Shams Merchant spent his entire life in Houston until two months ago, when he left the bayou for greener pastures. Driven by Fort Worth’s booming growth, Merchant picked up and moved his real estate law practice to Cowtown.
Merchant, an associate with Dallas-based Jackson Walker, works with developers of commercial and industrial projects. He’s only been in Fort Worth for two months, but he’s confident in the Metroplex’s development opportunity, even as high interest rates and construction costs slow the area’s office and multifamily development pipelines.
Why did you move to Fort Worth?
DFW is the fastest growing Metroplex in the country, and Fort Worth is the fastest-growing big city in the country. So, this is the perfect place to be if you’re in real estate. More deals are being done in DFW and in Fort Worth than pretty much anywhere else in the country. And of course we’re in Texas, so we get the benefit of the Texas economy being so strong.
What makes DFW different from other Texas markets?
Houston is a big city. It has a lot of established players there and a lot of attorneys and real estate developers. But Dallas and Fort Worth – that’s a frontier that’s still ripe, still open for new players to come in. It’s open for major growth.
As an attorney, how do you view your role in getting deals done?
Fundamentally, I’m an advisor to my clients. I draft contracts. I review leases. I negotiate leases, contracts and development agreements. I review title documents and essentially, I help my client determine: What are the legal pitfalls and issues with either acquiring a property or developing a property or leasing a space? What does my client need to watch out for in order to not incur legal liability down the road?
Essentially, it’s protecting my clients, and in that way, helping them successfully monetize their project.
Which real estate sectors do you work in?
Multifamily, industrial, retail. My favorite is mixed-use development.
What about working with mixed-use development projects do you enjoy?
Being able to help a client set up a mixed-use project properly is a little more complicated than just building an apartment where all the leases are going to be the same. Or retail. All leases are the same. But in mixed-use, you have to think creatively about parking. How are the residents in the multifamily using the parking versus the retail or the office tenants? It’s the combination of all of that and being able to harmonize that. I think it’s challenging and fun.
What are your thoughts on distress in the DFW office market?
You have flight-to-quality issues with office buildings, especially in downtown areas. But if you look at suburban office buildings, they’re very highly leased. If you look at office buildings in markets outside the core of Dallas, like Richardson and Plano, they’re doing pretty well still. So, I think it’s limited in that sense.
There’s definitely a problem with interest rates being where they are. Owners of older buildings are not able to convert them to multifamily or upgrade them enough to be able to attract tenants.
What about multifamily?
In terms of multifamily, you have the fundamental problems with interest rates. They’re preventing people who have aggressive redevelopment plans from fully capitalizing on those business plans. They’re now being forced to sell, because they can’t refinance, because the rates are too high.
But, on the flip side, you have plenty of multifamily players who are buying those deals. So, the cycle continues. We have clients now who have raised hundreds of millions of dollars to go buy multifamily. Deals are still being done. Yes, there’s some distress in the market, but I don’t think it’s systemic distress. I think it’s limited to some asset classes and, even deeper in those asset classes, certain operators and certain types of properties. In fact, I invested some money recently into multifamily here in Dallas.
What do you want folks outside of Fort Worth to know about the city and its development future?
It’s been two months since I’ve been here, and I can say that I think it has so much potential. There are so many new restaurant concepts coming into town. There are so many different areas that are growing. There’s just so much potential for growth. And the cost of living is better than Dallas.
You still have access to all the nice amenities and things that you would want in a big city but you still get a small-town feel. I think that sums up life in Fort Worth. I just think that there are a lot of opportunities for people here to want to invest but also to live. And I think there’ll be a need for more housing, more single family development, as more commercial projects come online.