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Foreign.
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Hi everyone. I'm Mark Civitelli, podcast host and president and CEO at the Commercial Real Estate Development Association. You're listening to our podcast Inside CRE featuring interviews with commercial real estate leaders who share industry and career insights. The Commercial Real Estate Development association is the development industry's leading source of for education, advocacy and connections that drive your business forward. Inside CRE is brought to you by Majestic Realty. Today we're joined by Steve Nagar, principal at CAST and president of the Commercial Real Estate Development Association's Southern Nevada chapter. Steve's going to discuss one of the biggest challenges and opportunities in commercial real estate today. What do we do with obsolete office space? We'll examine the Cliff, a $55 million suburban redevelopment that challenges conventional assumptions about adaptive reuse by transforming an aging office campus into a vibrant dining, retail and entertainment destination. Steve shares the strategy behind the project, from capital structuring and tenant curation to the broader market forces shaping adaptive reuse. Steve, welcome to Inside cre. It is great to have you with us.
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Thanks for having me. Happy to be here.
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B
Yeah. And happy to have you here is the first guest under our new brand Commercial Real Estate Development Association. And I think the adaptive reuse topic is a perfect way to kick it off under this because it is so much, so much rather of what we're hearing these days with projects around the country, really throughout North America. But there's still a lot of questions about this. So what I'd like to just kick off with is for those who may not be familiar with cast, can you tell us a little bit about the company and your role?
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Thanks. My full time day job is being a retail broker. As far as the entire cast crew goes, we've got a great team from Nevada to California and some of our people are building some incredible projects. It's a pretty special group that I'm very excited to be a part of. I know for me and my team, one of the things that's really come down to over the years is we've never really liked the word no when it comes to our clients needs. And I think over the years we've gotten pretty good at figuring out how to say yes and help. Yeah, we've always, we've gotten, we've also gotten pretty good at identifying opportunities and figuring out how to fix things and fix projects that are broken. And sometimes that involves going above and beyond where a traditional broker might go to get the job done. And we've gotten pretty comfortable with that.
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So one of the things we often hear about adaptive Reuse, or at least there's certainly this perception, is that adaptive reuse is really challenging, if not outright difficult. But at the same time, of course, there's no shortage of obsolete office buildings across the country. You know, we just. There's just so far fewer successful redevelopment projects. Why are so many adaptive reuse opportunities still struggling to pencil in your opinion?
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Because adaptive reuse can feel like opening Pandora's box. Even just extensive renovations can feel that way. Can be challenged for a lot of reasons. Talking about your office buildings, I mean, the reasons an office building might be broken or obsolete in a submarket could have absolutely nothing to do with why retail may be or may not be broken in that particular submarket. There's a lot that goes into assessing these repositioning opportunities that have nothing to do with whether you even can. Based on dollars and cents and codes, I'd probably say the biggest struggles with making adaptive reuse pencil come down to time and cost. They take a lot longer to work through and get done, and they cost a lot. And you know, in the brokerage world, we always say time kills deals, and time kills a lot of stuff, especially irr. From end users to developers. I've worked with a lot of them over the years, and I'd say just about all of them would prefer to start with a piece of dirt instead of an existing building.
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Yeah, I mean, that's probably arguably one of the biggest challenges, or at least the perception, you know, I mean, when we look at it from a developer's perspective, we're so used to starting with just a simple piece of dirt. You know, it's the Bob Ross blank canvas here. And now all of a sudden, you know, we. We've actually already got the happy trees painted there. And how do you make use of them despite the fact maybe not having, though, you know, just a blank dirt slate to work with. What have you seen in terms of market conditions that have changed over the past few years that have made adaptive reuse projects either more compelling or more challenging when it comes to putting these projects together.
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I think we all know what Covid did to office, but we also know that construction costs have gone through the roof this decade. It seems to be more of a problem in our market but than other markets. Based on conversations I've had over the last couple of years, but I certainly haven't heard anyone say that construction costs haven't changed. I think that's the biggest problem, holding back not just adaptive reuse, but I think creative development in general, especially in my corner of the world where restaurants have just been such a primary food group for transaction volume and growth for so many years, for example.
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B
Yeah. And looking at the Southern Nevada marketplace, have you found when it comes to adaptive reuse, maybe going from office to residential, that municipal, county, state governments are more receptive to working with the development community on these projects? Or is there still. Well, if we just hold out hope and wish hard enough, office will still come back in that building?
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Well, I don't know about office to residential. I mean, office to retail. There certainly is a dynamic where everybody wants it to happen one way or another, somewhere or another. But there's, you know, want versus respecting what it takes to make it happen are two very different things.
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Sure. Well, let's talk about the cliff. Your project that we mentioned at the beginning. What first caught your attention about this property and what convinced you it was worth pursuing when so many similar assets remain on the sideline?
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Yeah. In hindsight, I think the cliff was a diamond just barely hiding. My partner Chris was driving around with a celebrity chef trying to find a nice place in Henderson to build a restaurant. And that's not very easy if you want to build a really nice restaurant. If you're a local here, you know that Henderson can be a challenge. Not, not because of the demographics, which are fantastic, but because it's almost all class B and C strip centers and grocery anchored neighborhood centers. But Green Valley Ranch, which is a beautiful master planned area in the middle of Henderson, right along the Beltway, is great. And if you noticed, it's not just the cliff, it's the cliff at Green Valley Ranch. And the cliff happens to be sitting on one of the two bookends of Green Valley Ranch. Fortunately for us, that particular. Our particular bookend is, is where one highway meets another highway, putting somewhere near a quarter million cars a day at our front doorstep, which is very important to our world, of course, and on top of that, in the most underserved, affluent market in all of Southern Nevada. So it became one of those things where the more you looked at the fundamentals, the more excited you got about the project.
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Well, one of the things we talked about a little bit earlier here is, of course, deals like these can sometimes struggle to pencil looking at it from a high level. How did you and your team rethink the capital stack and the overall deal structure to make the economics work on this project?
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I think I've got an interesting answer for that. And we sort of started backwards with a unique question. In the very beginning of this project, or envisioning it being from here and understanding how much was lacking on the creativity front in terms of retail developments across the valley, we basically benchmarked a few special properties in both the submarket and the overall market and said, all right, if we took these kind of rents which these properties are achieving, which are around the top of the market for the suburbs here, and we plug those into some spreadsheets, how much could we spend on an adaptive reuse or, you know, extensive renovation of this place? And basically with this kind of potential noi, what can we build? And with the right architect and the right team, the end result was a special gorgeous premium next generation lifestyle center. So when it came to the numbers based on the comps, the economics were achievable, so the economics were believable. Then you've got to look at the market of Vegas and if you're not a desirable market for the people moving the money, then finding money is going to be pretty hard. I think one of the things that's also worked in our favor is that institutional grade money all over the country has begun to understand just how desirable and reliable and consistent this segment, meaning the premium lifestyle center has become. You've got incredible tenants and buildings that are sitting on irreplaceable high value land in the middle of sub markets with very desirable demographics who have the best in the best in market discretionary incomes. So to me, this is the safest place to put money in terms of retail real estate investments, if not the entire industry. And that may be the retail broker in me coming out of a little bit.
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No, no, no, that's okay. You know, we certainly, you know, look the entire facet of the project, from soup to nuts and everything in between is incredibly interesting about this. And my next question is actually going to get right to the broker side here for a minute. You know, you talked about the type of tenants you're getting, having the right tenant mix. And when we look at this project, you know, we can simply see that this just isn't filling vacant space. It was really, it seemed, at least when you look at it from kind of the 25,000 foot level, that it was more about creating a new destination rather than just, you know, Animal House. We need the dues, we'll just take whoever comes up here. How did you and your group approach that tenant curation in merchandising to build the long term demand?
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We are calling it Henderson's new center of gravity.
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That's a big long term.
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Well, you know, the experts come up with what the experts come up with. I think this is where our team's decades of experience really came into play. Because of that experience and knowledge about our market, we were confident not just about the game plan we came up with, but also the confidence to be committed to executing that game plan. Especially when we could have just gone with the first eight. Lois. We got and called it a day. We got eight or 10. Larger footprint Lois, in six weeks, with three watercolor renderings while we were still in escrow, which was more than a couple years ago at this point anyway. The cliff is retail dining service, health and wellness. That's our entire mix. These kinds of users, they care about traffic, they care about demographics, they care about tenancy, and importantly, they really care about that the development is on brand and creating the environment and experience that their own customers desire. So we carefully considered the needs of the customers of each of these different types of tenants or users, and we put those uses in the right part of the property where they complimented the design the best. And we've stayed committed to it, and it's been a great success so far.
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B
Let's take a look at the opposite side of success here for a minute. Because it wouldn't be a commercial real estate project if it didn't come with challenges. Looking back on it now, what would you say were the biggest risks and what had to absolutely go right for this redevelopment to succeed?
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Probably the toughest part of this has been the timeline. The timeline, or a lack of a reliable timeline when it came to entitlements and approvals and permits, has really been a challenge. Fortunately for us, we've been able to achieve rent growth and demand throughout those delays, which. Which helped, unfortunately. I don't. I don't think municipalities understand how the erosion of IRR can really discourage folks from doing these kinds of projects. It should have taken 12 or 18 months. It's taken us three years. It's a wild thing to say that we could have made plenty of money just keeping it the way it was, putting some lipstick on it, filling it up with more office tenants and maybe one or two restaurants. We probably would have been on our way out of it by now. Instead, we're just now on the verge of breaking ground. I think maybe, Mark, maybe Creta should go on a national education campaign for municipalities with the hashtag irrseverything.
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Well, look, we gotta quickly start hanging our hat on some new ideas on this. You may just be onto something there, Steve. Well, you know, I want to follow up with one of those challenges that you talked about, because I think one of the things that almost anyone that's even considering an adaptive reuse is that a lot of building codes, entitlement processes, approval frameworks, they're all designed for new construction, not adaptive reuse or infill redevelopment. Playing on what you just talked about a minute ago, let's dig a little bit deeper and take it, you know, from your perspective, what do you think are the biggest disconnects between today's regulatory environment and, and the realities that developers face when trying to reposition existing assets?
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Well, my guess is most developers would say that municipalities have done a pretty good job making it difficult just to do new construction. But it's a two pronged issue. To me, I think if developers had a choice, they're typically going to choose or I'll land over repositioning existing assets because it's easier. And I'm talking extensive repositioning, right? Not just talking about creating a couple patios and painting some walls. But major repositioning is more challenging than starting from scratch. And on the other side, the one true law of government or the one true law of bureaucracy is that it will inevitably become more bureaucratic. The current mindset of our governing bodies is to govern harder. More laws. I guess that's just the nature of any government. So you've got developers trying to develop projects that are harder to develop than ever before, and you've got governments that are making it harder to develop than ever before. So every year there's more laws. So every year is harder than the previous year. And to me that's just. It's not good. Not a good recipe.
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B
Well, it sounds like our other big education thing here is running in quicksand. It seems to be pretty appropriate for some of what you're talking about. Playing off of our two terrible jokes here. Looking ahead, what role do you think developers, and for that matter, organizations like Creta should play in helping modernize these processes so adaptive reuse can become a more practical solution throughout the country rather than just maybe in a patchwork of municipalities.
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I think this is a big part of the future of this organization. And thank goodness for this group. There's a lot of mountains to climb, I think. Look, common sense that protects the community is a no brainer. I think reasonable people, including reasonable developers, aren't going to argue over common sense regulations. Nobody wants a chemical or explosive plants next to homes or an elementary school. But I think that we need a true cultural shift at every level of government when it comes to development. With the future, we're luckily At Maricopa county in Arizona just struck 53 pages of their codes to make development easier. They just hit the delete button. And I think we need more of that kind of attitude. But they've got to be more common sense laws. And I could go into, you know, laws get made for a lot of reasons, and most of them are not good enough reasons, for sure.
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Yeah. You know, here, at least in D.C. looking at some of the other states around the country, we've seen some improvements like the one you're citing in Maricopa County. I still think at it. And, you know, you. You're the boots on the ground, so you're by far the better, in a better position to talk about this. But it does still seem that overall something like Maricopa county is the exception rather than the rule and that it's still a real challenge to make projects like the cliff work.
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No, Well, I would like. I would like for us all to get to a point where we call Maricopa county inspiration and not an exception.
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Yes, I think that, you know, they probably take that tagline and run with it as well, too. So looking ahead here, what do you think the Cliff tells you about where demand is heading?
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I think technology and data have made it easier than ever to find incredible opportunities, and the lines are more blurred than ever before. But, I mean, institutions are probably always going to have rules in market grades and risk tolerances. To me, at the end of the day, I mean, in a long game, demand is all about where the future composition and future growth of the economy is going to be. I think growth is the key to our industry, and growth will always be happening wherever it's easiest and best to business. So where is it best to do business?
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Yeah, well, you know, some would evidently say Maricopa county is a great place to be the indigenous these days. So. Well, continuing to look ahead, you know, for developers maybe evaluating a similar project to the Cliff today, what's a big lever that they should focus on to improve the chances of making adaptive reuse financially viable over the next few years?
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I think it comes down to sticking to the fundamentals and making sure that the most important boxes get checked, no matter how much you love a site or a vision. But also doing that in a market that is seeing consistent growth. Population growth isn't a silver bullet, but rent growth caused by population growth can certainly soften the impact of mistakes on your spreadsheet over time.
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Well, Steve, I'd be remiss if I didn't ask the following question. I Noted in the beginning, of course, that you are the current president of the association, Southern Nevada Chapter. And as we embark now on the next stage in our history as a commercial real estate development association, I'm curious to hear what you think, or rather how your involvement has shaped your perspective on where the industry is headed.
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Appreciate that I proudly am for the year 2026, quite an exciting year I've been involved in. I mean, before being president, obviously, I was involved in government affairs for quite some time. But I've been a part of and chaired numerous committees within the chapter. And I've learned a chapter is only as good as its members. And we've got incredible members here in Southern Nevada. And because of them and this organization's mission, our chapter has become one of the leading voices in the community. And sometimes we're the only voice of reason in the room. But that doesn't happen just because we exist. Right. It happens because a lot of people care and a lot of people do a lot of work to make the right things happen. When it comes to me and my experiences, I think it's. I know it's nice to not feel crazy to experience issues on the job in real time and bring them to this group and find that there's a lot of folks going through the same stuff that changes the nature of the conversation from some random complaint from some random person to, you know, potentially identifying a real issue or problem within the development community or even the state that needs to be urgently addressed. So I'm pretty proud of the group and we've done some good stuff.
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Yeah, I'd say be one of the biggest chapters in North America. I think things are probably going pretty well for y' all out there. Well, before we wrap up, I want to ask, is there. There's gotta be at least one misconception that you'd like to dispel about adaptive reuse today?
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We've already said it. And it's not to dispel amongst the developers, it's to dispel amongst the rest of the community. Which are existing buildings does not mean easier. Existing buildings almost always means more difficult. I think municipalities and other governing bodies should be making it at least twice as easy to do adaptive reuse than just new construction on dirt. That's my math, though. Could be off.
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B
And is that math based? A little bit. Because there's a lot that goes into rehabbing an existing structure in the simplest of terms, I think we all drive by, we see walls just raised up and put. But here you've actually got to dig your way around existing plumbing, wiring, all these other minefields that are sitting behind these walls. I gotta imagine that that's probably one of the unseen or unknown challenges that both investors and municipalities look at when it comes to an adaptive project.
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Mine's everywhere. And that's just. And that's just digging into what's underneath. Right? That's not even talking about the challenges of walking through a municipality, converting a property. I think that one of the things about new construction is it's established. The issues are the issues. And there's predictability. There are reliable timelines and you can work a spreadsheet, you can work a pro forma around those timelines pretty consistently. When you're having to go through new processes and new things and teach new things to people who haven't been through it before, all of it introduces an unpredictability into the process and it's a tough part.
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B
Well, it sounds like it's very much like Las Vegas itself. Not for the faint of heart. It's definitely a bit of a risk reward venture. Well, Steve, thanks so much for joining us today. It's been great to not only hear a little bit more about projects such as the Cliff, but also just to gain a little bit more insight from you having been down there in the trenches and working on projects such as this. Real pleasure having you and hopefully we'll get you on again in another point in time. Thanks again, Steve.
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Thank you very much. Good to see you.
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Thanks for listening to Inside CRE with your host, Marc Solitelli. Special thanks to our podcast sponsor, Majestic Realty. If you enjoyed this episode and you'd like to help support the podcast, subscribe please share it with others and be sure to subscribe to learn more about the Commercial Real Estate Development association and join a network of over 20,000 commercial real estate professionals. Visit www.credaglobal.org.
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Sam.