Uncover the story behind one of Texas’ most innovative mixed-use developments: Market Street – The Woodlands.
In this episode of Leaning In, we revisit the groundbreaking opening of Market Street in The Woodlands, Texas—one of the nation’s first mixed-use town center projects. Join Trademark Founder & CEO Terry Montesi and Managing Director & CIO Tommy Miller as they share the story behind this visionary development and its lasting impact on the retail real estate industry in Houston and beyond.
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Todd Anderton: Hi and welcome to another episode of Leaning In. I’m Todd Anderton, Senior Vice President of Marketing at Trademark Property Company. On today’s show, we’re looking back 20 years to discuss the opening of one of the nation’s first town center projects, Market Street The Woodlands in The Woodlands, Texas. We’ll hear from Terry Montesi, Trademark Founder and CEO, and Tommy Miller, Trademark Chief Investment Officer, on how this project came to life and how it helped to define the retail real estate landscape in Houston and across the industry.
Thanks for listening. Now here’s our interview with Terry and Tommy.
Terry Montesi: Yeah, I’m Terry Montesi, CEO and founder of Trademark Property Company.
Tommy Miller: Tommy Miller, Managing Director, Chief Investment Officer, and now I’m responsible for our investments and institutional services business.
Todd Anderton: This development is kind of special and interesting because of the story behind the project and how this story came to be. Walk us through how the story started and how you got it to where it eventually ended.
Tommy Miller: We were introduced to the Woodlands back in 2000. The Woodlands is one of these what I call premier suburban trade areas. Very important branding went along with the Woodlands, the trees, nature, the schools, the golf courses, and the Woodlands was run by a development company that was sort of the successor to George Mitchell. He’s a legend in the energy business. George and his family built the Woodlands to be the top master plan community in Houston, in Texas, one of the top maybe five in the country.
Terry Montesi: So, it was interesting, a long-time partner of ours, Tony Krohn, who ran development here for a number of years, he had met a guy who worked for the Woodlands Corp, Steve McFetridge. They’d gone on a golf guy’s golf trip for years. And Tony and I had said, man, if there’s ever a piece of land or an opportunity to do something in the Woodlands, we’d love to do it.
So, Tony would remind him of that every year. And he said, maybe one day, maybe one day, but we develop everything here at the Woodlands. They develop literally every shopping center, everything.
Tommy Miller: At one point, the Woodlands people who we were introduced to had aspirations to build a truly best-in-class shopping center with better tenants, maybe better tenants than you might see at a typical mall. So, they had aspirations, the Woodlands Development Company had aspirations of building this place themselves. They had a very specific idea that this collection of retailers and restaurants should be at a certain location.
They asked Terry and I, well, where do you think this should be? What do you think the opportunity is? We told them that we don’t believe that this is the right location that they’ve selected for what you would want to build. And they asked us, well, which property in the Woodlands Town Center do you think is the right place to put this incredible outdoor town center that could grow as the Woodlands grew? And we picked the site. It was this 34-acre site with four streets around it, across from the Cynthia Woods Mitchell Pavilion, Houston’s outdoor music and performance venue.
The Woodlands development team agreed with us that that was the right site. Then they decided, again, that perhaps they should be the developer of the property. So we stepped aside, and for the next year, the Woodlands Development Company retail team tried to put the project together themselves. And they tried and they tried and they tried.
Terry Montesi: And one day, Tony gets a call from Steve, and he says, you know what, the ownership has challenged us to raise some cash. There might be a window. Can you come down here tomorrow? We said, yes, sir, we can. We came down the next day, showed us the site, told us what’s up, gave us the lay of the land, and we literally talked price, shook hands that day.
We were so happy to have that opportunity because literally it’s the only piece of land in the Woodlands, in the Woodlands Town Center that they were letting anybody develop.
Tommy Miller: The stakes were high because the Woodlands was such a special place. It had to be in the right location, had to have the right mix of tenants. And I think it was because the stakes were so high that we were invited in.
Todd Anderton: Do you know why or do you have a guess as to why Trademark got this opportunity over competitors?
Terry Montesi: Well, we had already built a reputation at least regionally at the time as doing cut above retail work. We had been very intensely adding complexity and placemaking to each project as we went. And they got a little more complex, a little higher quality, a little higher profile every step.
We had done some really high quality grocery-anchored community centers like Trinity Commons here in Fort Worth, Preston Oaks in Dallas that had incorporated public art and public spaces in those projects. And so, it was a natural evolution, and we were looking to do a mixed-use town center.
Todd Anderton: Now, was the mall already located at the Woodlands?
Terry Montesi: Oh yeah. The mall was across the street. The Woodlands Corp, the seller, was 50% partner at the time with General Growth. But they didn’t tell General Growth they were going under contract with us. And as you might guess, their partner General Growth was not very happy.
Todd Anderton: Let’s talk about the concept of the project. So, to go back in time, this sort of town center opportunity was not very well known in the United States and not something Trademark had really worked a lot on.
Can you walk us through the pieces that came together to make the decision that that was the right project and how you avoided any traps or problems through the development and design process?
Tommy Miller: At the time, there were only a few urban mixed-use places in the country that had been built, suburban town centers. The examples were Easton Town Center in Columbus, Ohio, Kierland Commons, Southlake Town Square in the Dallas-Fort Worth area. So, bringing an urban mixed-use place to the suburbs was very new at the time for Sunbelt cities or maybe just cities that were non-gateway markets in the United States.
Terry Montesi: We’d been studying Easton Town Center. An ex-partner at Trademark, Tom Carter, had moved to work for Steiner at Easton Town Center, so we’d been studying that. And so we were studying those. We knew mixed use was where it’s going, and we liked that model. Then what we did was we interviewed designers. We interviewed three or four, and we ended up picking the one that did Easton Town Center, Development Design Group.
Todd Anderton: Let’s talk about design for just a second. Obviously, one of Trademark’s hallmarks now is the thoughtfulness that we put into design and how much care we put into making those decisions.
Talk about your role in collaborating with the designers to get that vision brought to life. You were going against the grain on a lot of tried and true formulas at that time. Did that give you any pause or make the risk feel even more impactful because you were doing it a different way than most people were doing?
Terry Montesi: Yeah, wired as an entrepreneur, my grandparents immigrated from Italy with nothing and were entrepreneurs and weren’t very scared, I guess that sort of fear has not been a big motivator.
And so, you just study, what do you like? What do people like? Where is it going? Went to a lot of ULI conferences, listened to Andres Duany, the father of new urbanism. We had worked on a project with him, and just learning about new urbanism, and that’s what this project is, it’s really based on new urbanism.
Tommy Miller: I think a lot of people in the retail business were skeptical that these types of town centers were going to work in the suburbs. Everybody wanted large parking lots in front of the stores. This was the conventional wisdom in the retail world. People wanted super convenient parking. They didn’t like parking in garages. Doing public spaces or town squares in the middle of retail projects was almost a waste of land. Why would you do that when you could build buildings in that public space?
Terry Montesi: So, I just felt like if you look around and you look at what people like, where they feel good, it’s not places with big huge parking lots. It’s places that feel safer because there’s eyeballs on the second and third floors. It’s places that feel safer because there’s people on both sides of the street.
Tommy Miller: We worked together with the Woodlands, a public-private partnership with them to enable us to be able to afford to put structured parking and a public space, which was all very important because you need a garage, you need density to create walkability and the right scale between the buildings.
Terry Montesi: You say it wasn’t tried and true in retail development, but it was tried and true around the world and just the development of great cities.
Tommy Miller: We decided that there was such a movement in the suburbs that people, particularly in places like the Woodlands, they wanted a special place in their community so they didn’t have to drive the 45 minutes to the Houston Galleria or Highland Village. They wanted the retailers and restaurants and merchants to come to them.
Terry Montesi: So, it just felt right. And again, watching Easton and listening to all the buzz around Easton and seeing Southlake come out of the ground and all the buzz around that, we weren’t pioneers. We were early adopters, but not pioneers, which is okay. It’s just a lot of things. But again, having a really smart design firm and having conviction on what would work and then studying that local municipality. And in some parts, some ways, we got lucky, because the dimensions of that site sort of forced us into a design that was somewhat tight.
And so, just everything fell together well. And it’s funny, some friends of mine who are in the business, for ten years after Market Street, they would say, God, Terry, I’m just not comfortable doing that stuff like you do with the parking in the back. And eventually, their next project after that was parking in the back.
Tommy Miller: We did some interesting things there. At the time, nobody was mixing product types together in the retail world. We truly wanted to do more than just retail. We wanted to do mixed use. We wanted to do office the right way. We wanted to do multifamily, but the Woodlands company couldn’t get their arms around letting an outside multifamily developer into their community. They wanted to develop all the apartments. All we could do was office.
Ultimately, we left a site out not knowing what one parcel in the property could end up being. We didn’t know what that could be, a Crate & Barrel. That became a hotel opportunity. We could have been one of the first in the country to actually do a grocery store, specialty grocery store and specialty retail in the same center.
Todd Anderton: So, I would imagine, in a lot of situations, as you develop, you’re pre-leasing. But there was a lot of sort of risk and leaps of faith in terms of closing on the deal, how the deal came to fruition with the lease momentum. Can you talk through that a little bit?
Terry Montesi: Yeah, so the mall and General Growth are a big part of the story, and again, they were the partner, 50% partner with the Woodlands, so the Woodlands was in the middle. And so, once the market found out, we tried to keep it confidential as long as possible, but once the market and General Growth found out, General Growth started doing everything possible to kill our deal, including talking to the tenants that we already had signed LOIs with, some that were at lease, about to sign the lease.
And so, we just went as fast as we could. But because they were working so hard against us, it slowed us down a little. And like I said, they needed to close pretty quickly, so we didn’t get that much time. So it came down to it, we had a committee approved deal with HEB. We’d never done business with HEB before that, but got to know them, seemed like people you could trust, had a committee approved deal with HEB, but it was not signed. It was at lease. And we had a number of LOIs working, but leases weren’t signed, with specialty tenants and restaurants.
But then because General Growth was putting pressure on the Woodlands, the Woodlands wouldn’t give us any extensions. We had to decide, what do we do? I made the decision to close out of pocket on the land, bought the land. Had we had a pandemic between that moment that we closed and the time we signed the HEB lease, I could have been hosed.
But fortunately, we didn’t have some major thing like that happen. The market was tight enough. We had a good enough design, had enough retail momentum that we were able to survive and move forward. But that was, I’d say without question, the biggest risk I have taken in my business career.
Todd Anderton: It was a David and Goliath kind of situation, right? So, talk about Trademark as David and GGP as Goliath. I think those that don’t know the industry would like to hear more.
Terry Montesi: It’s a big part of the story. We needed some public subsidy to make the project happen. And we had been told that GGP had a site across the street, but it would be years after us, that’s what the Woodlands people told us, before they could develop it, because they had to have, there was a canal that was going to be put in, they had to have a big subsidy to make it work. So we would have years of runway ahead of them.
And as it turns out, they were so irritated with their partner that we got this site, and then they saw what we were doing and they saw the momentum we got in the retail community, that they decided to go build that thing anyway. And they designed it super fast. And you can tell, they just went… it was more about speed and hurting us than it was doing the right thing. And so, they went fast without that subsidy initially.
And so, we ended up getting in a little legal battle because they… it was a little like the Caruso legal battle that Caruso pursued against GGP, and that Goliath was doing some things that weren’t kosher. And we ended up using the legal system to sort of back them down. He used the legal system to get like an $80 or 90 million judgment. We were mainly trying to get them to behave, tell everybody the truth, and just level the playing field a little bit.
So, it was super stressful, very tense. But it worked out, and in the last 10 years, Todd, we haven’t lost one deal, any retailer, restauranteur that we wanted that came to the Woodlands, we have not lost one deal to the mall the last 10 years.
Todd Anderton: Let’s talk about that for a second. We’re 20 years in, we’re celebrating 20 years of Market Street. The world has changed a lot in 20 years. It’s changed a lot since you concepted this idea and brought this plan to life. Retail has changed. So much has changed. But this property continues to evolve and elevate its offerings and its success.
So, from a leasing standpoint and appealing to consumers, what is the secret sauce over 20 years?
Terry Montesi: Yeah, it’s been really durable. And like I said earlier, some of it’s luck, the dimensions of the site, but also, we had a great designer. We did a lot of, we walked a lot of places, we walked a lot of streets, we walked other projects. And the Woodlands community and their support has been amazing.
But I think it’s a lot of little things. It’s not one big thing. And it’s not all about look at us. It’s about we had a great design firm. It’s about studying the size of the public spaces and what you wanted to do in the public spaces and studying the community voids. They didn’t really have a great place for their Christmas tree lighting. They didn’t really have a great place to hold what would now be the Fourth of July parade and things like that that are now held there.
So, you listen a lot, you do research a lot, you see what are the needs. And they also didn’t have anything anywhere near there that would be a downtown. You had this suburban, it wasn’t a town at the time, but it acted like one because it was 35 miles from downtown Houston. And that community, it is a township today, but back then it was just a suburb. It was a development. And so, just everything came together.
And I think that we took it a step above. We said, hey, what about incorporating public art? And our partner Kimco let us have a half a million dollar public art budget 21 years ago, 22 years ago. And it matters. You feel the difference. They let us invest in the buildings. The buildings, we hired multiple architects. And we hired Gensler’s Houston office to design the building with the cinema in it. And it looks completely different than the building across the street. And we had David Schwarz, who is a renowned designer that did Southlake Town Square, did the ballpark in Arlington, did Bass Hall, did the American Airlines Center.
So, we just brought lots of different people to the table. We listened to the community. We got several designers to do different buildings and to tweak the plans and to do peer review. It was a labor of love, and just we knew we didn’t know everything. And I think that might be why we nailed it the first time, because we didn’t have a predisposition that this is the way.
A lot of developers, Todd, we’ve talked about it, they’re knowers. They’re like, I’m a developer, the lady shoppers are going to love it. I’m going to put down what I want to put down, and they’re going to swarm this place. We think that’s too risky, and it’s not really the smartest way to do business. So we listen a lot. We got tons of input, designers, shoppers, local community advocates, and I think just with all of that and with a great builder like Linbeck, you put all that together, and it turned out pretty well.
Todd Anderton: Why do you think that Market Street is able to stay on the front of retail evolution, the popularity of the project? It’s 20 years old and it is more popular now than ever. Why do you think that is?
Tommy Miller: Well, I think it has to do with Market Street and how we’ve curated it over the years and paid close attention to every vacancy, every space. If we have to hold a small space off the market to wait for the best tenant that we can, that’s smart. But what’s really interesting is being at the center of the community, I mean, we built Market Street thinking it’s the downtown that the Woodlands, the master plan community, should have been built around in the beginning. The community feels like they own Market Street.
As the community progressed to a trade area that has more employees or office workers than it does households, we have just, every step of the way, Market Street has progressed as the community has evolved, become more affluent, more diverse, and more of a sustainable community with a large daytime workforce and all the changes that have occurred in Houston.
Terry Montesi: The sales have continued to do great. The project does over $1,000 a foot and there’s no Apple. And there are two or three other outdoor mixed use town centers or lifestyle projects of this scale that can say that. There are projects in the country that often get a whole lot of press, and they’re not as productive. They’re not as successful. And they haven’t been around near as long as Market Street Woodlands.
I’ve got Todd Norley, who’s a well-renowned retail consultant, has told me it’s clearly top 100. Any retailer that he’s asked to do a 100-store rollout strategy plan for, this is always going to be on the top 100. It’s going to be the second deal. There’ll be a Galleria area deal, and then there’ll be this one. My friend Jack Breard in Dallas, one of the top retail consultants in the country, says it’s his favorite project. I think it’s scale, it’s architecture, it’s details, it’s service, it’s ease of use, it’s not too big.
Like Easton Town Center, who is sort of the grandfather of this, as I mentioned, it’s too big. You can’t really walk the whole thing. It’s got three districts. It’s great, and it’s very productive. It’s massive. The scale of this is just lovable. It’s easy to walk, easy to understand, easy to use, and it’s variety. We’ve got a large gourmet HEB grocery, and then we have Tiffany and Gucci.
And so, we have luxury, we have a gourmet grocer, we have services, we have office, we have hotel, and we have just a sense of scale and detail that just feels really good. And it’s highly productive from a sales standpoint, which that’s what the retailers pay a lot of attention to. And the demographics in the area are outstanding.
Todd Anderton: Looking back, is there anything you would have done different either transactionally, design-wise, anywhere in the development process where if you had a do-over, you would take it?
Terry Montesi: Yeah, I would have dug my heels in a little harder to try to get multi-family zoning on the site. The Woodlands, they didn’t want us to have anything but retail. Then we fought for office, and they gave us 110,000 feet of office entitlements. And then we said we want hotel. Originally, they only gave us 30 rooms. We were able to push it to 70 as part of the lawsuit settlement with that GGP battle we were in. But they wouldn’t let us have multi, and I wish I’d have known to dig my heels in more because that would have been worth a fortune.
I was there for the grand opening, and I had my baby girl Emma. Let’s see. So Emma is 26. It opened 20 years ago. So, she was six. And we’re walking around there and just big bug eyes, and she says, daddy, I want to live at Market Street. Isn’t that cool?
Todd Anderton: It is.
Terry Montesi: That warms my heart. I got choked up saying that, but it was a super special moment because that’s what we want people to feel when they’re there. Not just shop, not just, hey, this is nice. We want them to feel. And Emma felt.
I was there another time, Todd, and I’m in line at the ice cream store. I think it was that night. It was grand opening weekend. And this man just turned to me and said, hey, how are you? I’m so and so. He said, where do you live? I said, well, I live in Fort Worth. He thought I was going to say in one of the villages at the Woodlands. And I said, yeah, this is my development. He said, oh my gosh, I have to tell you a story. Last Saturday, my kids, we’re sitting around, it was a beautiful day. And I said, what do y’all want to do? And I said, you want to go to the park? And they said, yeah, we want to go to the park. And he says, which park do you want to go to? And the Woodlands, the Woodlands. There’s parks everywhere. Which part do you want to go to? And his kid says, I want to go to the park at Market Street.
So, one of the things we did, Todd, was we wanted people to feel like they owned it. You go to a lot of malls and it says like ‘Westfield Shopping Town.’ Nobody could feel like they own that place because they’re advertising that we own this place. Well, this is just Market Street. It’s not- it doesn’t say Trademark owns this place anywhere. So, they feel the ownership, and that’s not super easy to do. But that’s, again, what we want; it’s the feeling. It’s not just a transactional place. It’s a place we want people to have a real emotional connection to.
Todd Anderton: Was there ever a specific moment in time where you’re like, we nailed it? Or was it more just over time you realized you were onto something?
Terry Montesi: The latter. I mean, every year that goes by and you get more and more tenants interested and the sales get better and better, you start to… And when you visit, I’ve been there so many times, I remember, you go on a nice day, and there’s 30 or 40 people just hanging out around the pop fountain. And I remember one day going, there was 30, 40, 50 people around the pop fountain, and there was only like eight people in Borders. And Borders was our other anchor. Now, the HEB had a lot more than eight or 30 or 40, but our anchor in the town center portion, Borders, had eight or ten people, and the pop fountain had 30 or 40 people.
And people are enjoying themselves and getting their pictures taken with all the various public art, sitting on the donkey. The donkey bronze, I think we spent 15 grand on the donkey bronze, and its back is hollowed out and shiny gold now because so many people have put their children on there to get pictures taken on it, which is exactly what you hope for.
Todd Anderton: If somebody walks onto that property, maybe they’re new to the community and maybe they’ve moved in close by, and you’re establishing how you want them to feel when they’re there, in your mind, what’s the ideal answer to when someone visits Market Street at the Woodlands, how you hope they feel while they’re there?
Terry Montesi: Yeah, I want them, first, I want them to feel, because something like just going to CVS to buy a bottle of aspirin transaction, I don’t know that you have any real feeling. You may be feeling sad because a friend is sick or something. You’re not really feeling. We want them to feel a little like they’re on vacation, like they get out of their normal daily rat race, and they come into a place that embraces them with love and detail and lushness of landscape and care and warmth and excitement and fun, those ways.
Todd Anderton: Is there any project that you’ve touched or worked on over your career that makes you feel the way you feel about Market Street?
Terry Montesi: Probably not quite. We really had a blank palette and a good market, and we got to do really everything we wanted to do.
Todd Anderton: Looking to the future, and it feels like this property will be a part of that community for as long as that community is there, what do you hope for in the future, years from now, or what do you think? And maybe those answers are the same. What’s your hope for it? Or where do you think it will be?
Terry Montesi: That whoever owns it, today it’s 90% Miller Capital and CalPERS and 10% Trademark, whoever owns it will continue to invest in evolving it.
Tommy Miller: It’s interesting, the property has just evolved over time. It started out at the time with a grocer, a Borders Books, a Sharper Image, a Z Gallerie that I think went bankrupt twice. We lost them, we brought them back. And today it’s everything from the specialty grocer, which is one of the top volume grocers we believe in all of Houston, if not Texas, to now having Louis Vuitton, a Gucci coming to the Woodlands, Tory Burch, 18 restaurants, probably the single largest collection of restaurants in the whole city in one place.
And it’s continued to evolve. And 20-plus years later, it’s still the bedrock. We called it the downtown that the Woodlands should have been built around at the beginning. And we brought that to their community. I think it’s been a great addition to the community. But just watching it evolve over the years and responding to changing tenancy, changing demand in the marketplace, and it just keeps getting better and better. I think it’s become one of the top, in a class of outdoor town center projects in the country, it’s one of the very top in the country. So, we’re very proud of it.
Todd Anderton: Let’s just say many years from now, if you could magically sit here with the next caretaker of this project, next owner or caretaker, what advice would you give them?
Terry Montesi: Well, don’t be penny wise and pound foolish. Don’t cut an amenity or cut the landscaping, don’t do anything to take away all that we’ve done to build that enormous connection with the community. The community absolutely loves Market Street, without a doubt. I hear it all the time. And so, just don’t do anything to squash that and keep a passion about taking care of those people because they have taken great care of us.
Tommy Miller: The Woodlands is truly a special place and we’re very grateful for having the opportunity to have this very important property right in the middle of it that’s a Trademark property, but I think it goes back to this property changed the community when we opened it. It is truly the heart and soul of the Woodlands, which I think the Woodlands alone is over 100,000 people and 100,000 employees. I think this property has the opportunity to continue to get better and better and better.