Trademark of Success: Real Estate & Leadership Insights

It’s time to spotlight Trademark Founder Terry Montesi. In this insightful episode with Kevin Kessinger, Trademark’s new President and COO, Terry shares his journey from the Memphis grocery business to groundbreaking retail and multifamily developments in Dallas Fort-Worth and beyond.

Discover what sets Trademark apart – a commitment to building a legacy that is not just financial. Plus, Terry reflects on lessons learned from transformative projects, like Market Street Woodlands and Saddle Creek, and discusses the future of real estate.

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Terry Montesi: Welcome to Leaning In, a commercial real estate podcast hosted by Trademark Property Company. Join me, Terry Montesi, CEO and founder of Trademark, and other Trademark leaders as we talk to industry experts about the future of retail, multifamily, and mixed-use real estate. Thanks for checking us out. And now it’s time to lean in.

Kevin Kessinger: Hello, everybody. I am so excited to join for my first Leaning In podcast. This is officially episode number 68, but we’re going to do something we’ve not yet done. We’re going to turn the tables on our CEO Terry Montesi and subject him to the other side of the Q&A. I’m Kevin Kessinger, and I’m Trademark’s relatively new president and COO, which, among other things, earned me the honor of interviewing Terry today.

But before I subject him to the tougher questions, let’s start with an easier one. Terry, why am I here?

Terry Montesi: Well, thanks, Kevin. Why are you here? Well, this is a really easy one for me to answer. My personal wiring is right brain. I’m a creative. I am an interpersonal focused, art-centric spirit, passion-focused person, but not operations focused. And I have been CEO because I’m the founder and have been paying the overhead for a while, but I really have never earned the job as president and COO. I’ve been sort of doing some of that just because I was here. And I’ve never felt super qualified at it, have struggled to be sort of average at it. And I’m just so excited to have found somebody to partner with that really likes and understands and has experience on the operating side of the business, not only property operations, but corporate operations, that also understands the deal side of the business and has great interpersonal skills and is a lawyer because we’ve not had a general counsel. So somebody that really can help us manage and minimize the risk to our clients, to our business, and really just help take our operations from good to great. Welcome.

Kevin Kessinger: Thanks, Terry. I appreciate the sentiment. I’d like to keep my general counsel lawyering to a minimum while I’m here, but everything else is certainly what attracted me in the first place. So, with that one off the table, are we ready to go? Any topics off limits today?

Terry Montesi: Not that I can think of.

Kevin Kessinger: Great. So, Trademark’s been around for about 32 years, and one of the easier ways to start this conversation would be for me to just ask you to walk us through its evolution, but let’s break it down a bit. Let’s start with before time. Before Trademark, how did you get involved with real estate in the first place?

Terry Montesi: Well, it goes back a long way. When I was a kid, my family was in the retail grocery business in Memphis, Tennessee. And I’ll never forget driving around with my dad looking for grocery sites, sites to build our grocery stores on. We actually are known to have built the first grocery superstore in the country. In Memphis in 1960, we built a 63,000-foot store. And then at Preston Royal in Dallas, Safeway opened a store that very year and it was 29,000 feet in the gold corridor of Dallas, Texas. That does tell me that that was pretty unusual. And Brooks Cullum with the Tom Thumb folks in Dallas has actually told me that they took pilgrimages to Memphis to see our big stores. So, I used to ride around with my dad looking for sites. And so I’ll never forget that. I always kind of had that in my blood.

I went to UT Austin, not Knoxville, to a real estate finance MBA. And I interned for a family friend that had an industrial real estate company. And I really got the bug. And part of the reason I got the bug was because of the design and the impact on the built environment.

And then out of grad school, I went to work for Lincoln Property Company in Dallas. And my first assignment after about 90 days, I ended up a block from here at University and I-30, those two granite office buildings, they’re called University Center. And then after Lincoln, I left and started, in 1986, started Huff, Brous, McDowell & Montesi, which is a local Fort Worth-based brokerage and management company with some folks that were at Swearingen at the time. And the same year, my brother and I became Blockbuster Video’s fourth franchisee, and I was sort of the real estate expert in the group. And so, I got to do a lot of retail real estate, which kind of that’s how I got into retail real estate because I was actually in the office business with Lincoln Property Company.

Kevin Kessinger: Got it. So then in 1992, you launched Trademark, and we recently celebrated our 30-year anniversary, which encouraged you then to reflect on the company’s evolution. What stands out most for you when you think of that early 90s time period?

Terry Montesi: Well, that’s sort of easy. Anybody that’s still around that was there, that was the deepest recession of our lifetime, really the deepest recession since the Great Depression. And the opportunity was just everywhere. The reason I left Huff, Brous, McDowell & Montesi to form Trademark was because virtually every property, when you drove down Preston Road in Dallas or you drove down Central Expressway, you drove down Camp Beware or Hewland or I-30 in Fort Worth, almost every property had gone back to a bad bank or the Resolution Trust, RTC, or the FDIC, and everything was trading at 10, 15, 20, 30 cents on the dollar. And I wasn’t a brain surgeon, but man, it sure looked awfully cheap, and it sure seemed like, in a cyclical business, those were going to be historically low prices.

So that’s what really stands out to me. It was so obvious. I just wish I had a lot more access to capital because instead of buying one property that was one line out of a book that had 300 pages single space, and that was the property, so there’s thousands of properties, I wish I could have found enough money to buy the whole book, as opposed to one line on one of 300 pages.

Kevin Kessinger:  I think a few people would characterize the period that way.

Terry Montesi:  I think so too.

Kevin Kessinger: And now it’s 2024, two years beyond the 30 year anniversary. Is it fair to say in just the last two years, we further evolved, and if so, how?

Terry Montesi: Yeah, really, the last two to three. Three years ago, we started investing in a multifamily development ground-up team and the last two have been filled out that team. It’s now a five-member team and then our marketing, accounting, etc., ITHR departments support that team as well. And so, our multifamily entry, and then we just got one started, as you know, about 30 days ago here in Fort Worth, The Vickery, our first ground up project at a great location right across from downtown Fort Worth.

And then the other thing, evolution, is kind of a back to the future situation, it’s retail development ground up is back and with a vengeance. And so we’ve now got three ground up specialty grocery anchored boutique community centers, if you will. They’re going to be a tiny bit lifestyle center, a lot community center, some grocery anchored center, a little bit sort of soft power center. We’ve got three of those ground up working now and Lincoln Square, as you know, we bought from your old firm, ShopCore, is a major redevelopment, but it is a ground up retail and mixed use with multifamily and office development. We’re leaving some of the retail, but demoing a lot of it. So I think the fact that retail development is back is another big, that sort of evolution, back to the future.

Kevin Kessinger: It’s funny how some of those properties follow you in your career, isn’t it? You spend a lot of time at one place getting to know it, it ends up in other hands, and then you end up back home again.

So, let’s shift now, if we can, to your business philosophy, your leadership style. I shared with you previously that Trademark’s purpose statement resonated with me from the first time I read it, that it felt genuine and called me to action in a unique way, despite nearly 30 years of my own in the industry. The purpose statement: to be extraordinary stewards, enhance communities, and enrich lives. How did this come to be, and how do you think it differentiates us?

Terry Montesi: Yeah, so thanks for that question. So about 17, 18 years ago, I met a guy named Rand Stagen, who runs the Stagen Leadership Academy in Dallas. And since then, I’ve gone through their integral leadership program and gone through their sort of advanced leadership program. And Rand’s business helps, he helps consult for businesses and does all kinds of things.

But one of the things they do is purpose work. And so, they helped us, helped our entire team, got us through a process, and out of which, came our guiding principles and our purpose statement. And so, it was a year, year and a half long process of small groups, large groups, one-on-ones, going through words, etc., etc. And that one has stuck the whole time. We’ve actually made some tweaks to our guiding principles as our business has changed and culture has changed, but we haven’t touched that. And it just felt so right when you think about what we are. We’re stewards for people’s capital.

So, we work for, and it is something that I take very seriously, we work for police and fire and educators and public employees with all these pension funds that fund our institutional clients. And so you think about being an extraordinary steward to those people is really important. But we’re also an extraordinary steward to the people whose backyards we build in.

We’re here at a cool project, West Bend in Fort Worth, and I’m super proud watching people take selfies with our murals and gather here and have their kids roll around in our green, and people come off the trail into some of our restaurants or snack places. To be extraordinary stewards.

Then you think about enhancing communities and enriching lives. Well, enhancing communities, if you do the quality work we do, you build public spaces with your mixed-use projects and your retail projects. That sort of comes naturally when you do the kind of work we do.

And then enrich lives, so we also enrich the lives of the people, the guests that hang out in our properties. We enrich the lives of those pensioners that own the projects. We enrich the lives, we’re a stakeholder model business. We are very involved in conscious capitalism, adhere to that old adage of doing well by doing good. I really think capitalism is the most powerful agent of positive change ever in history. And I love the fact that we can make money but we can do great work, impact peoples’ lives, impact communities, help get great returns for pensioners, and at the same time, really enjoy what we do. And I think if you focus like that, making money is a byproduct that will follow you.

Kevin Kessinger: Well, I certainly agree that capitalism is a very powerful force, can be a positive force for change. And with the power of words, those nine words, again, certainly resonated with me. More recently, you’ve been citing examples of how our command of both the art and science of commercial real estate sets us apart. What’s the art, what’s the science, and why do we need capabilities in both areas?

Terry Montesi: Yeah, thanks for that question. We have, I think in good part, the last 20 years maybe been unknown for the art side. What does that mean? The art is understanding consumer tastes and behaviors, understanding people’s aspirations, understanding how to create wonder and a sense of discovery as you wander around our places, an understanding of how to engage people with public art and custom artisan touches, how to engage with the local arts community, how to engage the senses, all the senses to make a place just a place that people, they don’t necessarily always know why they like it, they just know they do. Because so many of our thoughts are in the unconscious mind or in the subconscious.

And so, we just think that understanding all that and paying attention to design and paying attention to walkability, paying attention to what people care about and what they like and what they love. So that’s the art side.

The science is how do we lower risk? How do we manage risk? How do we enhance the chances of outperformance? And last but not least, we have, as you know, proprietary research that can do the best job of any that we’ve seen in the country, of anyone ranking an intersection or a shopping center or a trade area based on the amount of retailer voids of the right retailers and the demographics. So what places have not only the best demos but the combination of the best demos and the best voids of the best retailers that are far enough away from their nearest store that there is a likelihood that they would go there. So, we’re very focused on the science and are actually putting that to work with an acquisition program right now, as you know.

Kevin Kessinger: I sure do. And I’ve shared with you previously that when you first told me about the research that you’d done, given the amount of data and science and analytics that I’ve worked with before in prior engagements-

Terry Montesi: Where was your last one?

Kevin Kessinger: I was with ShopCore, a Blackstone-owned company, and we had access to some just terrific resources to analyze not only our existing portfolio, but assets across the country. And when I had the opportunity to sit down with the team here and look at some of the work that you all had done previously and then really even over the last, call it, two to three months, really narrowed in with the most recent market dynamics, I found it to be an impressive piece of research that’s available to us. And I’m excited to leverage it going forward.

Terry Montesi: Thanks. Yeah. Your skepticism has waned a little bit.

Kevin Kessinger: It’s waned substantially, but I think that makes it battle tested, Terry. That’s what we’re looking for is to test it. I used to use the analogy, you have to float the ship across the horizon and keep shooting at it. And if it doesn’t sink, you know you have something.

Well, we could spend a lot of time on just business leadership and then philosophy. There’s a lot of podcasts out there that do, but I will try to keep us on track. Is there any one additional aspect of your business or leadership philosophy that you think is most important to the success of the company and the great team that we’ve assembled here?

Terry Montesi: Yeah, that was a really good question as I was just reading it. And I think what makes me want to think about what makes us different, what’s different about us versus when I look at other teams. I think we are not, we’re just not predictably transactional, which a lot of real estate businesses are. They just think of themselves as financial businesses. And I don’t. I think we’re artisans that employ art and science. We’re building a legacy. We’re leaving something behind that’s not just financial.

So, I think, what is it that’s different? It’s our people really care. One of our guiding principles is take it personally. And we really care about the quality of the work we’re doing because we know that it has an opportunity to have a really positive impact on the communities in which we’re working and on the built environment which leaves a legacy. And so, I think it’s like we really care because we know the work really matters and it’s going to be here a long time. And it can matter.

Some people can build a shopping only environment and it won’t have any impact on their life other than it’s a convenient, easy to use place to acquire goods. Everything we do is at least a little bit more than that. And a lot of what we do is a lot more than that. And so we feel like what we do has a much more material impact on people’s lives. And so we really care deeply about it. And I don’t think it costs us any money. I think it helps us make more money because we have that attitude.

Kevin Kessinger: I think you’re right. And it’s actually a great dovetail into where I wanted to go next. So you’ve built this company. You bring your unique experiences and leadership style to it. But the part that draws so many of us into this business are the projects themselves that we get to bring to life along the way. So remind me, how many total properties have we touched over the years?

Terry Montesi: I think it’s 52.

Kevin Kessinger: Okay. So, 52. Well, we can’t get through all of them. So, let’s narrow in. First, pick one of the projects from which maybe you learned a lot more than other projects.

Terry Montesi: Well, I think it would have to be Market Street Woodlands, which is a mixed-use development we did ground up, bought the land in 2002. So, it was a blank palette. It was one of the first three or four what would have come to be called town centers in the country. I know Easton and South Lake were both either open or under construction at the time. It was one of the early ones. And so we were pioneering in a way, but we also studied all kinds of existing mixed-use places. Some aren’t projects, they’re real streets, etc. Or they were projects that were built long before then, like Highland Park Village, Mizner Park, etc.

But I think it’s Market Street Woodlands. And I think if you think about what people always want to know, what did you learn, lessons learned there. Well, one is great trade area. You can’t underestimate the power of great real estate in a great trade area. And you can’t underestimate the importance of supply constraint. Because the Woodlands, the Woodlands Corp controlled everything, heavy-handed. They controlled how much retail would get built, where it would get built, how it would get built. And so, we were able to buy one of the only pieces of land in the Woodlands that ever sold to anybody other than themselves. They had developed almost all the retail, but this moment in time, they needed some cash, so we jumped on it really fast and made a deal.

And so, supply constraint matters. Having great development controls matters because their heavy hand has really caused the Woodlands to be a very pristine, high quality environment because nobody can build any schlock inside of it.

And that design matters. We hired a really big time, internationally renowned mixed use retail and mixed use design firm. And that quality matters because that project is mostly brick, and it has aged, for all those reasons, it has aged beautifully and has only gotten better every day, every week, every month, every year the last, what is that, 22 years. And that project today does over $1,000 a foot without Apple. And we have virtually every tenant that we could want that would go in a great suburb in the US. Apple is pretty much the only tenant we don’t have that’s in that trade area that we would want to have. And so, I think there’s just been a whole lot of great lessons learned there.

Kevin Kessinger: Well, it was a learning question, and I received a learning answer. I’m a student. Nobody can build any what? What was the term you used there? Nobody can build any schlock?

Terry Montesi: Schlock.

Kevin Kessinger: I’m learning something new today.

Terry Montesi: Crap would be another word you might understand.

Kevin Kessinger: I’ll take the first word, Terry.

Terry Montesi: Low-quality real estate development.

Kevin Kessinger: Consider me educated. This next one might be like asking somebody their favorite movie. I’ve asked favorite movies and I get told I can’t pick one, but I’ll ask you anyway. Do you have a personal favorite among the redevelopments with which you’ve been involved and why?

Terry Montesi: Yeah, I’m going to violate your question. I say no, but there are a few that stand out. So, one thing that some people may not know about Trademark, we have a really strong success track record at moving real estate developments, retail and mixed use from good to great.

And some of those that we’ve done at that end that are very high profile in markets that mean a lot to us are, for instance, and you’ll see why all of these do, Victory in downtown Dallas, which is the area that essentially surrounds and complements the American Airlines Center. It was broken when we got involved, and we were brought in to essentially take over and finish the development, redevelop, rebrand, etc., the whole, it was 170,000 foot, I think, district at the time. And we worked with the city and worked with the owners and operators of the AAC, and we made all kinds of changes. And some of them were atypical of what a developer would do.

We worked with the city to take what were really wide, really fast one-way streets to make them two-way, to add bike lanes, to get rid of medians and widen sidewalks and all those things, they all made it feel completely different to the pedestrian. So walkability is what everybody knows everybody wants and they have developed that for the car to get the car in and out of the AAC in a 15 minute period after the game essentially. And you think about that, that’s 200 nights a year and it’s 15 minutes. So what is that? 3% of the time. And so that was broken. And so, it may take an extra one minute to get in and out of there now, literally. I don’t notice any different. But for the pedestrian, it feels 100% different. So I’m really proud of that work.

Rice Village, we took an asset of Rice University for the Rice Endowment and flipped it upside down. There was a very competent REIT that owned Rice Village before the Rice Endowment exercised an option and bought it back from them. But we studied that, rebranded it, we took what was like a big old red brick strip center and kind of deconstructed it and made it look like it should have been, look like a street district. We converted some parking into public spaces and we were able to attract a bunch of best in class tenants. I know we did the first Shake Shack in Houston, the first Tecovas in Houston, just on and on. We crushed it there. And I talk to people all the time that go by there and say, oh, I didn’t know y’all do that. I just know that six or seven years ago, it got way better. And so, those are two very high profile things, and they’ll be around forever, that we changed.

A couple of others, one that I said that means a lot to me, in my hometown, the first lifestyle center ever developed by Pogan McEwen was called Saddle Creek, and it had been purchased by Heitman in the state of Florida. And one side of Poplar, that’s the big retail street in Memphis, one side of Poplar was doing very well on Saddle Creek. It was split in half by this huge street, so you can’t really walk the whole thing. And the other side, so one side was an A-side and one was like a C-side, like the development in Florida. I didn’t do that on purpose, by the way.

But anyway, so we were able to come up with a redevelopment plan. We had to talk Heitman and state of Florida into demolishing some space that was not over 10 or 15 years old, demolishing some of that, and then reconfiguring, building some new, but it made the parking better, it made the visibility better, and we bought a little out building, and now we have two A plus sides of the street. It’s essentially 100% leases. Sales have skyrocketed. Apple expanded. We get every single lifestyle, better tenant that comes to Memphis. They don’t go anywhere else. We haven’t lost one in years. Lulu went somewhere else, Lulu Lemon years ago. But after we got involved, they have now come back. So since then, we’ve not lost one tenant that we wanted.

That is a trade area, market dominant property. And I grew up in Memphis. It’s my hometown. And we took it from what felt like a strip center to feel like a real lifestyle center. It feels great there. We’ve really improved the public spaces, added murals, etc. So, I’d say those are some of the ones that come to mind.

Kevin Kessinger:  I just had a chance to tour that one about a month ago and really enjoyed the time with the on-site team there and to see the progress.

Terry Montesi: It’s a great looking project.

Kevin Kessinger: Well, we’ll get to our pipeline in just a minute, but before we leave, current projects, current portfolio.

Terry Montesi: And by the way, all of those, they don’t just look good. The financial performance has been astounding. Victory, we went from minus $500,000 NOI when we took over to $6 million when we finished. So, they’ve all been really big financial movers in a positive way, and they’ve enhanced their communities.

Kevin Kessinger: Well, you know better than anybody that that’s where my analysis started. All of that work I had done before I arrived at the property, but I always like getting there to see what it looks like on the ground. So, anything else in the current pipeline, any initiatives you want to call out or maybe things we’re able to do today that we weren’t able to do earlier in our history?

Terry Montesi: Well, I’ll say, you think about pipeline, current project, what gets me so excited are new initiatives. So a couple of things. Being back in the retail development, I mean, and we are back. Like I said, three ground up retail deals and then one big retail redevelopment that is going to be like a big new retail anchored mixed use project. So that’s big.

And then something we’re not able to do earlier in our history, took a little too long, I’m a slow learner, but I’m finally in the multifamily business. And interestingly, I get asked all the time, how has that been, transitioning into multifamily? And it has been very, I won’t call anything easy in real estate development because it’s not easy, but it’s been very natural. It has not been wrought with friction.

It’s possible that if we ever decide to get into the logistics and industrial business, which is such a difference, it’s not dealing with consumers like retail and multifamily do, that might be wrought with a lot more difficulty. But getting in the multifamily business has been very natural. The design of our first several multifamily ground-up developments and the financial performance I could not be happier with.

Kevin Kessinger: Got it. And you mentioned in that answer for the second time today that retail is back. And of course, I couldn’t agree more. And a lot of that has to do with market conditions that are continuing to evolve but dynamic throughout. So, you and I have long shared a passion for the retail and mixed-use side of this since we first worked on Watters Creek back in 2007 I think we decided, but Trademark isn’t a typical retail mixed-use developer. So, help people understand in today’s market condition or under today’s market conditions, where are we focused?

Terry Montesi: Yeah, so on the multifamily side. So one, we’re focused in, for ground-up development right now, we’re focused on DFW and Austin, two markets that are very well thought of by the capital markets, two markets, one we have office in, one many of us went to school in and we’re very familiar with. So, we’re focused right here. That’s our primary focus on our ground up program. Our investment program, we’re focused on the growth markets in the Sunbelt. There’s, say, 15 or so of those.

Also, I mentioned this sort of ground up retail that we see as being sort of a new, a little bit of a new product type or we don’t necessarily have a great name for it yet. Tommy Miller, our partner, calls it boutique community centers. They are anchored by specialty grocers. They have another soft junior or two or three. What would a soft junior be, Terry? Somebody like Total Wine or REI or not deep discount. So a few anchors, a lot of F&B, a lot of F&B demand, a lot of boutique services demand. We’re not depending on soft goods at all, but they will have, most will have some sort of public spaces, and they will have some zones that have real walkability. So, a little bit lifestyle center, a little bit community center, and a little bit neighborhood center. And we’re excited about that and not at all afraid of it.

If you just look at what’s performed well and you borrow what we’ve learned over the last 20, 25, 30 years of what performs well, it’s really the evolution because we don’t have all the soft goods fueling those big, like you mentioned Watters Creek, where you and I met. That was back when people were building 300,000 feet, 350,000 feet of shop space, and 175, 200 of it was soft goods. Well, today it’s almost zero new soft goods. And so, it’s a new thing that is boutique services, F&B, soft medical, wellness, that would be most of that, plus grocery and soft juniors, like I mentioned.

Kevin Kessinger: Great. So, can we talk then about some of what I guess I will call market fundamentals? So, when I turn on CNBC in the morning and get the latest data, what are the fundamentals that are driving the renewed interest in retail real estate and multifamily real estate? What’s behind this resurgence, Terry?

Terry Montesi: Well, I’ll start with multifamily, and its macro. We still have a housing shortage in the country and no different in Texas. But then in Texas, we have job growth and population growth and a housing shortage, and so it’s pretty simple. And the reality is too that as older stock ages, people always want, there’s always somebody that wants something new. So, there’s a little bit of that, but that is limited. It’s very limited.

But when you focus on markets like Dallas and Austin for your ground up, where you’ve got job and population growth, that kind of fuels an almost constant need. Now, right now in Austin, there’s a historic high number of units getting delivered this year, but then people are pulling back a lot. So, it won’t be the same in the following couple of years.

Kevin Kessinger: Timing is everything.

Terry Montesi: That’s right. And on the retail side, start with, again, supply and demand. So really, since you and I were delivering Watter’s Creek together in September, oh, the grand opening was October of 2008. So our timing was not great on that one. But of course, you start that five years earlier, you don’t know what the cycle is going to be doing. But since then, that’s 15, 16 years, we’ve really had virtually no additions to the new shopping center or spec shop space supply in this country.

So right now, the fundamentals are the strongest they’ve, I think, maybe ever been or certainly been since I’ve been paying attention the last 30 years. So, you’re now seeing rent growth, accelerate rent spreads, leasing spreads, and rent growth that are at or better than multifamily was 10 years ago when people were, when capital was rushing to multifamily. So, we’ve got serious rent growth. The overall retail market shopping center occupancies are like 96%. It depends on who you watch, but vacancies are 3 or 5%. And then the good stuff, all the good stuff we have is virtually 98%, 99% lease.

And you’re just waiting for the next guy who you don’t want as much as somebody new to have their lease roll. And once their lease rolls with no options, you have vacancy for a short period while you’re filling with somebody better. So it’s just a super, super healthy market. And for the really good developments in the really good markets, even today’s nearly frozen capital markets, they function for the best stuff. And so, we’re just focused on the very best markets, the very best trade areas in those markets, and the best users, tenants, or in multifamily, the best design with trade areas with the best historic demand.

Kevin Kessinger: Well, for those of us that are paying attention to that retail supply and demand curve to see the just complete lack of new retail development over that time period, we can look back and attribute it to what people predicted in a way of online killing retail, and then, of course, COVID was going to kill retail. And of course, none of that happened. And so to emerge with not only great supply demand dynamics but also a hardened core of great retailers certainly has us feeling pretty good.

But let’s be honest, for our listeners here, those are the tailwinds for us. What are the threats? What are the headwinds, if any, about which you’re concerned?

Terry Montesi: Yeah, so the uncertainties, the things we don’t control are the things that I’m concerned about. So inflation, we don’t control that. We pay serious attention to it. It sure looks like it is moderating materially, and when you look at the parts of inflation that fueled the big rise, it was really supply chain, it was COVID relief funds, those things have certainly- The supply chain, Peter Linneman in a recent podcast, he thinks supply chain is not only functioning, it’s at overcapacity, and he sees some real downward pressure, even possibly slight deflation. And so that’s one.

And one thing that Peter said that was super interesting was that he thinks inflation today is lower than is being reported because of housing. Rental housing, they report it on like a six-month lag because people sign year leases, so they report it six months later. He says, if you really counted what it is today, he thinks we’d be at zero or negative inflation. So he feels really good about that. But that’s an area of uncertainty.

And then what’s the Fed going to do? So we live and breathe in good part off of the 10-year treasury. And the 10-year treasury, everything tends to follow inflation, tends to follow the Fed. And he thinks the Fed has sort of over extended or overcooked their efforts to keep rates up. But so how soon- the fact that we don’t have any visibility around what the Fed’s really going to do, that’s not a headwind but it’s an uncertainty. I don’t see all that many headwinds right now because we’re coming out of a tough cycle. I see more potential tailwinds. It’s just how long before we get to any of them. In the interim, we have these headwinds that are remaining from the last few years.

Kevin Kessinger: Well, Peter had a little something to say about one of the biggest threats right now to density. The biggest threat right now is perhaps not acting when the opportunity is here.

Terry Montesi: Yeah, he said, so his clients say, what are the biggest risks. He says your biggest risk is not acting right now when the capital markets are the only thing that’s having a problem. The fundamentals are really good everywhere. And he’s not talking about the office business because it is its own unique thing, but everywhere else he says, so if you don’t take advantage of this down capital market period, that’s your biggest risk, which that’s an interesting perspective.

Kevin Kessinger: And it’s another good transition into our pipeline. So, I’ll give you the simple one. Have we ever had a bigger pipeline than we do right now?

Terry Montesi: Nope. We have eight projects we’re investing in design. Well, one’s under construction now. So, we now have one under construction and seven that we’re investing design dollars in, pre-leasing on the for retail and completing design and getting ready to be in the capital markets on the other multifamily.

Kevin Kessinger: Well, with all of three months tenure here, I guess I can’t take credit for any of that. So, I’ll use our airwaves here to thank the dedicated Trademark team for their hard work making it so. So, with eight in the pipeline already and the robust pipeline, is it fair to say we’re not really focused on additional acquisitions and growth?

Terry Montesi: Well, Kevin, funny you ask. No, it is not fair to say. I’d say right now, we’re being very cautious and very picky as we look for our next development, ground up development, to spend any design dollars and pursuit costs on. But we do have another initiative.

Our research, which I mentioned earlier, has gotten the attention of some folks in the capital markets, and we are actually about, within the next two weeks, about to be in the market to try to raise some money for a research centric, research directed acquisition program because we think the retail fundamentals are so strong but the capital markets have been still so slow to tiptoe back in that this is a very unique moment in time to acquire quality retail at higher cap rates than we think are justified.

Kevin Kessinger: So, with that, you know our podcast reaches our friends and partners with whom we’re already working and groups to whom we’ve been talking and maybe even some of what I will call our newest future friends. So for all of them, what do you want them to know about how partnering with us is special?

Terry Montesi: Well, I mentioned earlier that we really care. We’re really passionate. We take it really personally. I mean, I don’t know of another company of our size or anything like us that has a vice president of place making and design who was a former artist and landscape designer and has a VP of experience that is focused on delivering experiences at our properties and teaming up with essentially Hollywood and Los Angeles based folks to create a program and content at our properties.

I just think Trademark is, we’re just not all about the money and we’re just not all transactional. We think that we can be both and we can deliver great product for our communities. We can enhance their communities, enrich their lives, and drive sales more than had we not had that focus and drive NOI more than had we not had that focus.

Kevin Kessinger: Let’s pivot maybe just one more time or maybe we’ll get to a few other topics, but let’s pivot more to I guess what I want to call the foundation work. So, we’ve been blessed. I think I can say that. And for both of us, giving back has been a huge part of what drives us. Can you give us a quick history of when and why you and Allison launched our Make a Difference initiatives and how employees were empowered to give back?

Terry Montesi: Yeah, I’m going to start even before that. I remember growing up, and this is a little sappy, but it’s true. I just always had this sort of burning desire inside to make a difference, to let my life make a difference. I believe in God, and I feel like God gave me one shot at this life. Unlike Shirley MacLaine, I’m not a believer that we’re going to have multiple lives, and so I don’t talk to a little man on the top of a mountain in Peru. And so, I just have always felt like, hey, I need to make this life matter.

And part of how you really matter is not just how much you do for yourself, but how much you do for others. And so I just always felt like that was just really, really important. And my grandparents were Italian immigrants, and I’m just so grateful for the opportunity to have not had the sacrifices they had to make and just feel like to whom a lot is given, a lot is required.

Kevin Kessinger: Well, it’s certainly something that, again, is something that we’ve talked about and through work that I’d done with CoreGiving before and coming here to find out that there was a foundation that was put in place was a big part of my decision to come on board.

Terry Montesi: And I didn’t give the details. I’ll add to that. So when we had a couple of major liquidity events, some maybe 12 years ago, 12, 13 years ago, and just, as I thought about tithing, one way I processed it was that I could set up a personal foundation, which my wife and I did, and I set up a foundation and seeded it here at Trademark called the Make a Difference Foundation, and it enables us to match our employees giving and then to do other things, to give, etc. And I’m hoping as we continue to have liquidity events to continue to grow that.

Kevin Kessinger: I hope so as well. I know it’s something that a lot of people here are passionate about, and there’s several studies out there. We dig in a lot to what motivates people to work, and consistently across the board, working for others is the single biggest motivator.

So, okay, let me ask a question that might make you a little uncomfortable. You’re an accomplished CEO, you’re a founder of a company that’s done great things. I occasionally see you actually running down the halls, popping into meetings because you see something interesting on the screen about which you want to talk. It’s not childlike, Terry, but you have this enthusiasm, this passion. Am I reading that wrong? And if not, help me out. What’s driving that?

Terry Montesi: Oh, golly. I’m wired with some energy, that’s for sure. But it’s much more than that. I have been super blessed. And I wish that for all folks, all of my children certainly, that I’ve been blessed to find art and craft that is also a vocation. It’s never felt like a job. It feels like a vocation. It feels like a calling. And it is when I’m getting up in the morning, I’m excited to come hang out with the people that are here. I’m excited to come work on the projects we’re working on, put my artistic stamp on them. I’m excited to have calls with the sophisticated and sharp clients that we partner with.

So, I just love my work. I love the people I work with. I love the work we get to do. I love the impact we get to have. So, I just am still pumped. And so, if anybody is looking for me to retire anytime soon, unless God has another plan for me, you might be sorely disappointed.

Kevin Kessinger: I don’t think any of us are expecting that, Terry, and I’ll share that it’s infectious, not just for me, but for others at Trademark. Having glass windows throughout the office lets us get a good look into your enthusiasm.

Terry Montesi: Well, thanks.

Kevin Kessinger: Well, we’ve reached that time, I think. So, if we reflect on the conversation today, I’m a big believer in let’s have one takeaway. If there’s one thing you want our listeners to take away from our discussion today, what would it be?

Terry Montesi: Oh, I think that Trademark’s a little different, that it’s a company that cares about a lot, cares about its people, cares about the communities within which we work, cares about the pensioners that we’re stewards for, and that we believe that capitalism is okay. And I wish there were more conscious capitalists out there. I’m glad to be one.

But Trademark really cares and that you can do really well and have more than one stakeholder. The old view was your only stakeholder was your shareholder. And we do not believe that. And I think that’s part of why we have such a great team and a lot of like-minded people. And people feel it when they interview here; they go, you have a lot of really nice people. And I’m proud of that.

Okay, Kevin, I’m going to turn the tables on you now. So, after stints with DDR and ShopCore, big companies where you’ve learned a lot, what attracted you to come to a firm the size of Trademark that does what we do to hang out with us?

Kevin Kessinger: Well, I think I have to do two things or I have to respond two ways. The first, and it might seem cliche, but it really was the people. After those stints at DDR and at Shopcore, I’d reached a point where I could be very thoughtful in terms of the people with whom I want to spend some very long hours and under very, at times, stressful situations. And the process, I’ve obviously known you for years, but the team with whom you connected me when we first started talking last year to a person gave me a feeling that not only did they reflect our guiding principles and our purpose statement, but were genuinely fun people. And I’d shared with you that that for me is a singular characteristic all by itself. There’s work-life balance and there’s job satisfaction, but actual fun and joy in what we do was a big driving factor for me.

But that by itself really isn’t enough. And so, the second thing that really brought me here was Trademark’s potential. We’ve talked a lot today about the retail dynamics being what they are and the opportunities in today’s market. But opportunity is one thing. Being positioned to take advantage of it is very different. And so, I looked long and hard with you and with others at Trademark’s track record to see if it was something that was going to resonate when we were trying to advance new initiatives, and it’s an impressive track record and it does. I took a look at Trademark’s positioning from a balance sheet point of view and from a team’s point of view to drive these things.

And so, to find a company like Trademark that had the types of characteristics that are necessary to take advantage of these opportunities, things that you can’t manufacture, you can’t tomorrow decide you want to go out and acquire a good track record. You either have it or you don’t. And so the intersection of those two things, just a really powerful team that finds joy in what they do and a company that’s well positioned to take advantage of what are going to be some really exciting times in real estate made it a pretty easy choice for me.

Terry Montesi: That’s great to hear.

Kevin Kessinger: Well, thank you everybody for joining in today. For me, it was truly a pleasure to have the opportunity, Terry, to, again, put you on the spot and put you on the other side of the mic. We look forward to having you join again for our next podcast. Thank you.

Terry Montesi: Thanks, Kevin.

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