Q&A: Patty Nooney

By Buck Wargo

Friday, Aug. 27, 2010 | 3 a.m.

What started as a summer job for her family-owned business turned into an unexpected career for Patty Nooney.

The managing director of brokerage firm CB Richard Ellis in Las Vegas, Nooney went to work for a commercial real estate firm started by her grandfather in 1945. The firm did some development, but mainly worked on management and leasing for large institutions.

“I started at age 12,” Nooney said. “My father did not believe in having teenagers be idle over the summer. I started working as a receptionist at apartment complexes, but I learned from the ground up doing a number of different jobs.”

IBLV: Did you think that would be your career?

Nooney: No. Originally after working in the summers, I thought real estate was OK, but I had a big interest in animals. I went to college to get a degree a biology thinking I may go on to vet school or on to marine biology. I went to the University of Miami in Coral Gables, Fla.

What happened?

After two years, I saw a lot of people graduating with degrees in chemistry and biology and they couldn’t find a job. I thought, “I better rethink this” and became an accounting major. I went to Touche Ross at the time, now known as Deloitte & Touche. I worked several years in Miami, getting a good background in auditing and tax work with Touche Ross. My grandfather asked me to come back to St. Louis to work in the family real estate business in early 1980s.

What did you do?

It was one of the largest firms in St. Louis. I started doing portfolio management work and sales. We were at the time raising money for our different funds, and I did a lot of the presentations to stock brokers and their clients to raise funds to go into real estate. I did that for a while and started in the management side of the house, learning how to manage office buildings and retail centers and moved up the chain managing individual properties and then portfolios. And then, because I had a good accounting background, rose to heading up the management and accounting side.

What happened with the company?

We sold in the late 1990s. A lot of large national real estate firms were going around the country buying the strong local firms. We sold the brokerage business to a firm in California, and I stayed with that company for five years, first running the properties and ultimately was the chief operating officer.

What happened?

I left to go to CB (Richard Ellis) in early 2006. I joined CB to head up the St. Louis office as the managing director. And then in August of 2008, I transferred out here.

Why did you come here?

There was an opportunity. My predecessor here had transferred to the CB office in Hong Kong. I thought at the time that this office was slightly bigger than the St. Louis office; we had gone through the merger with Trammel Crow. There were two of us running the St. Louis office, and I thought there was an opportunity in Las Vegas — that it would be interesting to come to one of these boom-and-bust markets.

What did you learn about Las Vegas you didn’t know?

I had to learn the market from the ground up. In many ways Las Vegas is still a small town when it comes to real estate. There are a handful of very strong, good local developers. You get to know who they are and what their properties are. There are probably more private-equity investors in this town as opposed to institutional investors.

What is your role?

As managing director, I am responsible for all of our lines of business — brokerage, investment sales, asset and property management, and the appraisal and valuation group. I help business development in all of those areas, and hiring and keeping the best people we can and getting them trained.

What services do you provide?

Brokerage of all product types — office, industrial, retail and land. The unique group we have here is our global gaming group that works around the world with gaming companies. Not only do we do brokerage for gaming companies, but we have internal analysts that do a lot of consulting work with gaming companies. We have an appraisal and valuation group, and I have a debt and equity market professional. We manage a little over 7.1 million square feet.

How have you dealt with the recession?

We don’t always replace people when they leave, and we had a few layoffs. Some of that was because of consolidation. We are down three or four people. We have a little more than 100 people here. We have the broad array of service — that has helped us get through this downturn. We haven’t had big layoffs. We haven’t had to do some things other firms did when they were heavily reliant on one service or two services.

How are firms surviving in this environment?

It is making sure you are out there communicating with owners. It is beating the bushes and finding opportunities. It is finding tenants for the buildings we manage, and we have a lot of tenant-rep business where we are out getting them the best deal.

How has it changed in the two years you have been here?

The biggest transition for my professionals is that they have to go out and cold call and look for the business opportunities. From 2002 to 2007, the phone rang and business came in the door. There were so many investors looking to get a piece of the action in Vegas that you didn’t have to do a lot of business development on your own.

How competitive are brokerages?

It is competitive. Brokers by nature are competitive with one another, but everybody is looking out for the clients’ best interest. In a down market particularly, you work closer with other brokers. You have one house listing the property and someone else has the tenant, so you work together on those occasions.

What was it like when you got here two years ago?

People were concerned. It had definitely slowed down, but people were still doing deals. With the financial meltdown, that’s when companies froze and were afraid to take new space because they didn’t know what was going to happen to the economy.

Where is the market right now?

I would say we are close to the bottom. The market is clearly better than it was a year ago. When I look at this office for the first half of 2010 compared with 2009, the number of transactions is up across the board, whether it is office, retail or industrial. Rental rates have continued to drop, but the number of transactions and mind-set of what we find out there through the tenants are they don’t have to stay on hold. They are saying, “I weathered the worst of it. I will now make a decision to lease new space, expand or renew where I am.” But they will make a decision on a lease transaction.

What is happening with sales transactions?

They are starting, but they are still relatively few and far between. The banks and special servicers are getting a little more realistic on pricing, and we are seeing the small deals start to trade.

How are tenants reacting?

Some tenants are saying, “I want to take this opportunity to move up to that Class A office building that I couldn’t afford before.” Tenants are now trying to sign for a longer term, and landlords are starting to say, “it is going to get better in three years, certainly in three to five years,” so they don’t want to sign a long-term lease. They would rather keep it a short-term lease. But credit of both the landlord and the tenant are looked at. It used to be landlords would look at a tenant’s credit, and tenants are also looking at the landlord’s credit and asking if this landlord has a good loan or is he in danger of default. So many buildings are in default or may be in default simply because the loan is coming due. The property may be well occupied, but the lending standards have changed.

Are you still seeing a lot of layoffs?

We still see some downsizing, especially in the industrial market. Most of the downsizing in the office market seems have taken place last year. Industrial took longer than office and retail to decline. The construction climate is not getting any better. There were some companies that serviced the construction industry that were still going through 2009 with CityCenter. There are no new major projects, and we are seeing some of those companies shrink.

What is your sense of where the economy is, based on what your clients are saying?

We are seeing more optimism right now than we did a year ago. They weathered the worst. They are not anticipating a great big uptick, but they are feeling it is not going to get substantially worse. The only thing we see as a potential problem on the horizon is the election season. And quite often with many companies, the closer you get to a major election, they go on hold and want to wait and see what is going to happen and what may change.

What are they concerned about?

Taxes, state and federal and what regulations are going to come down from the government.

What is happening with the office market?

Office occupancy right now is 25 percent and another 3 to 4 percent with sublease space available. We will see occupancy start to climb, but the rental rates won’t start to improve until the end of 2011 or into 2012. In the next two to four years, we will probably see office vacancy shrink to 10 to 12 percent.

What about industrial?

Industrial, because there wasn’t the overbuilding like there was in office, we are very close to the bottom right now at 11 percent (vacancy), which is certainly healthier than 25 percent in office. In 2011, we will start to see positive absorption and a slow increase in rental rates.

What about retail?

It is going to be tough. We have the unanchored properties that are available out there. Consumer demand has to come back. We have a lot to do before we see the retail market come back strong. We won’t see any new development in retail for quite some time. We have seen some of the big shakeout we are going to see — Circuit City and some of the big grocery stores shrunk. The big boxes are starting to be absorbed. We have seen some new tenants come in the market. The big boxes will get taken. It is the small-shop space that is going to be difficult. We are at 12 percent vacancy right now. It doesn’t sound that bad but historically Vegas was 2 to 3 percent. If you bought a property and underwrote it at 3 percent vacancy and you are now at 12 percent, you are in financial trouble. It will come back slower than office and industrial. I think getting back to 2 to 3 percent vacancy is unrealistic for most markets. I don’t know if Vegas will ever get back to having vacancy so low.

What about the apartment market?

The apartment market was suffering because of the rental-home competition. The apartment market was adding inventory at a normal pace. There wasn’t a big influx of new properties at any one time. You had inventory added when jobs were declining. We didn’t have that population growth, and we had population shrinking, and big employers laying off people.

Where is the land market?

We are clearly at the bottom of land. Transactions are happening in land (for commercial uses). A few pieces where we represented sellers we had multiple bidders, and prices got bid up a little bit. We are seeing that people recognize if you have the (ability) to hold onto land for a few years, now is the time to buy.

What about new construction?

Not for a while. We have a lot of space to fill before we see new construction.

How is Las Vegas’ commercial market different?

Vegas is more dependent on a tourist economy, and we need the rest of the country to get healthy before we get healthy. We will lag some of the other cities.

You wanted to come to a city with a boom-bust market. What lesson should be learned?

I think the lesson people learned is you have to pay attention to the fundamentals of real estate and prices and rental rates don’t go on a straight upward trajectory. There has to be reasonableness put in it. The rates here got so high and the prices got high not because of the fundamentals of real estate but because there was available money and people could flip buildings.

Is Las Vegas still in danger of seeing a wave of commercial foreclosures?

I do not feel we will see a wave of foreclosures. It is going to be trickling out. Lenders are still doing loan modifications and workouts where they can or they are slowly letting properties out for sale.

Do you see a lot of companies coming here from other markets?

We are seeing more interest. I would only say that there have been a handful of companies that have relocated, but we are seeing interest from clients from California and Canada and some of the Midwest who are taking a look at Las Vegas. We are part of a multimarket search. When they are looking at Vegas, they are looking at Phoenix and Albuquerque and Salt Lake City. We are still in a competition to attract them here. We have reasonable land prices and building prices and a labor force that is available and we have affordable homes.

What is the key to diversifying the economy?

A company looking to relocate looks at a lot of factors. It is not just a low price on real estate or low taxes. You have to have a trainable workforce and educated workforce to get them to move here. We are lacking in some of the incentives and workforce training incentives that some of the other states have.