The real estate industry in Las Vegas has another 18 months of stagnation before things start to turn around, a former Hughes Corp. executive said Wednesday at The Orleans.
Dan Van Epp, now executive vice president of Newland Communities, said residential development is coming back to some parts of the nation such as Texas, which didn’t experience nearly the downfall as Las Vegas.
“Phoenix is coming out of it. Here in this town, not yet,” Van Epp said at an Urban Land Institute panel discussion about emerging trends in real estate. “We’re still probably 18 months from being totally out of it, but if you’re a builder, you’re thinking about it right now.”
The reality is that most developers stopped putting capital into projects three to four years ago, early in the cycle of the real estate downturn, he said.
“A lot of us are thinking about how we’re going to remake the model for the future,” Van Epp said.
He expects to see more “builder clubs” around the nation, or coalitions of home builders who go in with a developer on a large parcel of land as they did in Las Vegas with Focus Property Group. They then share a common objective to move quickly on development, Van Epp said.
Some analysts have said the next shoe to fall is in the commercial sector, where values have fallen 40 percent to 50 percent from market peaks and default notices have spiked. Property cash flows won’t improve fast enough to rescue them from negative leverage.
Banks are taking a more measured approach, even as commercial loans reach maturity and go into default, said Kev Zoryan, executive director of Morgan Stanley in Los Angeles. Those with huge portfolios are waiting to see what happens, though smaller banks don’t have the ability to take those markdowns, he said.
“A lot of projects are generally cash-flow positive,” Zoryan said “As long as you can cash-flow, even if it’s very little, that basically prevents and delays foreclosure discussion.”
Terri Sturm, chief executive officer of Las Vegas-based retail developer Territory Inc., said the market is not as bad as some media reports would portray it. Still, she said she’s never been happier to have Wal-Mart as a tenant.
“The value-oriented discounters, the Big Lots, the Dollar Stores, they’re pretty active,” she said. “Most of our deals are in restaurants, from casual dining to below.”
Sturm said she’s really had to “dig into my bag of tricks” and get creative with deals. She’s giving away free rent and signing leases for less than five years, things she’d never had to do before.
Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.