3 min read February 2024 — In an interview with Invest:, Terry Montesi, chairman and CEO of Trademark Property Company, highlighted the timeless desire of mixed-use development, the impact from the Dallas-Fort Worth region’s consistent population and job growth and, lastly, how the company’s adaptive strategy helps it weather challenging economic phases.
Having operated Trademark Property for 31 years, how does this extensive experience shape the future of the company in the Dallas-Fort Worth market?
My career kicked off in Dallas, precisely with Lincoln Property Company, setting the stage for what has now been three fruitful decades in business. Our roots run deep in Dallas County and Tarrant County. Eventually, I ventured to Fort Worth and established Trademark nearly 32 years ago. Thus, operating for three decades is a significant milestone that shows our perseverance.
In terms of operations, our focus has primarily been on Dallas-Fort Worth, representing around 50% of our operations. The other half, roughly 50%, has been centered in what folks commonly refer to as the Sun Belt, stretching from California to Florida and spanning the Atlantic Coast.
The relationships cultivated in Dallas and Fort Worth have undeniably formed the bedrock of my career. We’ve also been keen on hiring local talent, often recruiting graduates from colleges in the Dallas-Fort Worth area. Our business footprint extends to various cities, including Fort Worth, Arlington, Dallas, Allen and more. It’s been a privilege to engage with diverse cities and their leaders across the Dallas-Fort Worth region. This region has proven to be an exceptional place for business and it remains our headquarters as it is a solid foundation from which to launch ventures nationwide.
What are the key opportunities in Dallas-Fort Worth and what strategies are you implementing to maximize these opportunities?
To delve a bit deeper into our core business, we specialize in mixed-use developments, encompassing retail and multifamily properties. The rationale behind our emphasis on ground-up development in the vibrant cities of Dallas and Austin is the remarkable population and job growth trends that have characterized these areas.
Throughout my career, I’ve witnessed consistent population and job growth in the Dallas-Fort Worth region and this trend shows no sign of slowing down. Presently, we are actively engaged in the design and development of several multifamily properties in both Dallas and Fort Worth. Additionally, we’re immersed in ground-up construction and redevelopment initiatives within the retail sector as we need space to accommodate the robust job market and the influx of residents into these dynamic cities.
Given the mixed-use market trends, how does Trademark Property prioritize staying ahead and meeting the changing demand for mixed-use spaces?
It’s important to clarify that many of the elements that underpin the success of mixed-use developments are not fleeting trends. Rather, they are enduring desires that have existed for generations. Take, for example, the innate human yearning to stroll from one place to another. It’s a timeless desire. Likewise, the urge to gather in vibrant, energetic spaces surrounded by fellow individuals transcends trends.
In many ways, what makes mixed-use developments thrive in Dallas or any other locale are fundamental human needs. When we examine the evolution of mixed-use projects, we find that their foundation lies in the ground plane, which predominantly comprises retail, food and beverage, and public spaces.
Contrasting this with the last significant development cycle, roughly spanning from 2000 to 2008, we have observed a shift. In contemporary mixed-use spaces, there’s a lesser emphasis on retail square footage. While retail remains a vital component, it has become more streamlined and curated. The focus has shifted from fashion and soft goods to food and beverage, boutique services and entertainment. This transformation has led to smaller, more specialized retail areas that cater to the evolving preferences of today’s mixed-use communities.
What is your perspective on the resurgence of experiential-focused retail, considering the previous notion in some sectors that retail was declining due to e-commerce?
Indeed, food and beverage have undergone a remarkable transformation, emerging as perhaps the most critical component of retail, especially within mixed-use environments. Notably, it’s the facet of retail least susceptible to the encroachments of e-commerce.
Speaking of e-commerce, there was a prevalent notion, often referred to as the “retail apocalypse,” between 2015 and 2020, suggesting that traditional retail would succumb to the rise of online shopping. However, contrary to these predictions, brick and mortar retail not only endured but thrived. This resilience was particularly evident among retailers who invested in omnichannel distribution strategies.
Even amid the rapid expansion of e-commerce and the disruptive impact of the COVID-19 pandemic, retail demonstrated its strength. While some weaker retailers did face challenges, those who adapted and embraced omnichannel approaches flourished. In fact, it’s safe to say that retail is enjoying one of its most robust phases. The fundamentals of retail real estate have never looked better, with high occupancy rates and substantial rent growth.
How do you anticipate technology will further disrupt and enhance both the development and operational aspects of the assets you’re involved with?
I can see a clear trend where technology is profoundly influencing our customers, and in turn, shaping the places we frequent. It’s evident in the significant investments made by retailers in technology, aimed at providing consumers with a broader spectrum of choices.
Consider the convenience of instant order options, which is the ability to order online and either pick up in-store or have items shipped directly from the store. This has given rise to the availability of same-day delivery services, where you can place an order in the morning and have it at your doorstep by the afternoon.
Furthermore, the concept of curbside pickup, where you simply send a text and someone delivers your purchase to your car, is becoming increasingly prevalent. All these technological advancements collectively provide customers with greater convenience and a plethora of choices, fundamentally transforming the retail landscape.
Given the current macroeconomic challenges, such as rising interest rates and inflation, how is your strategy for Dallas-Fort Worth real estate adapting to mitigate these impacts?
It is certainly worth noting that real estate operates in cycles and it’s impossible to predict them accurately. When you’re committed to the long term, as we are and intend to be, it’s crucial not to overreact to a specific phase in the cycle since its duration and characteristics can be unpredictable.
In many ways, our strategy involves staying the course. While many others have pulled back from development, we’ve chosen to lean in. This approach is grounded in the belief that when the majority of our competitors step away from the market and we secure financing to move forward, we gain a significant advantage. This advantage becomes particularly evident when very few competitors are opening new projects.
For instance, if we’re working on a multifamily development and a substantial portion of our competition retreats to the sidelines, moving forward can be a smart move. It’s highly likely that when our multifamily project is completed and there’s minimal competition in the market, we’ll outperform in terms of rental rates and the speed at which units are leased. This can lead to a quicker stabilization of the project with higher returns than initially anticipated.
In essence, we’re taking a contrarian approach, embracing development when others step back. Time will ultimately determine the wisdom of this strategy but it aligns with our current approach.
What is your outlook for Trademark Property Company and the Dallas-Fort Worth market and how will this outlook guide your priorities going forward?
Well, as I just mentioned, it’s unlikely that we’ll witness dramatic shifts in the macro economy in the near term, perhaps over the next nine to 12 months. However, looking further ahead, maybe in two or three years, we anticipate that inflation will subside first, followed by a gradual decrease in interest rates. Interestingly, many share the sentiment that interest rates will remain elevated for an extended period, which is a prevailing mantra at the Federal Reserve.
Our preparations align with this outlook, and it’s worth noting that this prolonged period of higher rates can deter some competition from entering the market, which we see as an opportunity. I recently read that Goldman Sachs places the odds of a recession at 15%, though I’d lean more towards 25% or 30%. Regardless, we’re preparing for the possibility of a mild recession, particularly in the context of Dallas-Fort Worth. Such a recession could bring certain advantages, like potentially lowering construction costs, among other factors. We remain cautious while recognizing that our industry is cyclical.
In our business, it’s akin to shipbuilding; we undertake projects that span several years and the macroeconomic landscape may change significantly by the time these projects reach completion. Thus, our strategy involves staying the course, remaining vigilant but not halting our operations.
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