June Breakfast Re-cap

“Once a Developer … Now What?” was the topic of discussion among a panel of industry leaders at the Chapter Breakfast Meeting on June 17, 2010, which was sponsored by Portfolio Property Management Global, LLC and moderated by Brad Schnepf, President of Marnell Properties and the current Chapter President for NAIOP So Nevada. The expert panel included Rick Myers, President of Thomas & Mack Development Group; John Ramous, Vice President of Operations of Harsch Investment Properties, LLC; Rod Martin, Vice President of Majestic Realty Company; and Phil Ralston, Executive Vice President of American Nevada Company.

In discussing how the decline in the Las Vegas commercial real estate market has affected their own business operations, the panel indicated that they now focus much more energy on controlling costs, preserving asset value, and strengthening tenant relationships. The panel also emphasized the importance of accepting that the market has changed and exploring new opportunities that did not exist in the robust market of the past few years. It is also important to long-term outlook as it appears unlikely that the market is going to improve significantly in the short term.

Loan implications have also become a significant complicating factor in the current market. Many commercial properties are in default or foreclosure, which results in lenders having much more control over transactions than in the past. Brokers should manage client expectations by explaining the difficulties and delays that can arise when dealing with troubled properties. Even relatively stable properties are seeing much more lender involvement in approving leases and limiting tenant concessions. Brokers and developers are spending much more time analyzing loan documents than in the past, to try to anticipate and resolve issues before they develop into more serious problems.  Lenders and special servicers also take a long time to approve large or complicated leases. It is important to develop and maintain relationships with lenders to keep transactions moving.

The panel also discussed how the current recession differs from the last major recession in the early 1990s. While the causes of the current recession may have been different, the resulting high vacancy rates, low lease rates, and low property values are the same challenges that were faced during the last recession. 

The panel concluded its discussion by analyzing current development opportunities.  Developers that can offer build-to-suit projects that capitalize on low land and development costs are likely to be successful.  The availability of financing is also key to any new development. 

In closing, Brad Schnepf reminded the audience that tremendous wealth has been created during recessions and encouraged all NAIOP members to actively reposition themselves to take advantage of new opportunities.

By Adam Malan, The Equity Group