As the Internet continues to displace brick-and-mortar retailers, ECHO Realty has chosen to develop supermarket-anchored shopping centers, a niche that’s hard to move online.

How did you land in your current niche?
Tom Karet: We had a very strategic flight path for that landing. There are a lot of challenges resulting from a generally lackluster economic environment and the impact of e-commerce that can disrupt brick-and-mortar businesses. These challenges are also opportunities for us. We know that people will always need food and will continue to shop in a grocery store to get it. The convenience and qualitative aspect of brick-and-mortar grocery is difficult to duplicate on the Internet. People like to see their produce and choose their meat. From a strategic perspective, we want to be where the consumer wants to be. Grocery store-anchored properties provide the stable consumer traffic that drives retail success in our centers.

What challenges come with building such centers?
TK: Finding the right site [and] a market-leading grocer as an anchor and being able to surround that tenant with complementary users in a layout that is convenient and accessible to the consumer. While these are not new challenges for us, in recent years the hurdles to ground-up development have become even higher. As a result, we are doing less new property development than we were before 2007. We are moving more into the business of acquiring existing properties.

In today’s economy, which is more prevalent: acquisitions or development?
TK: Historically, we’ve done more ground-up projects, but in the last couple of years it [has been] shifting to acquisitions. Today, we’re looking at 60–70 percent acquisitions with the remaining [being] ground-up. This is because of the reduced number of opportunities for ground-up projects.

Your company has distinct divisions—acquisitions, development, property management. How do they efficiently work together?
TK: I try to hire people who are entrepreneurial—people who can take control of an area and then hand it off at the right point. It’s a lot about interpersonal relationships and systems, and it’s been about gradual growth. When I started the business 13 years ago, we had two employees. Over time, we’ve added platforms that allow us to develop, acquire, and manage retail projects. It took us five or six years to find the right personnel to build the systems we have in place today, and we are continually trying to improve our communication and capabilities. We can now handle all phases of a project from development through long-term ownership and management.

What has been the key to your success?
TK: The two most important things we have are our people and our relationships. We have worked hard to associate with the best in class in our real estate niche. A lot gets done in our brokerage group. Our view is that this business is still a business of relationships. You have to deliver what you say you will deliver. We’ve developed a great reputation as a group who can get things done, and the people component of this is critical.

Tell me about one of your more rewarding projects.
John Palovsky: We are working on a great repositioning of an existing retail center in Cleveland. This project fits perfectly in our wheelhouse. The development has a large grocery anchor, some national tenants, and a few local tenants. The anchor will be moving out of its current 55,000-square-foot space into a newly constructed, 93,000-square-foot space, and the entire center is being remodeled, but we have phased things in a way that enables the retailers to remain open for business during the repositioning. The development had been a low-end center in a great location. Now we’re turning it into a premier center. We’re working with tenants that we’ve had great relationships with—like Giant Eagle, Starbucks, and GNC. We’ve been able to take a center that was less than 50 percent leased to being 98 percent occupied.

What’s next for ECHO?
TK: We will continue to do select ground-up projects for grocers with whom we have relationships and acquire existing grocery-anchored centers where we believe we can add value. We have some deals in early stages in our core markets of Pennsylvania and Ohio. We’re also moving into other markets; essentially anything east of the Mississippi is fair game. We will go where we can add value. ABQ