Conscious Development
Trademark Property Co. is developing projects with the community in mind. The ambitious developer has nine retail and mixed-use projects underway across the country.
Interview by Randall Shearin – CLICK HERE for the full article
Shopping Center Business recently interviewed Terry Montesi, president and CEO of Trademark Property Company, and a speaker at our recent Entertainment Experience Evolution Conference at LA Live in Los Angeles. Trademark is known for adding value to properties through development and re development. The company is arguably the busiest retail developer in the business today, with nine large scale projects underway, Based in Fort Worth, Texas, the company is active nationally and has built a staff of over 100 people, many of whom joined the company due to its development philosophies and methodologies, which are different than many traditional development companies. SCB met Montesi at his office in Fort Worth, which itself was bustling amidst expansion and renovation.
SCB: What inspired you to start Trademark?
Montesi: I grew up in the retail business in Memphis. My family owned an independent grocer. My grandfather developed the first grocery superstore in the country; in 1960, he built a 63,000-square foot grocery store. People from allover the country took pilgrimages to Memphis to see the store. At the time, Safeway was building 30,000-square-foot stores. I went to graduate school at the University of Texas; when I finished I went to work for Lincoln Property Co. in their office leasing division. When the real estate crash happened in Texas in 1986, I left to start a leasing and management company. In 1992, I started Trademark. The company was originally founded out of a downturn in the Texas economy to buy distressed retail properties. We were buying a lot of properties from the Resolution Trust Corporation, especially shopping centers and flex properties. After all that was sold, the market had fully recovered and there was a need for new development. We evolved the company into a development company. Since then, we have developed or invested in over 11.5 million square feet and over $2 billion worth of properties. Our operating portfolio is over 6 million square feet.
SCB: For many years you were known as a big box and lifestyle center developer. How have you evolved that business?
Montesi: Today, our business today is two-pronged: regionally, we have a market-dominant community center business and nationally we have a program to redevelop non-viable lifestyle retail and mixed-use real estate. On our community platform. we have strong centers like Alliance Town Center and Waterside. Most of those centers are grocery-anchored or big box-anchored with experiential components. Many of our projects are hybrid and don’t exactly fit in a box. Our national business revolves around lifestyle centers, regional malls and mixed-use properties. Our track record with both sectors has been very good over the last 23 years.
SCB: Do you generally intend to sell properties after redevelopment?
Montesi: We have an average hold time for our properties of about seven years. We have institutional investment partners in most deals. Even though we hold a property that long, we have achieved a 20.5 percent IRR historically. We usually sell to the institutional investment community, including REITs, pension advisors and some large private owners. When we invest, we intend to hold for a long period. We are not a merchant builder. With our institutional investment partners, we are not a public company who is forced to do something or a merchant builder who is building to sell. We have a specialty of turning around retail centric places or adding innovative retail experiences to those that need a fresh look. Our company’s purpose is to be extraordinary stewards, enhance communities and enrich lives. You can interpret that in a lot of different ways. We are
able to do that; we really do change the community and enrich the lives of the investors, the people in the communities we serve, and our employees. We love the stewardship role in that. We have an institutional approach with an entrepreneurial, innovative mindset.
SCB: Some of the properties you are known for, in recent years, have included Alliance Town Center, Market Street – The Woodlands and La Palmera. What are some other projects you are working on?
Montesi: We’ve recently begun work on Rice Village for Rice University in Houston. The Rice Village Arcade is their largest holding – which we are rebranding – and we are working on a few other properties for them, re-envisioning and redeveloping them allover the next few years. We’ve also started a major redevelopment at Saddle Creek in Germantown, Tennessee, near Memphis, and a project in downtown Napa, California. We’re also involved in Victory Park in downtown Dallas. We have two projects here in Fort Worth that we have under development, including WestBend, where we are sitting now, and Waterside, about three miles away. In addition, we are in the process of evolving and will be developing three of our newest acquisitions – Uptown Village at Cedar Hill, The Shops at Highland Village and Burr Ridge Village Center.
SCB: You had a lot of success with La Palmera, the redevelopment of a regional mall in Corpus Christi, Texas. Do you see some of the successes you’ve had with La Palmera and other regional malls being applied to other malls around the country?
Montesi: Yes, but every mall is different. Every solution is different. My chief thought on redeveloping malls is that you should never assume that a trade area is dead. If we take La Palmera and Corpus Christi as an example, the trade area’s average income is not that high. You would think that area would not support a mall that performs at $650 per square foot. However, there are a number of wealthy people in that market, and you didn’t see them inside the mall before it was redeveloped. They drove to San Antonio for most things, but they were going to the Dillard’s; that store was outperforming the rest of the mall. Corpus Christi is also a gateway to the beaches and you have a lot of second home owners. The physical plant of the mall did not meet the aspirations, needs and expectations of the affluent customer. There are a lot of places where the best retail in the trade area is not meeting the needs of residents. Uptown Village at Cedar Hill, The Shops at Highland Village and Saddle Creek in Memphis are other projects we’ve been involved with that had the same issue. We believe that there are segments of the population in those markets who are driving to other centers because these centers weren’t meeting their needs.
SCB: You are working on three large scale urban projects right now.
Montesi: Yes, WestBend in Fort Worth; Napa Center in Napa, California; and Victory Park in Dallas. These are going to be urban mixed-use places. WestBend was an office building with 6,000 square feet of retail. We are redeveloping it so that the office is expanded and we will have 180,000 square feet of office and almost 100,000 square feet of retail. We’re accommodating most of the expansion by replacing a large surface parking lot with an 800-space garage. Simon now owns the successful University Park Village directly across the street, and our retail will essentially be the new, fresh extension of that center. Together, these properties will have about 275,000 square feet of retail, which equates to the small shop space in a mall. This will be a market dominant lifestyle retail district. Our project is anchored by The Fresh Market, which will open this spring. In Napa, we are taking a distressed project within the city-street grid and adding a four-star hotel on top of tremendous lifestyle amenities. The design includes significant public space. The Napa Valley area has no meaningful concentration of retail. At Victory Park, we are re-envisioning the retail and streetscape. That development was really never finished. We are redeveloping, re merchandising and evolving the project substantially. The before and after here will be as dramatic as anything I have ever seen in my life.
SCB: You are involved with the redevelopment of Saddle Creek in Memphis, which is widely known as the first lifestyle center in the country. What are your plans for that center?
Montesi: An institutional owner has asked us to evolve the center and redevelop it. I grew up about three miles from Saddle Creek, so I know the market well. It is in Germantown, Tennessee, a suburb of Memphis. The center is 142,000 square feet today; when we finish, it will be closer to 170,000 square feet. We have demolished sections of the center and are building a large new addition. We are completely reconfiguring the parking to improve the center’s convenience, visibility and signage. We are also going to improve storefront heights so that the new Saddle Creek will feel dramatically different. The changes will enhance its ability to dominate the market for upscale and specialty retail. It already has a great start; Saddle Creek has the only Apple store in the market, as well as the only Anthropologie, Banana Republic, Michael Kors, Kate Spade and Brooks Brothers.
SCB: You are developing Waterside along the Trinity River in Fort Worth. You have an interesting approach to that project. Tell us about it.
Montesi: Waterside is a 63-acre parcel in Fort Worth. At the heart of it will be a Whole Foods Market-anchored hybrid community and lifestyle center. There will be a l-acre public space called ‘The Grove’ at the center of the project on which we are investing almost $2 million. Transwestern will develop apartments directly on The Grove, and we will have three to four restaurants as well. Water side will be our first ‘Conscious Place.’ We are involved in Conscious Capital ism, a non-profit corporation started by John Mackey, founder of Whole Foods Market, and Kip Tindall, founder of The Container Store. The goals of the organization are to espouse the benefits of capitalism and the stakeholder model, as opposed to the reputation of capitalists as greedy, terrible people. There are a lot of capitalists who are changing the world for the better. With this inspiration, we developed the idea of the ‘Conscious Place.’ Most of the retail places in the country are not very conscious. They are full of pavement and sidewalks; all the activity is in generic buildings. We partnered with Whole Foods Market to create the first ‘Conscious Place’ at Waterside. What does that mean? We are going to have some of our parking shaded by solar pan els. We will have an outdoor community room that will have room for 60 patrons in a shaded area with heaters and fans in which we will have a large video screen we call our Inspiration Station. It will have inspirational quotes and images, it may also host the Texas vs. Oklahoma game on a Saturday afternoon, and inspirational videos. All that helps bring people together. There will be solar powered charging stations for handheld electronic devices. There will be inspirational quotes, play areas for kids and adults, and public art, as well as works by local artisans. We want to have a place of commerce, community, meaning and purpose. We want people to feel that we are enhancing their lives.
SCB: You are working on a number of projects that seem to have gotten to a point with other developers and then weren’t pushed to the next level. Where do you feel Trademark can take those projects?
Montesi: We approach development and investment from a long term perspective. A lot of developers just don’t have that in their thinking. When they design projects, they are often in a hurry to build and sell, or they are trying to please civic organizations. We start most developments by listening to the community. We hold focus groups and community meetings. At Waterside, we’ve had 14 or 15 community engagement sessions, from 20 people to 150 people, asking for ideas. Even when we take over other projects, we go back to the communities; and we visit with the retailers. We are extremely collaborative. We approach our business as an innovator; we are not afraid to try new things. We think it is all about the experience. It is all about what a place can offer people that the Internet cannot. We try to listen to our customers and anticipate their needs. We are committed to evolving the experience that can be had at a shopping center. It can be a difficult decision whether or not to demo a building because it just doesn’t fit with the project, or to spend money on public art or shade structures. A conventional mindset would have you thinking, ‘what is my return going to be?’ You won’t necessarily be able to show a return on these types of investments. A tenant isn’t going to pay you 25 cents more per square foot in rent because you have spent this money. The numbers will return in the sales, loyalty and emotional connection. At La Palmera, we have invested in that community and the community has responded in a big way. Part of that was getting the community aligned with us.