Pete Montgomery is a Broker of Retail Development at CMC Properties, which has owned and managed thousands of apartments, offices, and retail stores. When CMC selects a site that it’s going to build on, Pete prospects for potential commercial tenants.
In this episode, Pete discusses mixed-use development, taking calculated risks in up-and-coming markets, and what he looks for when identifying the next downtown hot spot.
Pete Montgomery | Real Estate Background
- Broker of Retail Development at CMC Properties, which has owned and managed thousands of apartments, offices, and retail stores. When they select a site that they are going to build on, Pete prospects potential commercial tenants.
- Previous episode: JF2966: Mixed-Use and Commercial Development ft. Pete Montgomery
- Mixed-use development projects in Hamilton, OH
- Currently scouting for next location
- Based in: Cincinnati, OH
- Say hi to him at:
- Best Ever Book: Extreme Ownership: How U.S. Navy SEALs Lead and Win, by Jocko Willink and Lief Babin
- Greatest Lesson: Be humble to your clients.
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Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel, and I'm with today's guest, Pete Montgomery. Pete is joining us from Cincinnati, Ohio. He is a second-time guest on the Best Ever Podcast. If you google Joe Fairless and Pete Montgomery, his episodes will pop up. Pete is a broker of retail development at CMC Properties, which has owned and managed 1000s of apartments, offices and retail stores. When CMC selects the site that they're going to build on, Pete prospects potential commercial tenants. Pete's portfolio consists of numerous mixed-use developments, and currently projects in Hamilton, Ohio, and he's scouting for his next location. Pete, thank you so much for joining us, and how are you today?
Pete Montgomery: I'm great, Ash. Thank you. How are you?
Ash Patel: I'm doing great, and thanks for coming back for a second time. Pete, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Pete Montgomery: Sure. So I've been in real estate for about 10 years now. I started on the residential side, quickly realized that was not for me, and moved to the commercial side. Now, and with CMC going on about 11 years, we are into mixed use development, and that's kind of my forte. I go out and help prospect for cities that we want to build in next, as well as potential retail commercial tenants that would go into our mixed-use projects.
So currently, right now we are on a project called Roscoe Flats in Hamilton, Ohio. Hamilton, Ohio is very hot right now; one reason, due to the [unintelligible 00:02:48.25] Sports Club that has just opened, the largest sports indoor facility in the country.
Ash Patel: Let's dive into that. Hamilton is 30 minutes from where I live, it's really 20 minutes from Cincinnati, and nobody knows this is going on. Literally, nobody knows. The largest sports complex in North America is 20 minutes outside of our door... And I've talked to people up until a few days ago, nobody's heard about this. How did you guys get to jump on this, and how did you know Hamilton was going to become a hotspot?
Pete Montgomery: Well, we didn't know that Hamilton was gonna become a hotspot. Actually, Hamilton had a pretty bad reputation. It started with a city manager named Joshua Smith. He approached us and said, "Hey, this sounds crazy, but we want to put a mixed use development downtown Hamilton." He said "There is potential of this sports complex coming called Spooky Nook." We had never heard of it at that point [unintelligible 00:03:44.15] Pennsylvania was currently the largest in the country... But it was in Pennsylvania, and it was not on our radar at all. So we were intrigued.
They showed us the development site, which was a former hospital, and we certainly saw the potential; it was right next to a river, right by the bike trail. We said "This is kind of our MO, we like it." But again, Hamilton had a pretty seedy reputation at the time.
So Mr. Cohen, my boss, asked me what I ,thought and I thought, "Well, if anybody can make it happen, we can make it happen", and we ended up acquiring the land from the city, and they were absolutely great to work with. We ended up doing our first mixed-use development there, on a whim, that maybe the sports complex would come, maybe it wouldn't. Luckily for us, we won, because it did get approved. So now Hamilton is probably the hottest city that is the best kept secret in the Tri-State.
Ash Patel: You guys rolled the dice on this one big time. You're developing a $100-million property or so...
Pete Montgomery: Our developments are a little smaller, but we're about a $20 to $25 million dollar development. But this will be our second one coming in that we just broke ground on. So by the time we're done, we'll be hitting 100. But we did roll the dice. Even to spend that significant amount of 20 to 25 million, especially in a city that nobody would touch... So it was a big risk for us.
Ash Patel: Has there been a time in your experience where you've rolled the dice or you've worked with a company that rolled the dice and lost?
Pete Montgomery: I'll be honest with you, and I can't take the credit for this... Mr. Cohen, again, has this foresight, that "Hey, we're gonna go into a downtown; it has to be historic, it has to have some of the original buildings, it has to look like a downtown... And we're going to take that sleepy downtown, that everybody passes through every day and says, "This is a great downtown. There's nothing here" and he decided this is going to be our new forte... And we're going to build in these downtown's... And we absolutely had a homerun on every site that we've built in thus far. Really, I can't say anything negative about it at all, because every time we built something there, the town changes within 12 months. It's one of the hottest cities around. So everything we've touched so far has been luckily gone our way. Hopefully, that continues, but you know how it is... But so far, so good.
Ash Patel: Yeah. And I can vouch for that. I've seen - everywhere you guys go, everybody else wants to be there a year later. You guys are the catalyst. So the city manager reached out to you; I would imagine every city manager reaches out to you guys, and says, "Hey, we want to mixed-use development like you did in these five other towns." You look for river, bike trail, historic buildings... What are other aspects that you look for, that maybe some of our Best Ever listeners can look for in places that they're going to invest? Is there a certain demographic, job growth, traffic count, household income?
Pete Montgomery: To be honest with you, it's going to be definitely the job count. It's going to be - the city plan is what we look for... But to be honest with you, it's more of its location... You've definitely got to have a city plan that's aggressive. And it's also, the people that are in the city, on the city council, city manager, mayor - everybody has to be on the same page. We don't really care about the demographics so much as just the location and the willingness to work with us.
Again, our MO - it has to be a downtown that's got some historic value to it, it's got to have the original buildings... We like that fullness, that area where people are like, "This is a great downtown, but we have to drive five miles to go get a steak" or "We want to get a street taco, but we have to go and spend money outside of our own city." So we try to look for things like that. And not everything's gonna be a home run, but... When you build it, I'm telling you, it changes everybody's outlook, and it starts from the inside with the City Council, with the city manager; everybody has to be on the same page.
Ash Patel: And in this case, proximity to interstates is not one of the criteria... Because Hamilton, it's not easy to get to; there's no interstates that are running through it. It's not the easiest place to get to.
Pete Montgomery: It's not. Now, that's what I'm getting at... So the good thing about Hamilton is - one, the sports complex being the largest in the country is a no-brainer. We rolled the dice. But before that even opened, which is just now getting ready to open, I've got retailers in there that have been going on five years now, waiting for this thing open... They're doing number one numbers better than some of the best cities in Cincinnati.
So for instance, I've got a retailer who has two locations - he's doing almost double the numbers in the city of Hamilton. So what happens is, all of a sudden, you're putting in this restaurant that nobody has anything in, the city doesn't have anything like it, and you start to see everybody in the city say, "You know what? We're going to support our restaurants in this city." So they all want to spend their money there.
How many times have you been in your hometown and you go "God, I wish there was a cool place I could spend my money at, and go buy a steak" or something like that, but you've got to drive. So being the big fish in a small pond is a very good thing. A lot of people say "I want to go into these areas where it's the hippest town right now." Well, at some point, that town was not the coolest town; it had to be built like that. So why would you want to open up where there's 10 hotdog places, 10 burger places, 10 pizza places? Open up where they're the only one, and be the one that initiates that, and see what happens.
Ash Patel: That's a good point. Is there a target age group that you want to attract? Is it 18 to 24, 25 to 34, mid 30s, 40s? What's the target that spends the money and all these bars, restaurants and boutique stores?
Pete Montgomery: We try to have that targeted at young professionals between the 25 to 45 mark, and what we're seeing is there's a lot of empty nesters that are saying "All the kids are gone. They're having their own families. We're tired of taking care of this big house. We want to be able to come home, not do any yard work, have a beer, and walk back upstairs." So we're getting a lot of mixed demographics, which is crazy. We didn't really plan on it, but it's kind of cool, because you've got mom and dad that just want to have fun here, and then you've got a young professional, and then you've got the kids right out of college, that just graduated, and everybody seems to be very happy. It's a big mix. It was kind of shocking to us, because we had our eyes set on certain demographics, but it's been very nice. Great tenants, and to see mom and dad get rid of that four-bedroom house they don't need any more - it's kind of neat to them, too. They get to have more time to have fun and just kind of enjoy life.
Ash Patel: That is cool. That's what I want to do when I grow up, live in one of your communities with the bars downstairs and the shops in a walking distance...
Ash Patel: Now, Pete, your responsibility is getting tenants for a lot of these commercial buildings. How do you convince them to roll the dice alongside of you?
Pete Montgomery: Well, the perfect example is, for instance - it's kind of crazy, but I overheard somebody that was at a football game recently... I won't mention the tenants' name or anything like that, but a friend of mine was at a restaurant and he overheard the manager saying "God, we'd love to come to Cincinnati." So he called me and said, "Hey, you're gonna believe this... We're at this cool, cool place, eating, and they were mentioned Cincinnati." So what did I do? I got on the phone the next day, called him, he didn't call me back; I waited another day, sent him an email... And actually, the following day, at 8 in the morning, I get a call, and it's the owner of this place. And two days later, they're in Cincinnati, touring. Today, right before I came on, I got an email saying, "Let's get an LOI together."
So you've got to be very aggressive. You've got to think out of the box. We try to go after tenants that are going to be a fit for the community that we're going into, so we try to ask people that are in the community, "What would you like to see here?" and we try to stay away from the big chains. We try to keep it more of a cool mom and pop type feel... But you've just got to go out and be aggressive. What I did doesn't happen all the time, but it sure happened, and it was a homerun for us.
Ash Patel: Yeah. Pete and I have been friends for quite a while... I was lucky enough to witness that phone call. He did it in front of us. And it's an iconic East Coast restaurant, that he just literally called up -- you went through the dialer directory, right?
Pete Montgomery: Yeah, I just googled it.
Ash Patel: Yeah, you got to the right person, and left a voicemail... And sure enough, they called him back. So taking that initiative. That's important. Just getting out there and putting yourself out there. Do you have to, at times, convince people to take a chance, let them know what you're doing? Is it a sales process, or is it just presenting and waiting for them to come around?
Pete Montgomery: First, you've got to sell yourself, I think, and gain the trust of some people. And I think that's easy to do. There's a lot of people out there that you're going to get calls every day... But the biggest thing is to be humble, be honest, be a little upfront with people and let them know that "Hey, I know you're not thinking of this area", and then once you get them out there, they go "You know, we like this guy. He's honest with me. Let's give him a chance."
A lot of people don't understand anything about Hamilton or about the sports complex. The place that I called when you were there, they had their eyes set on one of the hottest cities, which is called Oakley, or Hyde Park, in Cincinnati. Well, everybody goes there. Everybody has a restaurant there. There's 20, 30 different restaurants with every type of food you can think of. And we convinced him to come to Hamilton. Once I got him out there, he saw the site and the vision that I saw years ago, and now he's starting to understand.
So you've got to sometimes walk them through what's coming, show them what's going to be there. Just talking about just sending an email - everybody does that. You've got to get these people out there, walk them, talk to them, show them how excited you are about a site and what the benefits of it can be, and then get them introduced to the city manager. The reason we liked that place is because the city manager, the city council - everybody is amazing. When we did our tour, I had a council member there, a city manager there, the assistant city manager... You name it, they were there on our tour, and that really knocked the socks off of them, and now we're gonna do an LOI probably soon.
Ash Patel: Yeah. And our last call we dove into this, and you've taught me how important it is to have the city leadership pro-business, wanting to help attract the right tenants, and really just putting the effort out there. But we've seen other towns and municipalities where city council is divided, they're not on the same page. The city council meetings are just a crap show, and nothing gets done in those towns. They're still sleepy little towns, right?
Pete Montgomery: Correct.
Ash Patel: Now, a lot of Best Ever listeners have to be wondering - and I felt this for a long time too, I'm like, "Alright, I missed the boat on Hamilton." But in reality, you helped me get a building under contract a week ago, and it's in one of the hottest areas, like you said, in the Tri-State. How does somebody get into Hamilton, or the hotspots - Nashville, Miami - when everything seems to be blowing up, and they think they missed the boat? How do you still get a deal?
Pete Montgomery: You've got to find somebody like myself; I'm not saying that to toot my horn, because I'm not like that. But you've got to find someone that is passionate about the area. If you go into a city, and you go to visit it and you go, "Man, this is great", try to find somebody that knows the city, interview a couple brokers, [unintelligible 00:15:34.18] But what I did for you is the city actually came to me and said, "Hey, this building's going up for sale. Do you know anybody to be interested?" So right away, because I knew you, and I knew the significance of Hamilton, it was kind of almost like a pocket listing... And before I know it, you were in there literally the next day, and you made an offer, and probably one of the best deals I've seen in Hamilton.
So sometimes it's just luck... But you've got to really go out there and find somebody that's from that area, that knows the area, and stay in contact with that person. Because if we didn't stay in contact and know each other, I probably would have went to the next person; but I called you first. So it's all kind of luck, but you've got to do a little bit of your homework, too.
Ash Patel: Alright, I'm gonna put your feet to the fire...
Pete Montgomery: Sure.
Ash Patel: You've just relocated to Memphis, Tennessee. And Memphis is absolutely on fire. Everyone else is relocated there. It's the hottest town around. You, not knowing anybody, what are your immediate steps to try to procure real estate? You want to buy real estate for yourself.
Pete Montgomery: I think what I would do is one, talk to the locals there. Say there's the hottest bar, but then there's a lot next to it empty... A lot of times when you go to a city like this, you've got a bunch of big wigs that come in and people are hesitant to even meet with you. Try to become friendly with somebody that knows the person that owns that property, try to make relationships with them. Don't go in overconfident. What I like to do, I always bring a bottle of Kentucky bourbon with me, and I like to say, "Hey, look, I just want to give you a bottle of bourbon. Let's talk over some business, but let's make it friendly", things like that. Think out of the box. If you can get a meeting set up with the person that actually owns it, instead of going through 10 different outlets to make a friendship with them, that person is going to sell you that property before they would to anybody else.
So I would find the properties that I think would be one of the best, try to find out who owns it, and go around everybody and try to get to that person, and try to set up a meeting, become friends with them, try to convince them to see me at least once, and then try to sell yourself too, in a narrative to make an offer.
Ash Patel: So use unconventional methods to build your network in that locality.
Pete Montgomery: Pretty much.
Ash Patel: Don't do what everyone else is doing.
Pete Montgomery: Yeah, don't do what everyone else is doing. Everyone else is going to call that number on the site... You know what I do? I think out of the box; I'll send you a gift basket, say something funny on it, and say "Cincinnati has the worst wings in the world. We would love to have something that people would actually enjoy eating." You know, things like that, and just make them laugh. What they're going to do is they're gonna call you because you stand out. Don't just call up your broker and say "We're interested in this." You've got to think out of the box, you've got to stand out. If you want to get in there, and get in good, and get that property, you've got to do more than just make a phone call.
Ash Patel: Yeah, don't call and say "I'm new in town, I want your best deals. Give me your pocket listings."
Pete Montgomery: Yeah. Make a relationship. If I come into your town and act like I know everything, it's not gonna work; you've got to go in and you've got to do your due diligence, you've got to understand who owns what. A lot of times, it could be a brother who knows a piece of property, and he don't want to sell it because he hates the broker that the brother's working for. Things like that. And you've just got to really take your time. But that's stuff that pays off, just like it did for you on spot that we got you; that's a home run.
Ash Patel: Yeah. And the power is in the network.
Pete Montgomery: It is in the network. You've got to really know who you're talking to, and make sure that person is a good person, that knows people, that is not just kind of blowing smoke to get a commission... And kind of stay with that person; be loyal, but you've got to do your homework. Going into a new city is hard, but once you find that person that knows the right people... It's not going to be some broker make a phone call to; it's going to be somebody's cousin or brother that knows this person, and they're going to connect you, and then before you know it, you just got a piece of property for a quarter of what you thought.
Ash Patel: Pete, a lot of our listeners are in the residential and multifamily space. What advice would you give to them to try to get into non-residential commercial? ...whether it's office, retail...
Pete Montgomery: I think that what people get scared about is that they don't understand commercial. To me, if I was going to break into being new in -- coming from residential, if you're going to break into some commercial, start with a small warehouse, or start with a small strip center, or just maybe even a converted bi-level, or something like that, that's now office space. And you'd be surprised... People need places like that just as much as they need a place to live.
So I would start off small, something that's got nice visibility... But don't be scared of that stuff, because commercial to me is a lot easier to maintain, it's longer leased, and really, I think it's easier to make your money back on the commercial side.
Ash Patel: And we don't have showers, pets and kids... We have business owners.
Pete Montgomery: You don't have showers, pets, kids, you don't have any type of bugs to deal with, you don't have any type of eviction stuff, do you? Very rarely. But other than that, it's just the tenants, it's the way they're making their money. So it's easier to rent that stuff out. And to me, it's just an easier way to maintain property, and things like that. The commercial side is pretty much the only way I would go.
Ash Patel: Yeah, I agree. And once you have an investor who's gone from residential, even multifamily, to commercial, they never go back to residential.
Pete Montgomery: Residential is great. I manage 25 high-end homes on the side, and it's the biggest headache; probably more than anything I deal with. Commercial - if somebody has a problem, it's fixed the next day. Residential - I feel like I'm dealing with these people, more than anything else that's going on in my life. So it's a lot of work; commercial to me is 50% less work, and a lot more return.
Ash Patel: Yeah. Great advice. Pete, thanks for your time again; how do the Best Ever listeners get a hold of you?
Pete Montgomery: You can reach us at perfectsmalloffice.com. I'm in the Springdale location; reach out to me for any questions. I'd be more than happy to help, anything that you can think of, I'd be more than happy to give you some advice and see if I can help you out. And we love doing it.
Ash Patel: Pete Montgomery, thank you so much for your time again, dropping some great knowledge second time around. Thank you for your time.
Pete Montgomery: Ash, I appreciate it, and look forward to you opening that new spot soon.
Ash Patel: Yes, sir. Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five star review, share this podcast with someone you think can benefit from it. Also, follow, subscribe and have a Best Ever day.
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