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A crafty move: Danny Thomas turns to arts, crafts and more to salvage a troubled $500,000 Southwest Little Rock retail project.

This summer, commercial real estate agent Danny Thomas of Little Rock was in a financial jam.

In 1990, National Home Centers pulled out of his family's retail project at the southeast corner of Baseline and Geyer Springs roads in southwest Little Rock.

The move left the president of The Danny Thomas Co. with 40,000 SF of empty space and more than $457,000 of debt to carry.

The retail center originally was leased for 20 years to Sterling Stores, which operated a Magic Mart there.

A succession of subleases followed with Handy Dan's in 1978 and National Home Centers in 1988.

Thomas was unable to find a replacement tenant before the master lease expired last year. By June of this year, Thomas was still without a tenant and was several months behind on his mortgage payments.

That's when Superior Federal Bank of Forth Smith filed a foreclosure suit seeking $181,128, plus accrued interest and expenses.

The litigation triggered a second foreclosure suit by Metropolitan National Bank of Little Rock, which held two promissory notes with an outstanding balance of $276,275.

The debt was secured by the empty retail center owned by Magic Mart Joint Venture, an investment group composed of Thomas; his wife, Johnnie Nell; and his mother, Carrie.

The 2.75-acre development was creating a world of trouble for Danny Thomas.

"My tail was against the hot pipes," Thomas says. "I was having to carry that project for more than a year ... I could not sell it or lease it. I had to do something because I was getting in a bind."

What Thomas did was convert the retail center into a market for small vendors selling a mixture of arts, crafts, antiques, collectibles and new merchandise.

The center, dubbed Carrie's in honor of his mother and granddaughter, is filled with 318 merchandising booths. Because of its success, Thomas' financial situation has improved dramatically.

"I've been asked to open two or three more, but I have my hands full with this one," says Thomas, who has spent most of the past three months overseeing Carrie's. "Our business has increased every two-week period except for one."

Are other vacant retail properties in central Arkansas suitable for this type of redevelopment?

Former Kmart Corp. stores in downtown North Little Rock and in Little Rock's Riverdale Shopping Center often are mentioned.

And what about the 153,600-SF Outlet Mall along Interstate 30 near the Pulaski-Saline County line?

Carrie's already has inspired copy-cat efforts in Harrison and Searcy.

The initial performance of Carrie's was enough to convince Metropolitan National Bank to refinance the project with a $505,826 loan in October.

With that backing, Thomas paid off Superior Federal Bank, and the foreclosure suits were dismissed.

Spotting A Good Thing

Thomas didn't originate the indoor market concept.

He saw the concept in action at projects such as Apple Tree in Branson, Mo., and Connie's in Joplin, Mo.

In fact, Thomas almost entered into a joint venture with the developers of Connie's, but they didn't want to take any of the risk.

Thomas had tried the traditional methods of leasing the building without results. Faced with the prospect of losing the property through foreclosure, he turned to the unconventional flea-market approach.

Officials at Metropolitan National Bank were skeptical that Thomas' idea would work. But the building -- heated, cooled, well-lit, clean and having a full-time security guard -- proved to be a successful setting.

"I personally thought it would work, but I didn't know," Thomas says. "I had never done anything like this before.

"In July, we just bit the bullet, built 113 booths and started leasing. My wife remarked that if there was any question about me being crazy, we now know it's true."

The first lease was signed July 29.

Carrie's opened for business Aug. 23.

Thomas averaged 30 to 35 leases per week as word spread. Sixty days after opening, the building was fully leased with 318 booths.

Booth space leases on a month-to-month basis. The turnover is averaging only 5 to 10 percent.

"It makes bankers nervous because it's only 30 days," Thomas says of the leases. "The question is, 'Will it stand the test of time?'

"... It's kind of hard to refinance an empty building, and not many bankers like 30-day leases. But when you have 318 of them, that makes a world of difference."

Lease rates range from $50 to $125 per month. The price depends on the size of the booth. The smallest booth is 32 SF, and the largest is 140 SF. The average retail area per booth is 100 SF.

The result is a critical mass of merchandise with low overhead risk for vendors.

Thomas also collects a fee for keeping sales books for vendors and paying their sales taxes. The software program that keeps track of sales was designed by his son, Dan Thomas, who runs the property management operation.

Carrie's features a central, computerized checkout area so vendors don't have to man their booths. Each item bears a price tag with a booth number, which allows the sale to be credited to the proper vendor. The system enables retailers to track their inventory and permits them to share booths.

Thomas settles up with vendors twice a month. Vendors are required to come in weekly, straighten up their floor space and restock their merchandise.

Thomas has been airing spots on Little Rock television station KLRT-TV, Channel 16, and has two billboards under contract.

He is considering using the slogan, "If we don't have it, you don't need it."

Location, Location, Location

Marketing through word of mouth and the media has helped Carrie's get off the ground.

However, the project's location might have been the most important factor.

The intersection of Base Line and Geyer Springs roads is one of the busiest in Little Rock. It's an area that has been good to Danny Thomas.

"I made my living on Geyer Springs," says Thomas, who worked as a commercial broker for the Little Rock real estate firm Rector Phillips Morse at one time. "I sold, I guess, $1 million worth of real estate my first year out here."

He sold two of the intersection's three corners and has kept the Carrie's location through the years.

"I would have sold the northeast corner if I hadn't gone off to deer camp," Thomas says with a laugh.

Thomas, who once lived in the nearby Windmere subdivision, began selling residential real estate in 1962. He moved to the commercial side of the business in 1968 and left RPM in 1975.

After Baseline-Geyer Springs, the next hot spot for Thomas was the Rodney Parham-Reservoir Road area of Little Rock.

In the West Markham-Bowman Road area of west Little Rock, a group of investors put together by Thomas made $2.7 million on their initial investment.

Like other commercial players, Thomas has had to contend with problems such as properties where the existing debt is more than the current appraised value.

"We've had our fun the past couple of years," Thomas says with a grim smile.

So have other commercial Realtors.

They're hoping the next several years will be less exciting and more profitable.

Properties Managed By The Danny Thomas Co.

* Pyramid Place, a 90,257-SF office building in downtown Little Rock.

* Centre Place, a 48,000-SF office building in downtown Little Rock.

* Old World Plaza, a 25,446-SF office building in North Little Rock.

* Parkwood Center, two Little Rock office buildings totaling 36,395 SF.

* La Villa Shopping Center, a 22,000-SF retail project in Fort Smith.

* More than 500 apartments in Fort Smith.

* More than 600 apartments in Little Rock.

* 60 apartments in Greenville, Miss.

* 423 acres in north Dallas. The mixed-use land is paid for and turning a profit.

* 17 acres on Chenal Parkway in west Little Rock. About 12 acres are zoned for commercial development, and five acres are zoned for office use.

* 37.75 acres in east Memphis, Tenn., zoned for office development.
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Article Details
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Title Annotation:commercial real estate agent and real estate developer
Author:Waldon, George
Publication:Arkansas Business
Date:Nov 18, 1991
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