Par Tolles on Nevada Newsmakers

Aired, Tuesday, May 12, 2020

Below is a transcript of the conversation between Par Tolles and Nevada Newsmakers host Sam Shad.

Sam Shad: And back on Nevada newsmakers were always pleased to welcome back to the program, Par Tolles, he is the head of Tolles Development Company. You have a lot of projects all over the Reno area but before we even get started what are your current thoughts about where we are today as we tape this?

Par: I've used the term in the last couple days, I still feel like we're a little bit in no-man's land and I listen to as many programs probably as you and read as much as you and I remain undefined on timing and exactly where we're going so as you know we have about 125 tenants probably half office, half retail so we're intimately involved in conversations every day with how are we going get revenue back going in these businesses and it's, I think we got a little bit more ability to hold our breath, Sam but it's going to get pretty dire with every week I'm sure there's a good chart that I could tie to business closures or bankruptcies as each week goes on but, got a lot of small restaurants and bars some have been able to do to-go and keep a portion, say 25 to 30% of their revenue flowing but the rest are closed and so we spend a lot of time doing surveys working with our tenants on getting their PPE PPP checks and that jet fuel, if you will, is helping them survive but we're gonna get to the point here where it's gonna get it’s gonna get very trouble it is troublesome but it's going to get dire if we don't get reopened.

Sam: Well and in addition to that and it's something that you probably wouldn't mention but I will which is that you've given a lot of tenants a rent-free situation in these restaurants to help them keep going and I know they're incredibly grateful to you for having done that.

Par: Well thank you and yeah, I get pretty emotional about it and you know these guys are our lifeblood, right? I mean the system of real estate is the customer to the tenant, the tenant pays rent to the landlord, the landlord pays his mortgage, and fortunately we've had some lenders that have really worked with us so the system, and I think there's a 90 day kind of friendliness between lender, owner and then we can now be friendly to tenant and we've actually come out of pocket also for our tenants but that cycle has to turn back on in order for the economy and for business just towork in a normal fashion.

Sam: You know you and I have had many conversations over the last few years I mean in fact we’ve been talking for many many years and there’s been this huge excitement about what was going in the state of Nevada in general and in Northern Nevada in particular. Midtown where you own a lot of property has been one of the hottest spots. How are your investors, the people who are giving you money to build businesses, how are they feeling at this point and are they prepared to either put in more money or hang on to where they are?

Par - Right. You know I've got a great - we probably have about 50 investors and – not all in - in various projects and they, all of them have been encouraging and which has been really heartening to me in the sense of they call, they know that we’re working hard they know that it's going to be a bumpy road and yes they're prepared to support us and real estate like any investment has its risks. This is probably my third recession I’ve been through. I've done a lot of loan workouts. I'm hoping that we get to the point here by June or July where if the engine turns back on that we don't have to go and repeat what we had to suffer through in 2008-12 but you know again I'm very hopeful and it’s needed that we get turned on by June.

Sam: As you see the CDC guidelines, which is really what the state is following, do you think that these businesses can operate even at break even with the social distancing that's being required?

Par: Great question. I we can go through…let me give you a couple interesting statistics. So, in 1920 our service employment was 26%, 2020 our service employment the United States is 86% percent, so this pandemic is a laser-guided missile to the service industry. If you look at hotels and restaurants, both of which I'm involved in, it makes up about 10% of United States workforce which translates into about 15% percent of employment. So, if you have 30% unemployment and restaurant in hotels, you have 7% unemployment in the United States. So, you translate that to Nevada, we only have one state that's more reliant on hotel and restaurants than us and that's Hawaii. So all the statistics I just gave you from a from a country standpoint is greatly amplified for Nevada. How, you know, I think gaming is going to really be the innovator here and they're gonna lead the way for innovation on how they can fit as many people as possible into a space safely. I think we need to watch their innovation. But no, I mean restaurants, their priced to perfection and most of these small business owners don’t have a lot of savings so it's going to be tricky. My hope is that we can get somewhere to 75% percent that's my hope here and this isn't going to last forever…I think you know between sanitization and masks are gonna be the key- masks are, should be kind of our flag of social responsibility and those two will go away but we've got to play by the rules and when we do open up and so that we can get from that it will start at 50% I think - I think you have a big rush back in employment in people that want to be out and socialized at about 50% and then we have to work really hard at staying safe to get from that 50 upward to 75 and then on from there and hopefully by that time testing, vaccine will kick in and we'll be able to get back to normal.

Sam: We've not had an opportunity yet to see what gaming will do yet although obviously and the governor is working with the major casinos on the strip to come up with all the preparations they need to be able to open safely, but we do have an example with the Costco’s, the Walmart's and other stores and medical offices that have remained open to see that the social distancing is certainly making -and I'm just saying this from a personal point of view - I feel comfortable going into a grocery store, I feel comfortable going into a doctor's office at this point in time because they are not overcrowded they are holding people at the front door if there's too many people trying to get in at one time and so I think that that as we increase the comfort level for people, they will feel comfortable because as you say there is this incredible pent-up demand - people are going nuts at home right now

Par: Yeah right... yeah and I think you’re seeing our country in the world really fall into line and show responsibility and I think we got to give ourselves a little bit more credit I mean I've been to the same stores you have and as I have gone in to go to get to-go and restaurants etc.… people line up appropriately, they put on their masks, if people are too close I see this passersby’s on running trails people put up their masks and there's a personality type that I think is a little bit more timid and worried, you and I think area little bit more comfortable that's why I’m here

Sam: that’s the polite word (laughs)

Par: That's why I’m here today. But I think you know I fall in the line too and I'm very cautious I keep a mask in my car and when I’m out I play by the rules and I think that’s gonna be, playing by the rules is gonna be our key to keeping the momentum going so that we don't have a repeat of what's happened.

Sam: No and I absolutely agree with you. I think the other thing that has to fall in line and I’ve talked to several members of the media about this, which is that the media has done an incredible job of spreading word that people need to be responsible, they need to stay home and all the things that that the government has said we need to do to keep this virus um and not overwhelming our hospital system and I think that the public has done an incredible job of that. I think now it is the media's responsibility to give context to what's going on so that people understand that, you know for every person that's sick there are a lot of people who aren't sick. For everybody who's sick those are not resulting in deaths. We have to lay out the statistics because that, like the stock market, like people who invest in your businesses, that's where the confidence comes from, right?

Par: Yes. So, as you and I chatted quickly before, the statistics in Washoe are incredibly important to analyze. My wife has been spending the last week, ten hours a day with this nursing home crisis…

Sam: …and let's point out that your wife is Assemblywoman Jill Tolles.

Par: Yes and it's horrible what's happened there, but half our deaths in Washoe County have come from one hot spot. So, rounding, if we have 30 deaths, 15 come from a hot spot, we’re tracking our reopening based on these statistics -we can't just paint everything with one broad brush. Washoe County actually has a very very low death rate. If you take the 15 that weren’t part of the nursing home and then layer in pre-existing conditions to that, we're actually doing, better than most and that needs, that that’s where I really go back to - we've got to have a local, countywide authority given by the state to really report back to the governor, and have the governor listen and allow different openings at different - Elko is different than Washoe, Washoe is different than Las Vegas and it’s so important that we really study those statistics and then act accordingly.

Sam: And in Reno we have seen Renown, the major hospital build a facility in a parking garage to hospitalize 1400 people - it is almost not being used at all. There were plans to open up the convention center as additional medical space. That has been postponed until such time as it might or might not be needed. In Las Vegas, they built 600 beds for the homeless and the occupation was minimal. There were plans to open up the Convention Center in Las Vegas, that was also not needed and now the governor is allowing medical treatments to continue that are not Coronavirus-related. So I think that this this is where the media - and the majority of people these days get their news from television - that there is a huge responsibility on television news…

Par: yes

Sam: …to be realistic and not be behind the curve as so many times they have been but be in front of the curve to say, hey this is where we really are and this is why you can have confidence that you can do more.

Par: Think of the irony, most of my guys that work for me are married to Nurses, I think all of them are except one and…

Sam: It’s not a company rule is it? (both laugh)

Par: Many of them, those nurses are being sent home because there’s not enough to do.

Sam: Right

Par: And so now we actually have a health care issue where they're not making the money that they need to make. I was, I'm on the board of one of the hospitals and they're worried about many of the doctors starting to go out of business because they can't perform elective surgery or actually have people come in and perform their duties. So here we have this pending healthcare crisis and we have doctors that are in the same position as some of the small business owners the restaurants and bars that we have.

Sam: all right let's take a break

Par: Sure.

Sam: And back on Nevada Newsmakers we continue our conversation with Par Tolles. He's the head of Tolles Development Company involved in all kinds of real estate. Let's talk about malls. You know Simon Mall which is the largest mall company in the country - has Fashion Show Mall in Las Vegas, has Meadowood mall in Reno - they had laid out plans to open up malls across the country and yet at this point in time we're not seeing malls being allowed to open up in Nevada. When do you think it's going to be an appropriate time, and do you have concerns that the mall industry is in in danger?

Par: I had concerns that the mall industry was in danger before, pre-COVID and I think- like many things COVID is going to put those that were already in trouble - you saw J.Crew filed yesterday, Neiman Marcus is, I think, has filed, JCPenney's on the edge- those that were heavy laden with debt that were in trouble COVID is kind of the thing that's gonna push them over the edge. I think outdoor malls, so if you compare say a Meadowood with a Summit or even the mall, the shopping area that we're building Rancharrah, it's very outdoor focused. There was a great interview on CNBC with Rick Caruso whose kind of the outdoor mall expert in Southern California and he is very bullish on shopping districts that have parks and an outdoor focus and plazas versus the malls that are forcing everybody in. So, I think you're going to see a lot of people feel more comfortable when they have, back to the social distancing, when they can spread out, where they can go outside, where there’s outdoor dining. I think the malls themselves – again, I think there'll be appropriate sanitization put in place - we're gonna be the cleanest country

Sam: in the world

Par: in the world

Sam: literally

Par: Right. And I think they're gonna do appropriate Things, but I think being indoors, cooped up - until there's testing and vaccine -that's gonna fall behind those that have more access to the outdoors.

Sam: And I think the two professions that should see a boom because they are really needed is marketing and sales. Now within your company, obviously because of the amount of business that you've been doing the last few years, you have that part down. But as I look around to other companies and I see you know the sales efforts are awful and the marketing efforts are awful

Par: Yes

Sam: Um… it's really stunning and I think part of it is that we saw an economy that was doing so well that you almost didn't need to be doing sales and marketing because it was, you know, do I have the product in stock and if I do this is what you're gonna pay for it.

Par: Right

Sam: Whereas now it's we need to cut a deal

Par: Right

Sam: And for example, for advertising there's been never a better time to buy advertising because every television radio station newspaper is going to cut you a deal and yet the marketing efforts are not close to what should be.

Par: A great point I've seen some really good creativity with some of our tenants. I'll give you two examples. One, we have a bar called The Emerson and he is now, he's a mixologist and so he's bottled a lot of his drinks but given them names, you can go buy the drinks - we did yesterday for Cinco de Mayo - we bought a case of his margarita mix and so they've really been innovative in being able to still bring in some revenue through making drinks. Um, if you look at Granite Street Eatery who has turned themselves into a market so you can get your to-go food but you can also get a variety of other things that you get in the grocery store. And they even look at Mark Estes - we got to go the other night at Liberty which is a popular place in downtown Reno and he has a YouTube video which accompanies each of his meals to show you how to cook it so necessity being the mother of invention you're seeing some of these folks that are really looking this as an opportunity and how to differentiate themselves from their competition they’ve you seem some really interesting, Fun, creative things that have drawn me to want to give them my business.

Sam: All right let's take another break we'll be right back with Par Tolles after this.

Sam: And back on Nevada Newsmakers we continue our conversation with Par Tolles, head of Tolles Development Company. Creativity is the thing that the United States is number one in in my opinion. I mean you look at you know the IT Industry; you look at you know every area when we get into trouble we come up with creative ideas. I don't know how long it’s going to take for us to get out of this and I hope your timeline is better than others that have been put out there, but I think that we are going to see a new world. I mean is that the sense that you get?

Par: Yes and if you don't think we're gonna see a new world then you really have your head in the sand and again, I mentioned my “no-man's land” - you’re starting to see creative invention, you’re starting to see things that are that are going to allow people to reopen and allow business to open but it’s going to be different. I mean you can see the shield's that they're coming up with planes right and how they're gonna face the seats differently how they what do they do with the middle seat. You’re going to see restaurant Plexiglas and sneeze shields between server and patron and where it's just going to be a new normal and it's gonna, just like September 11th Sam. I mean the TSA experience has become part of our life. The COVID experience will be part of our life. Again, when vaccine and testing become - in trace tracking I guess they call it -is the norm then you're going to see some of the creativity may be that those can be dampened down a little bit and our normal pre-COVID will come back a little bit but no it's going to be different.

Sam: You know and as I said earlier context is something, I'm really trying to bring to this program so that people can understand. Um you mentioned earlier that you have been through several crises in real estate over the years. The bottom line is we came through all of them and not only did we come through all of them across the state, but we thrived and isn't that going to be where we're going to come again?

Par: Yeah and I think, I mean pain is uncomfortable, but pain produces greatness and you're gonna see leaders and - I've seen Governor Cuomo’s a great example. A guy that's really stepped up and lead. We would have never known much about him but he's on TV every day. I've seen, I'll just throw out a few I've seen Bob Lucy step out and lead, you know effectively and you're seeing people that and many business leaders that are out there serving meals um, and really I sit back and I'm saying I wouldn't, I didn't know you had that in you and you do and watching how you’re conducting yourself in a time of crisis and you’re the selflessness that you’re showing in a time of crisis - I want to know you more I want I want to do business with you and this is what difficult times produce and you're gonna see, I mean I, you know there's that great line in The River Runs Through It where Brad Pitt says, “Brother, I'll never leave Montana” and through this crisis I’ve told Jill, I said we'll never leave Reno. I mean the intimacy that we've created, and the bond that we've created even in the last 60 days going through some very difficult times and dealing with some others that have had some, you know been affected a lot more than we have; we’re part of this community and this community will pull through. It has, it will. The country will. But Reno itself, we were on the verge of really tipping to something different and great and we will get back there sooner than we think.

Sam: And long-term development -we have less than 30 seconds - but long-term development is moving ahead without stopping and thankfully the Governor did not shutdown construction.

Par: Right

Sam: And so, we are going to see the benefits of that over the coming next years and it's not the next year or two, it's five, ten years down the road. So, the continued growth of Nevada and potentially Las Vegas finally seeing more, much more diversification than it saw before…

Par; Yeah, you've talked about the ricochet effect back to our need for diversification. You know we're obviously a state that relies way too heavily on gaming – that’s for another show, but we will see economic diversity become en vogue again and whatever we need to do to recreate the Tesla opportunity or recreate the Google opportunity, that is going to be top of mind come the legislative session and we need to be ready to really continue to broaden the footprint of what were, of the businesses that we have both in Southern and Northern Nevada.

Sam: And that's what we have to leave it. Thank you sir.

Par: You’re welcome

Sam: And thank you for all you're doing to help all the people who you’re working with. We do appreciate it and we’ll be right back.

Sam: You can now watch Nevada Newsmakers on YouTube just go to YouTube and search for Nevada Newsmakers and become a subscriber. We'll see you on the next broadcast. Thanks for watching and listening.