Nevadan at Work: Developer says real estate market is on the mend

With two decades of experience selling land in Las Vegas, Bill Lenhart feels like he has a good understanding of the fundamentals that drive the real estate market.

Lenhart, managing member of Sunbelt Development & Realty Partners, has brokered hundreds of millions of dollars in real estate transactions. He owns and manages a portfolio of land investments.

Like other brokers, Lenhart anticipated a market correction in Las Vegas, but he never thought it would take such a radical downturn. While recovery is imminent, a return to peak values will not likely occur for at least two market cycles, probably 10 to 15 years, he said.

Year-over-year prices decreased last year in nearly every category, even the high-demand areas of single-family and multifamily residential land, Lenhart said.

"I don't think anybody expected improvement in 2011," the broker said. "It was mostly flat, and flat is not a bad thing. Another significant thing is the decrease in bank-owned sales."

He sees modest improvement in land sales volume and prices this year. It's all tied to the amount of commerce the property can support.

Investors will be driving the market in the first half of 2012, he said. Homebuilders will remain on the sidelines until they see a significant increase in new-home sales.

The "California factor" could work in Nevada's favor, Lenhart said. California is the world's eighth-largest economy with a population of more than 36 million people. But it's a very expensive place to live with a high tax burden on individuals and companies. Budget shortfalls are worsening.

All of this comes into play for Nevada's economy. With its low tax base and affordable housing, Southern Nevada has never looked so good as a destination for new businesses, Lenhart said.

"I think we will begin seeing new industries moving to Clark County," he said. "We have been on the short list for large employers seeking a more business-friendly environment, mostly from California. I am optimistic that we will start landing some of these businesses and a trend will begin."

Sunbelt Development has fostered business relationships with banks, property owners, builders, private equity funds and private investors by positioning the company as a reliable source of market information, Lenhart said.

Sunbelt reported an average price of $80,337 an acre for industrial land in 2011, down from $161,346 in 2010; $177,814 for office, up from $129,171 a year ago; and $222,819 for commercial, down from $263,997 in 2010.

Low-density residential land was $90,023 an acre in 2011, up slightly from $88,039 in 2010; medium-density was $110,011, down from $117.953; and high-density (14 or more units an acre) was $163,836, down from $201,350.

Question: Do you see any bright spots in the current downturn?

Answer: Some good has come from the market correction. For example, affordability. In the peak of the market, only 29 percent of median-income households could afford a new home and only 39 percent could afford an existing home. Now, 60 percent can afford a new home and 80 percent can afford an existing home. That's a good thing.

Question: You place a high importance on research. What does your research tell you about Las Vegas?

Answer: As an investment company, our claim to fame is that in anticipation of a correction, we began selling all of our land in Clark County in 2005 and we have no land exposure in Las Vegas during the market correction.

Question: Have you changed your brokerage strategy during the correction?

Answer: Although many of our clients are banks and institutional investors, our business model for the future is focused on thousands of traditional sellers that own most of the land in the valley. Going forward, we think developers will be limiting their market risk by seeking smaller development sites owned by traditional sellers. Our goal is to provide the traditional seller with a bundle of services and match them with the best buyers when they are ready to sell.

Question: You've got a 1.27-acre parcel around the Las Vegas Beltway and Flamingo Road offered by the Federal Deposit Insurance Corp. How's that going?

Answer: It's under contract. That area is really distressed. It's not $40 a (square) foot any more. This will be an end-user or long-term holder, someone who recognizes the value today.

Question: Many real estate-related companies have had to downsize or close during the recession. How have you been able to survive?

Answer: There has been a lot of attrition in our industry. Although sales volume is a fraction of the peak years, there are also a lot less investors, builders and brokers to compete over market share. It's what we call "economic natural selection," and at the end of the day, we end up with the best-in-class in our respective disciplines, which is good for service providers and consumers. We're proud to say that since the market turned, we have not contributed to the unemployment rate in Las Vegas. We have kept our sales and support team intact.

Question: One of your hobbies is racing mountain bikes. How did you get into that?

Answer: As a workaholic, a low-volume market made me pretty restless and I was looking for an outlet. I had been a cyclist for several years, but in 2008, I began competing. Who knew those 20 years of real estate was preparing me to be a competitive cyclist. I'm just competitive by nature. If I'm going to do something, I'm going to do it to the best of my ability.

Question: Have you succeeded?

Answer: Sometimes. I began racing three years ago in the intermediate class and I now compete in ultraendurance cross-country mountain bike events at an expert level in Nevada, California, Arizona and Utah. My most recent accomplishments was at a 12-hour mountain bike race in Boulder City in October. The objective in the race is to complete as many laps as possible on an 8-mile course. I completed 13 laps in 11 hours and 40 minutes for a first-place finish. It was all ages and I was the oldest guy on the podium.

Question: What are the similarities of being a land broker and competitive cyclist?

Answer: They both take hard work, self-discipline and perseverance. I work and train every day. I'm going to Utah (in February) to train with a professional coach. Preparation and execution. You don't win races on race day. You win races on training days, and I work and train every day.

Question: What can you take away from cycling and apply it to your business?

Answer: Real estate is more like a marathon, not a sprint. You need to build on your strengths, intellectual assets and human resources. Also, strategic partnerships. In cycling, we know we can go faster when we work as a group. The same is true for real estate. Every client and every race gets my best effort of the day.

Question: What advice would you give people?

Answer: Never underestimate your competition or overestimate yourself. Run your own race and never give up.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.