says of his grandfather’s retail whim. “And it was a financial success; that was where the real light bulb was. To him, it was originally nothing more than an amenity package to sell single-family homes. All of a sudden — bingo! — it had something called ‘cash flow.’”
Yet that cash flow soon dried up when the Great Depression hit in late 1929. Casto spent the 1930s trading mortgages and bonds since there wasn’t any real estate development to speak of anywhere in the country. When World War II intervened in 1941, all industrial capacity was geared toward the war effort.
“It wasn’t until 1947 that he reentered the real estate business, this time not as a single-family developer but as a shopping center developer,” Casto says. “He wanted to realize the idea he’d had back in 1928.”
In 1949, Casto opened the first regional strip shopping center on the east side of Columbus, in Whitehall. Called Town & Country, the Casto family still owns and operates it today. Known at the time as “Casto’s Folly,” the center was home to the first suburban locations for retailers like JCPenney, Richman Brothers, Kresge and Kay Jewelers. Casto also persuaded the public transportation authorities to run a bus line to the center — another ‘first’ for a shopping center.
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In Charlotte, North Carolina, Casto Lifestyle Properties and Grubb Properties are developing Morrison, a 24-acre mixed-use project in Charlotte’s upscale South Park district.
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“[Town & Country] had very unusual and innovative things that we take for granted today,” Casto says. “It was open on Saturday; it was open in the evening, which was unheard of; and it had illuminated, free parking.”
Town & Country served as the springboard to Casto’s future success in commercial real estate development. Today, the company has evolved from a family-centric firm to one that has recruited some of the highest-quality real estate professionals in the industry, which has created a more broad-based partnership boasting 20 million square feet of commercial development (approximately 8 million of which is still owned and managed directly by the Casto family).
“By morphing into a partnership and changing the character and structure of the company — and attracting a lot of really good development professionals — we were able to position the company with a solid foundation to grow,” Casto explains.
The company has grown not only by development but also, in large part, by acquisitions. Approximately 4 years ago, Casto acquired the retail portion of Duke Realty’s portfolio. In 2005, the company acquired 1 million square feet of retail space in North Carolina and opened a third office in Charlotte. Earlier, in the late 1990s, Casto formed a relationship with Brett Hutchens, a Florida-based consultant. “We conservatively started small in an effort — we thought — to do grocery-anchored and big box-anchored centers in Florida.”
But, like Don Casto Sr.’s original intention to sell single-family homes and nothing else, that focus would soon change. An emerging trend called ‘lifestyle centers’ helped change the course of Casto’s destiny.
Enter Casto Lifestyle Properties
“We started out in a completely different direction,” Casto says. “Yet, through a combination of serendipity and a project called Winter Park Village, we found ourselves on the cutting edge of the lifestyle development trend without even realizing it.”
This is how Casto Lifestyle Properties, a Sarasota, Florida-based affiliate of Casto, was born. Today, the company focuses on the development of mixed-use lifestyle centers, primarily in Florida and the Carolinas. Again, the Casto business model is nimble, adaptable and capable of changing with the times.
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Winter Park Village’s 2000 opening in Winter Park, Florida, led to similar mixed-use lifestyle opportunities for Casto Lifestyle Properties.
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And it all started with Winter Park Village, a redevelopment in Winter Park, Florida, that opened in 2000 with 350,000 square feet of retail, 114,000 square feet of office space and 58 loft apartments. De-malling the obsolete Winter Park Mall began in 1996, at a time when Hutchens, now president and CEO of Casto Lifestyle Properties, was working as the aforementioned consultant to Casto in Florida. Hutchens’ robust activity in Florida led to the formation of Casto Southeast in the late 1990s; then, once the company realized its own market niche, it changed its name to Casto Lifestyle Properties to better identify with what the company does best.
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Casto Lifestyle Properties’ Main Street at Lakewood Ranch will open in Sarasota/Bradenton, Florida, in early August.
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The experience at Winter Park Village led Casto Lifestyle Properties to similar types of ventures, including Main Street at Lakewood Ranch. This 170,000-square-foot project, which will fully open by early August 2006, is located in the heart of the Lakewood Ranch master-planned community near Sarasota/Bradenton, Florida. Another recent project involved an urban center that brought Whole Foods to downtown Sarasota. Along with ancillary retail, the project features 95 condominiums atop the retail.
“It’s really been the catalyst for the residential development of downtown Sarasota that they had hoped it would be,” says Hutchens of the Whole Foods project, which was developed as a public/private partnership in conjunction with the city of Sarasota.
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Lakeside Village, a 500,000-square-foot mixed-use greenfield development in Lakeland, Florida, is another key Casto Lifestyle Properties development.
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A third key project for Casto Lifestyle Properties has been Lakeside Village, a 500,000-square-foot mixed-use greenfield development in south Lakeland, Florida, with retail, office and hospitality space adjoining new suburban residential development.
“We’ve executed the mixed-use product in four very different formats: a 3-acre downtown urban site, one in the middle of a master-planned community, a de-malling of Winter Park Mall and a greenfield development,” Hutchens says.
Casto Lifestyle Properties has begun zoning in on the Carolinas as well, with a new joint venture project underway in Charlotte, North Carolina, in partnership with Charlotte-based Grubb Properties. Called Morrison, the development will consist of a 24-acre shopping, dining and residential neighborhood in the heart of Charlotte’s upscale South Park district. The first retail anchor tenant, organic grocer Earth Fare, is scheduled to open by the end of this year. As of mid-February, 50 percent of the 86,500 square feet of planned retail was pre-leased, only eight condominium lofts remained to be sold, and the next condominium phase was scheduled to begin shortly.
Also in Charlotte is Casto Lifestyle Properties’ proposed Elizabeth Avenue project, which will include 250,000 square feet of retail space, 800 residential units and 300,000 square feet of office space. The highly anticipated project, which is expected to break ground in late summer or early fall, will comprise five city blocks of downtown Charlotte.
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Casto Lifestyle Properties is currently underway on Bayside along the waterfront in downtown Sarasota, Florida.
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Closer to home, Casto Lifestyle Properties is underway on Bayside, a redevelopment of a 15-acre parcel in downtown Sarasota, Florida. Located on the waterfront near the Ritz-Carlton, Bayside will feature 700 condominiums, 150,000 square feet of upscale shops and restaurants, and 40,000 to 50,000 square feet of office space.
Homegrown Roots
Casto and Casto Lifestyle Properties both prefer sticking close to home in markets they know best, whether it’s Ohio, Florida or, more recently, the Carolinas. “The larger you get, the larger geographic area you cover, the less effectively you’re able to do your job,” Casto says. “Size becomes an impediment. One of the key assets any developer has is a close relationship with communities, community leaders and government officials, [as well as] local market knowledge.”
To that end, Casto has chosen to focus on a few key markets that it considers high-growth, such as Florida and the Carolinas. This is a departure from 50 years ago when the hot markets were Rust Belt towns like Toledo, Ohio, and Pittsburgh. “That’s where the post-war industrial growth was,” Casto says. “Jobs were there and factories were being built, so department stores and supermarkets [followed].”
And, of course, developers like Casto followed. Up until a few years ago, Casto says the company still found itself holding on to substantial ownership in what are decaying Rust Belt communities. Instead of having modest growth or the 20 to 26 percent growth that the Carolinas and Florida are enjoying, these communities are showing negative growth predicted over the next 10 years.
“If you’re a steward of family trust assets, it doesn’t make much sense to maintain ownership in those markets,” Casto says. “So we made a strategic decision to vacate Toledo and Pittsburgh and all those old Rust Belt markets. We have sold or are selling all those assets, and we’re repositioning the equity capital into the Carolinas and Florida.”
It all goes to show that Casto is not burdened by its past, but rather inspired by it. The Casto of early years also changed with changing times, and the Casto today continues down that path. A healthy dose of Midwestern conservatism never hurts, either.
“Over the years, we’ve been very conservative,” Casto says. “We tend not to be plungers or get ahead of our resources. When you talk about development, you’re dealing with human capital and financial capital, and we try to stay within our limits and not get stretched out with too many opportunities.”
Sometimes, Casto says, turning down opportunities takes a lot of self-discipline. “You want to do every deal that comes your way, but you just can’t,” he says. “So a lot of times when the market turns on you and the music stops, we’re able to find a chair and sit down and ride out the storm. We’ve been fortunate in that regard for a number of years.”
It brings to mind Don Casto Sr., who was able to ride out the dark days of the Depression and World War II and, nearly 20 years after he opened his first shopping center, realize his dream of becoming a commercial developer. And his legacy of success has never looked back.
©2006 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.
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