DAVID DELZOTTO, IF I KNEW THEN INTERVIEW, CRAIN’S LAS VEGAS
In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.
Remington Nevada is a commercial real estate developer located in Las Vegas. The company currently has close to 800,000 square feet of retail shopping centers either under construction or in development phases throughout Southern Nevada and metropolitan Phoenix.
Before 2008, I was buying land in other markets and titling it because we could sell it to homebuilders before we even mapped the lots. I won’t do that again.
As a developer and as a builder growing up in the industry, you always anticipate market softening, market slowdowns, changes in markets, but I would say that I never anticipated the 2008 financial meltdown.
If I knew then that something like that could happen, I obviously would have prepared differently for it. That has certainly affected the way I do business today because although we’re in a good market now, it has taken a long time to recover. A lot of builders and clients are still somewhat skittish. They’re still feeling the recovery in some respects because it affected a lot of us in different ways.
It wasn’t just a softening of the market. It was the banks saying, “Even though we allocated X number of dollars for your project, we’re not lending it to you anymore. You’re done.” And you’re halfway built and you’re like, “Well, what am I supposed to do with the Starbucks that’s ready to move in and the Wells Fargo that’s ready to move in and the grocery store that’s ready to move?” “Well, sorry.”
What I learned from that is that, sure, we always have to anticipate softening of markets and changes in the economy, but knowing what happened in ’08, I now prepare for it a little differently in a number of respects: How we approach land deals, how we develop shopping centers, and how we structure partnerships. All of these things are everything I think of, if not daily, certainly weekly and certainly with every deal we look at.
I’m always looking at an exit strategy. I’m always looking at the time of the project and prepare for “what if” — what if the financial markets change again?
Certain things are out of our control, but with the things that are in our control, I’ve learned to not only prepare for a rainy day but prepare in great magnitude. Just when you think it can’t get any worse, it probably can. This business is risky enough. We take risks every day buying real estate and titling it and building on it, but the key points are the way I structure deals, the way we structure joint ventures, the way I borrow money from banks. All of those things I look at differently today than I did 10 years ago, for sure.
There are still risks [involved] but they are more calculated risks. Before 2008, I was buying land in other markets and titling it because we could sell it to homebuilders before we even mapped the lots. I won’t do that again. So the risk is more localized to Las Vegas and Phoenix and markets that we’re established in, and the risks are more mitigated up front so I can know my exit, the timing of the project, my worst case scenario, mitigating any guarantees.
Whereas before I would guarantee loans, today I try not to, and if I do guarantee a loan I have the mindset that I am prepared to buy that loan out so that I’m not just saying, “I’m going to borrow $30 million.” Well, then I better be able to write a check for $30 million if the bank decides to not fund me.
That’s the biggest thing that I can take away from 2008: I do business totally differently and try to mitigate my risk and have an exit before I even start a project.