“Change. Isn’t it appropriate that the Chinese word for it is comprised of two symbols—one for danger and another for opportunity? How you perceive and adapt to change makes all the difference.” – Spinditty Blog
Just like everything else in this world, the commercial real estate industry is constantly changing. Trends come and go, prices go up and down, there are boom years and bust years. As we near the fourth quarter of 2018, one of the most interesting trends has been that of the retail market. With the continued proliferation of online retailers, many consumers would simply rather order their goods from the comfort of their couch, in their pajamas. As we watch brick and mortar establishments shut their doors, downsize, or file for bankruptcy, how does the industry adapt? Read more
“If you build it, they will come.”
Shoeless Joe Jackson, Field of Dreams
What can Las Vegas’ commercial real estate market expect from a brand new stadium? Does this project promise guaranteed growth, more opportunities for mixed-use developments, sustainable jobs in the form of leases and tenancies? The answer is: probably, however it’s difficult to say. Frankly, there are a lot of articles out there, but there just aren’t a lot of solid numbers. While Las Vegas will certainly see an increase in tourism, which contributes greatly to our economy, what do sports venues truly mean for the commercial real estate market?
In October of last year, Ten-X Research published an article looking at local apartment and retail markets. They studied the correlation between new stadium announcements and openings and net absorption rates, completion rate and NOI growth. Taking a sample from 9 of the newest NFL and MLB stadiums, they found, as it pertains to completion and absorption for the retail market, when they compared the submarket to the overall market, there was no evidence to suggest developers are more inclined to build new retail, and likewise tenants are no more inclined to lease space near a new stadium. Conversely, NOI growth at the submarket level exceeded the broader market by over 65% in both post-announcement and post-opening cases. This strongly suggests vacancy rate improvement and rent growth in areas surrounding new stadiums.
Markets such as Sacramento, Kansas City, and Detroit have seen notable increases in population growth, mixed-use development, and redevelopment, in their downtown areas, since the opening new arenas and stadiums in their downtown cores. In a January New York Times article written about the impact on sports stadiums downtown, it suggests that the recipe for successful growth and development is a stadium surrounded by some sort of mixed-use project, instead of a stand-alone stadium surrounded by a parking lot, in the suburbs.
What does any of this mean for Las Vegas? At this point, no one knows for sure. Las Vegas-based sports venues are unique for multiple reasons, first and foremost, location, location, location. T-Mobile Arena is on the Las Vegas Strip – commercial development on these parcels is an anomaly unto itself, and there is no comparison or quantifiable metric to measure commercial growth on the Strip in traditional parlance. Additionally, the proposed football stadium sits across the I-15 freeway from the Strip, on a small parcel, surrounded by a parking lot and existing industrial properties, with no additional room for mixed-use development absent substantial planning. Yet, development of the football stadium seems most comparable to the development of Petco field in San Diego and redevelopment of the surrounding warehouses into the “Gas Lamp District.” Maybe that’s the recipe for success? Finally, the Las Vegas Ballpark in Summerlin, located in Downtown Summerlin and bordered by existing commercial and retail and a large swath of open land, certainly sets up the pins for a tremendous run on mixed-use development. But what came first – the chicken or the egg? Would any of this land develop without a sports facility project? Did the sports facility spur future development? There is no doubt we have seen and will continue to see increased foot traffic in all of these developments, perhaps a population increase and demographic shifts, and it will no doubt boost tourism, but aside from building the actual facilities themselves, what long-term benefit will commercial real estate in the valley see? While some politicians claim early credit for success due to the sports facilities, and others express concern about the allocation of precious capital and resources, the rest of us will have to wait several years to know whether and how sports facility developments affect the Las Vegas commercial real estate market.
Odds & Ends
Oftentimes, we are asked to describe the most effective piece of lobbying we’ve seen, and although we’ve seen a lot, this gem easily predates us, and everyone who is reading this bulletin. To that end, we give you the following:
While many companies looking to relocate to Nevada often point to favorable corporate laws and tax rates, there exists another, lesser known advantage for Nevada hospitality businesses, restaurants, bars, and now, sports facilities; Nevada has no dram shop laws.
No one knows for sure how this happened, or even when. But, in a state built on excess, allowing those who provide the excess to serve alcohol with impunity seems surprisingly fitting. Actually affording a few drinks these days – particularly at the sports facilities – remains an open question.
Jonathan P. Leleu, Director
Kerrie Kramer, Government Affairs Analyst
email@example.com | firstname.lastname@example.org | T: 702.692.8037
There’s a storm front coming (mood indigo)
White water running and the pressure is low
Storm front coming (mood indigo)
Small craft warning on the radio
– Billy Joel
Political trends. Fascinating to watch, these patterns of public opinion tend to follow events of historical significance and create mayhem across the political landscape. Although the traditional cliché describing political trends is that of a pendulum, a political trend reacts more like water in a bucket. If outside influences move the bucket side to side, the water splashes back and forth; if the bucket is moved in a circle, the water spins like a whirlpool; if the bucket is shaken, you get wet. Whether the patterns are cyclical or simply repetitive, they – when combined with metrics such as registration advantages and contribution / campaign spending analyses – create predictability in elections and provide endless entertainment or at a minimum, something to talk about between sips of wine at happy hour.
Following passage of the registration deadline for the 2018 election cycle in Nevada, the field of candidates solidified and gave us the first quantifiable indicators of possible results in November. Most significantly, the Nevada State Assembly Democrats, who presently enjoy a 26-16 majority, appear poised to expand their influence to a possible veto-proof supermajority (28-14) due to lop-sided registration advantages and a significant number of uncontested races. Of the 42 Assembly seats, 29 are either uncontested or are located in districts with a registration advantage of greater than 10 points; 20 Democrat and 9 Republican. The Democrats also enjoy a significant registration advantage in an additional 5 districts, while Republicans have a thin advantage in 5 districts. Simply put, all the Democrats need to do is hold all 25 seats with a significant registration advantage, and pick up 3 seats in the districts which slightly lean Republican, and Democrats can seek out a veto-proof majority in the Assembly.
Will trends push Assembly Democrats over the edge? Will Assembly Republicans harness their recent mid-term power and hold the Democrats? Only time will tell, but make no mistake, with stakes this large, each party will be working hard to ensure the other “shakes the bucket” and ends up all wet in November. That said, on March 27, 2018, a major influence on political trends reared its ugly head once again. In the special election called to fill the seat vacated by disgraced Councilman Ricki Barlow, Cedric Crear won the seat last by more than 10 points. This was not a surprise; Crear has been campaigning for the Ward 5 seat for more than a year, and he was nearly $100,000 ahead of the next highest candidate in fundraising. What is shocking is of the more than 38,000 registered voters in Ward 5, there were about 2,300 who voted. This equates to a 6% turnout. Cedric won with 27% of the vote (627 TOTAL votes). Former State Assemblyman Harvey Munford was a distant 3rd with Joe Mitchell (existing Ward 5 liaison) only received 9% of the vote. This, apparently, is what Democracy looks like these days.
Although it did not seem to have much effect here, make no mistake voter apathy can turn an election. Tying this to the numbers noted above, if increased voter apathy is a trend which holds through November, Republicans have a good chance of preventing a Democrat super-majority in the State Assembly.
We hope everyone had a nice weekend!
Jon & Kerrie
Jonathan P. Leleu, Shareholder
Kerrie Kramer, Assistant Director
We cannot solve problems by using the same kind of thinking we used when we created them.
– Albert Einstein
Among the highlights of NAIOP’s 2017 Nevada Legislative Session was working alongside the RTC and local municipalities to push AB 399 (Asm. Irene Bustamante Adams) and SB 517 (Sen. Scott Hammond), commonly known as the “infrastructure bank bills,” through the Legislature. As we’ve written in the past, AB 399 was amended to include the transportation infrastructure provisions of SB 517, received bicameral passage, gubernatorial approval, and Nevada now has the skeletal framework in place to receive funds in the banks, should they become available. Will we receive funding for I-11? Storm drains? How about public transportation? Like a teenager who has just pressed <<SEND>> on a text message which says “I love you,” Nevada now waits impatiently alongside 31 states for the return message, which hopefully has the good news we’re waiting for. Knowingly, time…stands…still…
The phone vibrates. You give it the side-eye. If this is you again, mom, I’ll text back tonight! Yes, I remembered to wash my socks, now stop texting. You look down:
LEGISLATIVE OUTLINE FOR REBUILDING INFRASTRUCTURE IN AMERICA
Bingo! This is what we’ve been waiting for, and what we spent 4 months pushing in Carson City! We’ve all heard the reports. The President said in the State of the Union his infrastructure ask is going to be “YUGE.” Some speculate $1.5 trillion, which would catapult Nevada and our country into the stratosphere! Did we get the “I love you” return???
The President’s “Outline” does indeed contemplate $1.5 trillion in infrastructure upgrades, which is the largest suggested infrastructure investment in several generations. Accordingly, the Outline certainly looks YUGE on the surface. However, the Outline is a framework of an incentives program which is broken out as follows: $1.3 trillion in funding from state and local governments, which, following approval of an application by the US Department of Transportation, US Army Corps of Engineers, or the Environmental Protection Agency, may trigger an award of a federal incentive from a pool of $100 billion, less administrative expenses. (The remaining $100 billion is divided between a Rural Infrastructure Program ($50 billion, styled as grants), transformative infrastructure projects ($20 billion styled as grants), $20 billion to increase capacity of existing credit programs to fund infrastructure investments, and other programs.)
Incentive awards would be based on:
• The dollar value of the project (weighted at 10%);
• Evidence supporting how new, non-federal revenue creating long-term funding for infrastructure investments will be secured (50%);
• Evidence supporting how new, non-federal revenue for operations, maintenance, and rehabilitation will be secured (20%);
• Updates on procurement policies to improve efficiency in project delivery and operations (10%);
• Plans to incorporate new and evolving technologies (5%); and
• Evidence supporting how the project will sport economic and social returns on investment (5%).
Incentives would be limited as follows:
• The incentive grant could not exceed 20% of the project;
• No state could receive more than 10% of the total amount available ($10 billion);
• Grant recipients would agree to achieving certain milestones before the grant would be released; and
• Any milestones not reached would result in reallocation of the grant.
The upshot? The $1.5 trillion infrastructure Outline actually contains substantially less than $10 billion in incentivized infrastructure grants, per state. The remaining value of the plan comes from initial investment from the states, local municipalities, and private sources. Indeed, the Outline is an overt message to the states to fund infrastructure locally.
As for infrastructure banks themselves, the Outline simply states the following – and only the following:
State infrastructure banks (SIBs) currently are underutilized.
This underutilization can inhibit State and local governments from best directing Federal funds to infrastructure projects.
Providing incentives to use SIBs, such as reducing federalization requirement on funds lent to SIBs that are deployed locally, could encourage the use of SIBs.
Expanding the legal capabilities of SIBs, in addition to direct appropriations, would allow SIBs to take responsibility for infrastructure funding in an effective manner that may not be possible for the Federal Government, particularly for rural projects or projects of smaller total cost.
In summary; states should use infrastructure banks, and in a more effective manner, whenever federal funds are appropriated. The Outline does not dedicate funds to seed the banks.
After all this, you are certainly asking, “where does this leave Nevada?” The answer is, quite simply, “on the outside, looking in.” The Outline suggests a funding paradigm which either a) does not help some states, or b) hurts others. It would appear Nevada falls into the latter category. Through no fault of the federal government or this (or any other) Administration, Nevada is not in the same position as larger states, which may more freely reallocate or raise revenue to reach the available incentives (if they chose to do so – in the scheme of things, the application process and resulting oversight may outweigh the meager incentive award). By way of contrast, Nevada’s entire economy is dependent on a fragile general fund. Nevada real property taxes are capped, it has no income taxes, and state lotteries, taxes on mining, and toll roads are all unconstitutional (amendments take over 5 years, and a vote of the people to pass). These are just a few of the hurdles which must be overcome to raise revenue substantial enough to fund large-scale infrastructure projects, and all of them are self-inflicted. Given the difficulty Nevada has in raising revenue, qualifying for an infrastructure incentive seems like a pipe dream, and places Nevada at a competitive disadvantage with other states, as the Outline would be applied. Should Congress implement the Outline as-is, Nevada would be on its own.
Here I go, again on my own
Goin’ down the only the road I’ve ever known
Like a drifter, I was born to walk alone
Kerrie limited Jon to one song in this edition.
Odds & Ends
In 1855, Secretary of War Jefferson Davis became convinced camels could supplement horses in the transport of military equipment in the harsh deserts of the western United States. Unfortunately, the camels’ hooves split on the rocks, and they kicked, spit, bit, had terrible tempers, threw off their packs, and disturbed nearby livestock by screaming – generally, what you observe when visiting Jon in Carson City. Ultimately, in 1875, the Nevada Legislature passed a bill banning the use of camels on state roadways, which stayed in place until around 1900, when camels were generally outmoded to make room for horses. Preserving and enhancing our infrastructure to allow for advances in transportation and technology has always been of fundamental importance to Nevada.
Have a great day!
Jon & Kerrie
Jonathan P. Leleu, Shareholder
Kerrie Kramer, Assistant Director
– Butterfly Boucher
As the calendar flipped on the new year, so too did the switch on the 2018 election cycle. Almost immediately after the fireworks ended on the Las Vegas Strip, potential candidates announced their intent to run, and several candidates and administrators decided to step away from their respective races or government positions. To recap the month’s major events:
- Sen. Becky Harris – no longer seeking re-election; nominated to chair the Nevada Gaming Control Board, a seat vacated by A.G. Burnett, who moved into private practice
- Las Vegas City Councilman Stavros Anthony – no longer pursuing his race for the open seat in CD 4 (currently held by Rep. Ruben Kihuen, who is not seeking reelection)
- Fmr. Rep. Steven Horsford – announced he is running for CD 4 (the seat he lost to Rep. Crescent Hardy)
- Fmr. Rep. Crescent Hardy – announced he is running for CD 4 (the seat he lost to Kihuen…following this?)
- Las Vegas City Councilman Ricki Barlow – resigned and pled guilty to a federal felony of fraudulent conversion of campaign funds for personal use
- Deonne Contine, Director of the Nevada Department of Taxation – moved into private practice, and announced her intent to run for the seat vacated by Assemblywoman Amber Joiner, who is not seeking reelection
The moral of this story is: a lot happens in a month. Announcements, fundraisers, and “deadlines” aside, candidate filing (where a person becomes a “candidate” and officially commits to running for a specific office) BEGINS on March 5, 2018. Stay tuned; the political landscape will continue to change as the filing date approaches.
Stop callin’, stop callin’,
I don’t wanna talk anymore!
I left my hand and my heart on the dance floor.
– Lady Gaga
As NAIOP represents the second largest industry in Nevada, you should be dancing (there’s another song here…but we digress). If your phones have been like ours, ringing non-stop with candidate contribution calls, your dancing in recent weeks has looked more like moves in a game of dodgeball. It stands to reason that this time of year, we field quite a few questions regarding contribution laws, limits, suggested guidance on contribution strategy, etc. Accordingly, we thought a quick note on Nevada campaign finance is appropriate for this newsletter, to help you dodge the wrench from Patches O’Houlihan.
- Individual contributions are limited to $2,700 per candidate, per race.
- Direct corporate contributions are prohibited.
- PAC contributions may be made, and are not limited.
State & Local Races
- Individual contributions are limited to $5,000 per candidate, per race. Primary and General elections are treated as separate races, which means an individual may contribute $10,000 to a candidate, in the aggregate, per election cycle.
- Direct corporate contributions and PAC contributions are permitted, and limited to $5,000 per candidate, per race, in identical fashion to contributions from individuals.
- Contributions to political committees, parties, or ballot measures are permitted, and not limited.
Candidates without a primary may still receive contributions up to $10,000.
In-kind contributions are permitted, limited by the monetary restrictions noted above. Within 30 days of providing any in-kind goods or services, a donor must provide the recipient a signed statement setting forth the actual cost of the goods and services provided, or their fair market value. In-kind contributions include invitations to attend annual dinners or other events where seats/tables are purchased for admission.
No contribution of any kind may be made for 30 days before, during, or 30 days after a regular Legislative Session. With respect to a special session, the contribution blackout begins the day after the Governor issues a proclamation calling the special session, until 15 days following adjournment of the special session.
With respect to gifts, please note Nevada significantly raised scrutiny on the giving of gifts to public officials. To that end, it is almost never appropriate to gift anything to a public official “which would tend improperly to influence a reasonable person in the public officer’s or employee’s position to depart from the faithful and impartial discharge of the public officer’s or employee’s public duties.” NRS §281A.400.
With respect to participation by the Southern Nevada Chapter in the upcoming election, the Government Affairs Committee is establishing schedules for candidate interviews in selected races and will ultimately recommend a contribution budget to the Board in the coming months. We look forward to providing more information on these endeavors shortly.
Odds & Ends
Exactly one year from now, we will be moving back to Carson City to begin another 120-day sprint, as the 80th Nevada Legislative Session convenes the first week of February, 2019. Who’s ready??? 46 of the 50 States convene their legislative bodies annually. Nevada and Texas are on a biennial calendar. Can you name the other 2?
Have a great day!
Jon & Kerrie
Jonathan P. Leleu, Shareholder
Kerrie Kramer, Assistant Director
Now is the accepted time to make your regular annual good resolutions. Next week, you can begin paving hell with them as usual.
– Mark Twain
Happy Holidays! Kerrie and I would like to thank NAIOP Southern Nevada, its Board of Directors, the Government Affairs Committee and all members for a wonderful 2017. Before turning the page on our first year representing the organization which represents Nevada’s second largest industry, we’d like to take the opportunity to look back on a very active and successful year.
2017 by any measure is a NAIOP success story. In February, Kerrie and I made our biennial trek to Carson City for the 2017 Nevada Legislative Session and began work on re-orienting NAIOP’s legislative posture from what had been traditionally defensive to collaborative; a position NAIOP must maintain as the voice of an industry. To that end, we amended or defeated 5 bills which would have opened the door to application of prevailing wage to privately-funded commercial developments. In addition, we defeated legislation intended to create a public registry and licensing requirement for vacant commercial properties. We significantly amended a bill which required all newly-constructed commercial buildings to have baby-changing stations in every restroom, by reducing the number of required stations to 1 equally-accessible station per building and creating an “opt-out” for buildings with no restrooms available to the public. Together with the RTC, we advanced Nevada’s access to federal infrastructure appropriations by advocating in favor of legislation creating transportation and utility infrastructure banks. Finally, we positioned NAIOP as the recognized thought-leader on real property tax reform measures by offering substantial testimony regarding the impact of real property tax abatements (caps) on the commercial real estate industry and options for revision, defeating legislation offering only partial solutions to restructuring Nevada’s property tax code, and advocating in favor of a resolution seeking open debate on solutions currently interpreted to be in violation of the Nevada Constitution.
Of tremendous importance to galvanizing NAIOP’s role as a leader in the business community, we developed pro-business coalitions with other influential business associations to fully vet the impact of business-related legislation and develop unified positions strengthened by large constituencies. Together these coalitions were instrumental in defeating legislation such as the “plastic bag tax” and proposed minimum wage hikes.
Away from Carson City, NAIOP experienced unprecedented success locally. Drawing upon our existing relationships with staff and local elected officials, we moved NAIOP into its rightful place as an industry leader and resource for its members as well as local municipalities. Together with Clark County staff, our Government Affairs Committee worked to amend the County’s parking ordinance and NAIOP’s President, Jay Heller, publicly supported adoption of the agreed-upon language. Similarly, we are in the final stages of negotiation with the City of Henderson on revisions to its parking ordinance. In addition, we continue to work with local municipalities on issues relating to federal lands and infrastructure. Over the last year, NAIOP has become such a presence locally that it was called out as a primary stakeholder to contribute its vast institutional knowledge of commercial real estate to Clark County’s submittal for the Amazon Headquarters project.
Turning toward 2018, we see NAIOP increasing its profile and influence throughout Nevada. Among the many projects the Government Affairs Committee will be undertaking is expediting the approval process in both planning and permitting. In addition, we will continue to monitor issues related to text amendments to local zoning codes, planning, permitting, and licensing fees, and fire codes. At the state level, we will continue leading the charge with respect to real property tax reform, and for the first time, NAIOP will be advancing its own legislation, including a bill seeking to clarify the Nevada Commerce Tax with respect to CAM charges. We will also be working with the Governor’s Office of Economic Development on increasing NAIOP’s role in facilitating the state’s economic development plan, and the RTC on transportation enhancements. At the federal level, we will be working with Nevada’s congressional delegation on infrastructure appropriations, and increasing the availability of develop-able property by addressing some of the federal disposal boundaries. With respect to the upcoming 2018 election cycle, we will be working with the Government Affairs Committee on vetting and supporting candidates for office who have an understanding of issues which may impact commercial real estate.
Kerrie and I are so proud to represent NAIOP and working with your organization has exceeded all of our expectations. Looking back at 2017, it is hard to believe we accomplished so much in just one year. Although it was not easy, the road we paved this year has opened doors and allowed NAIOP to advance its agenda like never before. We are so excited for 2018 and we look forward to a wonderful new year!
All the best,
Jon & Kerrie
Jonathan P. Leleu, Shareholder
Kerrie Kramer, Assistant Director
There is no sincerer love than the love of food. George Bernard Shaw
It’s that time again, where we gather with family and friends and stuff ourselves until we are uncomfortably full. The holiday season is upon us; time for food, festivities, merriment, federal lands discussions, tax packages, and campaign contributions. Given the nature of the season, and how busy everyone is, we thought we’d keep it light for you this month. Just a quick overview of a few issues facing NAIOP, with a much longer, more in depth write-up on each topic to follow. You didn’t think we’d let you off the hook that easy did you? Read more
The only way to keep your health is to eat what you don’t want, drink what you don’t like, and do what you’d rather not.
– Mark Twain
The Commerce Tax was signed by Gov. Sandoval on June 9, 2015 and since that date, various groups have toiled to repeal it. Nearly three years later, as we close in on the 2018 election cycle, the Commerce Tax remains a hot-button issue for many candidates, particularly within the GOP. Indeed, the Commerce Tax will likely again be a deciding factor in a number of primary races (and may have brought about the primary challenge in the first place). Given recent reports of candidates weighing the possibility of repealing the Commerce Tax and the filing of a referendum which, if successful, would bring the question of repealing the Commerce Tax to the voters, it is time to re-familiarize ourselves with the history of the Commerce Tax, and begin thinking about positioning NAIOP for the upcoming policy discussion.
“ A man who carries the cat by tail learns something he can learn in no other way.” – Mark Twain
And we’re off… with no less than three recall petitions going on, to oust three legitimately elected Nevada state senators, the 2018 election season is well underway. While there is still much that is unknown about why these recall efforts started, the information which has been uncovered since our last update is enlightening.