Commercial Real Estate Development Strategy for Reviving Small City Downtowns

Pete Montgomery (00:00)
Yeah, it’s good. You know, the biggest thing I can tell anybody that’s going to be doing any development is do your homework. One thing that, that, that I was taught by, by Mr. Cohen was he’ll go out and before we step foot into a city council meeting to even propose something, he will walk that city at night. He’ll walk it at the end of the day. He’ll talk to business owners that are there, ask them what they would like to see there, what their needs are, what, what, what could we do that would make the city thrive?

Cody Crabb (01:58)
Welcome back to the Real Estate Pros podcast. I’m Cody Crabb with Investor Fuel. Today I’m joined by Pete Montgomery out of the Cincinnati area. He is the Director of Commercial Leasing and New Development at CMC Properties, where they focus on revitalizing historic downtowns and bringing new life into overlooked markets. We’re gonna talk about how to pick the right cities, how to approach development in these kinds of areas, and what it actually takes to make this type of deal work.

Pete, thank you so much for joining us today.

Pete Montgomery (02:26)
I appreciate you having me on today.

Cody Crabb (02:27)
course, yeah, happy to do it. So for people listening, how did you get into this niche in the first place with commercial real estate and development?

Pete Montgomery (02:36)
Well, about 20 years ago, I was actually in the residential side where I was kind of flipping homes and ⁓ had a portfolio of probably about 75 to 80 homes. I was managing to and flip it and I’m renting them out and I come to realize that I really hated the residential side. Not hated it, but it was just a lot of work and a lot of, I felt more like a counselor than I did a real estate person because I was just getting calls left and right. So a friend of mine who was,

Pretty well known here in Cincinnati as the go-to guy for commercials said, you know what, you got to get out of the residential side, try commercial, it’s between night and day, you’re going to love it. So I applied at CMC Properties, I’ve been with them going on 14 years now, and he was right, I absolutely love the commercial side, will never go back, and it is 100 % right, between night and day. So that’s kind how I got started.

Cody Crabb (03:28)
Wow,

wow, that’s, mean, it sounded like was like love at first sight pretty much as he switched over. So out of curious, I’m curious then, so give us a little rundown of how they were so different. It seems like it kind of was night and day for you.

Pete Montgomery (03:43)
Well, so what we do is ⁓ we manage a lot of residential apartment buildings, but we also have a commercial site that’s pretty big also. We are pretty much known as the go-to people for office space. Our product is called the Perfect Small Office, and we have seven locations throughout the Tri-State area. Think of it as you and your partner just decided you wanted to open up your own law firm or a real estate firm. You could come into one of our locations, get an office that day.

month to month, yearly. so it was just, it was very unique and different for me. got to meet several, several different people and help them grow their business. And I just fell in love with it. From there, Jim Cohn, who’s the president of CMC properties, he said, Hey Pete, you you’re, you’re, really good at sales. What do you think about helping out with some, some of the bigger stuff, some of the retail projects, you know, the, the, the cool stuff, the restaurants, the bars, the nightlife things. And I said, absolutely. So

He has been my mentor for going on 10, 12 years now and eventually just followed his step, watched everything he did and then now I’m the director of commercial leasing and new development. you ⁓ know, it’s every day I wake up, I love coming to work, I love what I do. It doesn’t feel like a job, it feels more like ⁓ it’s exciting to go to work, believe it or not.

Cody Crabb (05:49)
That is awesome. You can’t really ask for a better situation than that. Then you’re excited to be doing what you do every day. So congratulations. ⁓ So you made that jump into commercial. What was the first deal or project where you remember it really clicking for you at first?

Pete Montgomery (05:57)
Exactly. Yes.

I think the first deal is when they put me at, when I first started, I kind of got a reputation of, this guy can sell. He can close deals. So ⁓ what I figured out pretty quickly is the commissions ⁓ that come with commercial, to me, was one of the biggest motivations at first. And then I started thinking to myself, well, okay, I filled up this property. I said, I went to the owner and I said,

Mr. Cohen, I want to be at the worst property that we have. And he looked at me like I was crazy. And he said, why is that? And I said, because I want to take that property and I want to fill it. So they stuck me in a location that was kind of more of like an urban kind of location. It had a lot of younger type of people that were just coming out of college. It kind of mixed with just the urban feel and just a different type of mix versus being.

in an area that’s all business or strictly lawyers or strictly doctors, things like that. So what I did is I figured out a way to lease to people that have never been leased to before and came up with just different strategies as far as social media, using what’s out there to a different level that not many people have done before. Back in the day, commercial was very, know, you had to wear a suit, to portray a certain image. What I did is I took that and made it fun and funny.

So I would, you know, my daughter got me into TikTok back when COVID hit because there’s nothing else to do. And I said, you know what? I said, this is a pretty cool idea. Why don’t we start doing walkthroughs and videos on TikTok and promoting this stuff? Everybody thought it was kind of crazy. Not a lot of people knew what TikTok, but they thought it was more for my daughter, to be honest with you. She actually edited my first video and we did a fly by with some music to it over one of our new developments.

Cody Crabb (07:28)
Hmm.

You

Pete Montgomery (07:56)
and man it just took off like wildfire and from there I just kind of fell in love with it because I ended up leasing up the worst location and made it one of the best. It’s still to this day one of the top locations and went from like 60 % full up to almost 98 % full and then for five years straight we were 100 % full. So it was, that’s the type of thing that when you take something it’s kind of everybody’s like there’s no way you’re gonna do something there and making it ⁓ the best.

Cody Crabb (07:59)
Mmm.

Pete Montgomery (08:22)
the best number one property, that’s what makes me kind of thrive in doing what I do.

Cody Crabb (08:29)
Yeah, it sounds like you kind of just found a system that worked and then just kind of went for it after that, which is awesome. ⁓

Pete Montgomery (08:37)
Yeah, you got to kind of

think out of the box a little bit when you’re doing stuff like this. So if you’re just like every other broker, every other person, anybody can say, hey, here’s an empty space. But you got to sell yourself first. then you got to, every call that comes in, you got to make sure you answer that call and call those people back that day. So that’s something I learned pretty quick.

Cody Crabb (08:59)
Okay, yeah, think, yeah, I’ve talked to some people that kind of have maybe like a more casual style or maybe they like, kind of swear in their marketing or something like that. they’re intentionally kind of excluding some people from working with them, but it seems, and on its face, they’re like, yeah, people get worried that I’m gonna alienate clients or whatever, but it’s the opposite. Like people see that and they’re drawn to whatever I’m putting out there and that’s, you know, I don’t wanna work with those lame-os anyway.

Pete Montgomery (09:08)
Yes.

Cody Crabb (09:26)
that are worried about me swearing in a Facebook post. it’s like…

Pete Montgomery (09:27)
You’ll get there.

Go ahead.

Cody Crabb (09:32)
No, was just gonna say, that’s a good strategy to kind of, you’re kind of doing some lead selection. It’s weeding through the people that may not wanna work with you anyway.

Pete Montgomery (10:17)
Yeah, it’s funny to see somebody that’s got buildings that are like, say, I dealt with this one gentleman in his 80s and still at it daily. he said, Pete, how come I cannot rent this building? said, well, I’d say the first thing you’re doing is you’re overpriced. And he said, well, it’s a certain area, which in Cincinnati is known for being overpriced. And I said, let’s just drop it a little bit. Let’s fill it up. And by the time these people get in here and see all the amenities, how nice the area is.

then we raise it up. did that, we filled it up and you just got to get some people that think the same way and get them to change this a little bit. Because if you don’t, you’re going to kind of be that guy that just has a sign in the yard or on a building and you get a call and maybe you get it rented in six months. I like to get stuff rented 30 days, 40 days, know what I mean? Stuff like that. So you just got to think out of the box like we were talking about.

Cody Crabb (11:09)
Yeah, okay, so thinking outside of the box, I’d love to hear, do you have any other things that you’ve tried where you feel like that’s outside the box in your marketing stuff or things like that? I’m curious, because it sounds like you think that’s a real core part of being successful.

Pete Montgomery (11:27)
Yeah,

so the biggest thing is do what nobody else is doing. Like I said, if you go into any market, and I love every broker I work with, not everyone, but you’ll notice that if you deal with brokers, especially owners, there’s a lot of brokers that kind of get little bit, I’d say, conceited or maybe a little bit, they think that they’re kind of like, I always compare them to maybe like on the movie where Tom Cruise goes, me the money. They get kind of a little bit of ego.

And what I do is I make it so to make it very friendly and easy for anybody to talk to me. Instead of having the ego, which yeah, there are probably there’s some great brokers out there that do amazing, but there’s also a lot of people that won’t do business with that broker. And I keep hearing this over and over from different owners and they go, you know, you’re so different. actually, you go to the showings. It doesn’t matter if the person might not qualify or not, you still show them.

And in my mind, I look at it like this, if this person doesn’t qualify here, maybe they can qualify at a smaller unit or something that’s less expensive. So it’s just about basically customer service 101, call people back, answer your phone, because if you don’t answer, they’re gonna call somebody else that will answer. then don’t be afraid to do social media, put yourself out there. You don’t have to act crazy, you don’t have to be silly, but a simple video ⁓ and you can even talk through it.

Cody Crabb (12:39)
Yeah.

Pete Montgomery (12:50)
People like to see something before they go and waste their time and say this isn’t for me. And I found that that really helped a lot is actually doing tours through the buildings.

Cody Crabb (12:58)
Yeah, I mean, I’m just thinking through like maybe somebody, maybe there’s somebody that’s out there that’s like, I’m so tired of all the people that are acting all crazy to get attention on social media and they come across you and you are really straight-laced and to the point and you’ve given good information. That’s the kind of person you’re gonna attract. So that’s my point is that, yeah, you just kind of, you’ll attract what you put out there. So I think that’s great. So all right, let’s, go ahead.

Pete Montgomery (13:15)
Yes.

⁓ I’ll talk to later.

Y’all had said 100%.

Cody Crabb (13:25)
100%. So it looks, it sounds like a lot of this just kind of comes down to responsiveness and showing up, which…

Pete Montgomery (13:34)
Well, a lot of

when the leasing, as far as the leasing and selling stuff, that’s where you have to be the sales guy and kind of in the customer service comes into part. Once you get into development, that’s a lot different, then that’s more of relationship building. So, what we do is we look for cities that have a downtown, typically a historic downtown, maybe something that used to be really, really

Cody Crabb (13:49)
Sure. Yeah.

Pete Montgomery (14:03)
cool back in its day and it’s kind of sleepy. It’s just people forgot about it, but man, it’s got great bones. It’s got a great downtown. And then we try to find something that’s close to either a bike trail, a walking trail, a river. So we like that those are kind of what we target. We want a historic downtowns that are sleepy, forgot about. want something that is going to be by a bike trail, running path, some sort of a river lake so that they can get exercise. And that’s where we try to focus in on those types of cities.

Cody Crabb (14:31)
Interesting. Okay, so ⁓ let’s talk about the market right now. Something that you kind of mentioned was that finding land itself has been a challenge for you. So because you mentioned those are the ones you target, I’m curious, why has that been a challenge for you?

Pete Montgomery (14:42)
Yes.

Well, because when we go to find land, we typically don’t purchase land. So that’s what the challenge is. When I say we don’t purchase land, we ⁓ only deal with cities that own land and are key in their downtowns. So if we come into a city and they say, we don’t have anything down here, we’d love for you to build, we’ll give you tax credit, whatever you want, but you got to buy the acreage, we won’t touch it. So what we do is we look for a city that’s got

that’s got key property to enter downtown. But more important than that, we also build a relationship. So a city manager to us is worth its weight in gold. If you are dealing with a city manager that’s amazing and is putting in his effort to re recreate the city to make it what it could be or what it used to be, that’s what we look for also. we zero in on on some, just some good city managers. Most of them I’ve ever met have been great.

I think I’ve only met one and he was still great. It’s just they didn’t own any property. we had to, you know, we couldn’t, we couldn’t work with them, but that’s a big key is, is know who you’re talking to, see what kind of land that they have. And when I say we don’t pay for it, we don’t pay somebody that’s not with the city because we do pay for it, but at a very discounted rate because we’re investing 25 to $30 million investment and going to change your downtown. So we need all the help we can get to make that investment work.

Cody Crabb (16:47)
So just to make it clear for the audience, so what is it that the city’s bringing to the table and what is it that you’re bringing to the table and what are each of you responsible for?

Pete Montgomery (16:56)
So what we bring to the table is we’re going to drop 200 to 300. Typically what we do is we go about, we do four stories. We do about 100 to 105 apartments. Reason being, key reason for that is you can manage an apartment building like that with one manager and one maintenance man. So that’s something we think about. We want to keep some of your biggest expenses salary. So with that type of those type of units, you can do one manager and one maintenance man.

So what we bring is we’re gonna drop into your downtown that’s just nobody’s that’s got every shop boarded up that no businesses are here. Everybody’s leaving your downtown to go three miles to five miles down the road and spend their money because there’s no restaurants here. There’s no nightlife. So what we do is we bring that back to that city. We’re gonna invest 25, $30 million in your downtown. And I can tell you right now, we’re gonna make this downtown one of the coolest downtowns that you’ve ever seen like it used to be.

For instance, we did our first project was in downtown Milford, Ohio. Now we didn’t do a mixed use there because there wasn’t enough room, but we dropped in a first time in probably ever in the middle of downtown, about a hundred unit high-end apartment building overlooks the little Miami river. And I could tell you right now, you can’t get a storefront in Milford. And they got some of the hottest restaurants in the city there. They just announced yesterday, Milford, Ohio. Yeah. So before we were there,

Cody Crabb (18:15)
Milford.

Pete Montgomery (18:18)
They had a bunch of shops that were cool, but they were like, you know, like a little record shop or a little camp, but now they have breweries. have some of the hottest restaurants they’ve got. They just announced yesterday. They’ve got three new developments that are, taking bids on or, know, so it’s just booming there. And then we took that same model and we went to a city called Hamilton, Ohio. Hamilton, Ohio had a very bad reputation. Used to be in its glory days to be amazing. And now Hamilton, Ohio, when we first went there six years ago,

I remember Mr. Cohen, president of CMC property said to me, Pete, do you think you can get some of your restaurants here that you always get? I go, are you insane? I said, there’s no way. Well, that’s when we met Joshua Smith, who was the city manager of Hamilton, Ohio at that time. And that’s where it was key to me. That’s when I started to learn, because I’m still learning every day from Mr. Cohen, that building a relationship and having a good city manager is key. He ended up getting the spooky nook sports.

Sports Complex, is the largest indoor sports complex in the country to come to Hamilton, Ohio. So once that came, we said, heck yeah, we’re gonna do it. We built a hundred and something unit apart, mixed use development right at an old hospital site. And before you know it, we had about 15,000 square foot of retail. We landed a five star restaurant, then we landed an Aveda salon and then another restaurant, another restaurant, and they are still full to this day. And there’s a waiting list for the apartments.

Cody Crabb (19:20)
Wow.

Pete Montgomery (19:43)
You go to that city today and it is one of the nicest, just most fun, live, and people are walking everywhere. When we first went there, people were scared to walk at night. So that’s what we do. We go into a downtown, not necessarily has to be a bad downtown. It just happened to be Hamilton at a pretty bad reputation. Now it’s one of the hottest cities around. So it’s neat to see that happen.

Cody Crabb (20:05)
Yeah, what about like, have you ever worked with a project that did not have a historic, ⁓ like it maybe had no reputation, no history, or is that, that’s pretty much a requirement, or have you ever kind of taken something out of, from nothing and built it up?

Pete Montgomery (20:18)
I

When I say nothing, mean, every city that we go into has got its character and they all have got something, but ⁓ we haven’t had any failures and we haven’t been to a place where there’s nothing at all. We’ve tried. We tried to go to a city where the downtown was just sad, but the city around it was like, I mean, that’s anybody wanted to live in a city.

And what happened is a lot of red tape kind of got in the mix of it. some people, some people wanted a building in the downtown. Some people saw the vision and said, we need a hub for our downtown. And it ended up getting voted against, against our development. Nothing that we did wrong, nothing that the city did wrong. It’s just, some people weren’t ready for change at that time. When you drop a four story mixed use development, it’s gorgeous right in the middle of your downtown.

people that have been there forever get a little upset because they think Section 8 or they think, you know, what’s going to happen? It’s going to, you know, put a bunch of kids in our school. They don’t understand that the developments we do are typically empty nesters, young professionals. If there are families that go there, they are there while they’re building a house in that city. So it’s a win-win for the whole city because it really, drops in two to 300 people in your core city. And then all of sudden,

Every storefront that’s empty becomes full. Every building that had paint shipping off, now the owner of that building is painting it because they say, my gosh, we can rent this for triple what we were renting it for. So that’s what we do. We’ve never really had a city that’s been nothing and then we bought it, we brought it up because we always pick a city that’s got character to it. I mean, they’ve been sleepy. Don’t get me wrong. I’ve been to cities where I’m like at nine o’clock, you could shoot a cannon down the middle of street and nobody would even know it.

And ⁓ those are the cities that we love because ⁓ those are the cities that the city managers come to us and say, we need nightlife. So what do we do? We’ve dropped in at Mixy’s Development. I put in some of the hottest restaurants. And before you know it, they’re getting people from 20, 30 miles away. They’re coming to their city now. And then they got outside patios with music going. So that’s what we do. We have to kind of stick to our…

Cody Crabb (22:07)
Ha

Yeah.

Pete Montgomery (22:34)
thing that works best and that is finding a city that’s, you we love the historic buildings. We love, it’s gotta have at least two to three, one to two of those options anyways that we talked about.

Cody Crabb (22:44)
Yeah, I think that’s smart, because I mean, there’s always, you could always do more or different things, but if you found something that works and you’re not running short on projects, I say why, you know, if it ain’t broke, don’t fix it. Just keep moving on with what you’re doing. ⁓ So yeah, it sounds like you’ve really kind of dialed in what’s been working for you, and it’s really paid off. I bet it’s rewarding too, to kind of see these places that maybe were a little unsafe, or people felt like they were unsafe, ⁓ and they’re kind of transforming into really cool.

Pete Montgomery (23:02)
Yes. Yeah.

Cody Crabb (23:14)
like well used places of the community.

Pete Montgomery (23:14)
It’s

really neat. It’s good to see it. what makes me just want to do the next city, find the next city. We’re currently looking for our next development. We’re in talks with Middletown, Ohio, which would be one of their first prior developments in their downtown in probably a hundred years. But it’s, know, and it’s another thing just like we’ve done it. I went through the city. The downtown is gorgeous. have an opera house there that is

probably 100 years old, it’s amazing. And nobody knows a lot about the historic stuff down there. So the problem is there’s nobody down there. if we end up building there, which we’re pretty close to hopefully getting it done, it’ll probably be one of our more trickier ones because we don’t know the area as well as we do. It’s a little farther out from Cincinnati than we’re used to, but we feel very positive about it and think we can do the same thing there.

Cody Crabb (24:06)
Okay, gotcha. Well, this has been really awesome to hear. It’s kind of a different situation. Usually we hear somebody bought a building and they rent it out. This is a very different strategy, but it sounds like it’s really paid off for you.

Pete Montgomery (24:18)
Yeah, it’s good. You know, the biggest thing I can tell anybody that’s going to be doing any development is do your homework. One thing that, that, that I was taught by, by Mr. Cohen was he’ll go out and before we step foot into a city council meeting to even propose something, he will walk that city at night. He’ll walk it at the end of the day. He’ll talk to business owners that are there, ask them what they would like to see there, what their needs are, what, what, what could we do that would make the city thrive?

And I’ll tell you what, it really pays off to do your homework on cities.

Cody Crabb (24:47)
Yeah, I mean, who’s going to know the city better than the people that literally live and work there every single day? So that’s that’s amazing. That’s an amazing tip there. ⁓ So if there’s any city managers that are frantically looking for your information to try to see if they can get you to come to their town, where can where can someone find you online and learn more about what you do?

Pete Montgomery (25:09)
They can just go to cmcproperties.com or they can Google Pete Montgomery and I know to pull up our locations. ⁓ My email is [email protected]. We would love to talk to anybody that has a vision that’s ready to do something that everybody’s on board with. It takes a lot of people to get this done. We not only want us to build, we want other people to build also, which sounds crazy. You’d think we’d want to be the only people there doing a mixed use.

We want other developers to come in beside us because we could drop it 200 people, but if you drop it at other hundred and somebody else drops in another hundred, now all of a sudden we got six, 700 people in a downtown. And before you know it, that downtown is insane. So it makes property values go up. It increases revenue for everybody. All this, the little record store that’s selling, barely hanging on, all of a sudden they’re thriving and it’s cool. People like, you know, unique shops. That’s one thing that I do with the retail is we never do.

any type of chains, you know, unless it’s something that’s very, very high end. I always go out and find a really, really good mom and pop or somebody that just started out that’s got a good reputation and we try to bring them to our locations.

Cody Crabb (26:08)
Hmm.

Do you do something specific for the area or is it just kind of, do you have any strategy there just out of curiosity?

Pete Montgomery (26:25)
Well, what we do is we were speakers at the Chamber of Commerce in Middletown. And what we did is we kind of showed them what we were doing. And then we asked them, hey, what does the city want? Everybody, we did a of a Q &A and asked them, what would you guys like to see here? We’re not going to put a mom and pop famous ice cream store that’s in Middletown that everybody goes to since they were 10, 12, and they grew up, and now they’re taking their kids there. We’re not going to put our famous ice cream shop, Grater’s, from Cincinnati next to it. We would never do that.

So what we do is people are like, you know, it’s amazing. A lot of developers, don’t care who goes in. We do care. We take in consideration of the stores that are there. We want them to thrive and we know they will. And we ask, what do you guys want? Now, it doesn’t always work out. Some people want stuff that’s just not gonna be feasible, but we usually get something that’s not gonna be competition with another restaurant that’s nearby.

Cody Crabb (27:17)
Yeah, wow, this has all been really great. And again, it just goes to show, taking some extra care and time, no matter what you’re doing, is gonna really pay off. It sounds like that has been some of the biggest key payoff you’ve gotten, is just taking some extra time and really listening and digging in and doing your homework. So thank you so much for, ⁓ yeah, go ahead.

Pete Montgomery (27:37)
Yeah, listening is key.

I said listening is key. You’re right. 100 % listening is key.

Cody Crabb (27:43)
Yeah, for sure. Okay, well, thank you so much for sharing all this with us. Our audience has gotten a lot out of this today. And if you did, listeners, if you did get something out of this, go ahead and like, subscribe, follow, do all the things, and make sure you stay subscribed so that you can get the next episode of Real Estate To hear from cool people like Pete. one more time, Pete, thank you so much for joining us today, and we’ll see you later.

Pete Montgomery (28:04)
May I?

Thank you.