Cooper Realty picks up pace with purchase: Bailey sells commercial properties.

Cooper Realty Investments is expanding its commercial real estate portfolio with a seven-property deal in central Arkansas totaling $33.2 million.

The company is buying more than 470,000 SF of retail and office space from Little Rock's Bailey Properties LLC. Cooper Realty also has a $20 million deal pending on its first out-of-state purchase: the Center Point development, a three-building office project totaling 157,000 SF in Knoxville, Tenn.

All told, the commercial real estate division of Bella Vista-based Cooper Communities Inc. has opened its wallet to the tune of $77.4 million to fund a 1998 buying spree that has pushed its ownership upward of 1.5 million SF.

"We're operating that as a totally separate company with its own strategy," says John Cooper Jr., chairman and chief executive officer of Cooper Communities. "We look at that as an investment in that company. We're excited about the progress."

The strategy is to parlay its base of retirement community-related commercial projects in Arkansas, Tennessee and South Carolina into a more extensive group of holdings.

Toward that end, Cooper Communities and its founding family are committing a bigger portion of their cash-rich assets to buy retail, office and warehouse properties throughout the Mid-South and Southeast.

The Bailey deal encompasses three retail projects totaling 250,000 SF with the Factory Outlet Mali in Hot Springs and west Little Rock's Bowman Curve and Rock Creek square. Two mixed office/retail projects in west Little Rock, the Market & Merrill Center and Pavilion In the Park, add up to more than 204,000 SF.

Rounding out the list are two office buildings, the 11,000-SF Riverdale Building in Little Rock and 7,800-SF Overbrook Office Building in North Little Rock.

The sale represents a lucrative harvest that Bailey Properties is now reaping after picking up some bargain properties and sprucing up the projects with cash and improved occupancy.

"We've put a lot of money into our properties, and I'm proud of that," says John Bailey, president and CEO of Bailey Properties. "When we buy a property, we don't look at it as a short-term scenario. Cooper will be a wonderful owner for these properties."

The Bailey transaction is the largest of three Arkansas buys for Cooper Realty and marks the fourth stop on an acquisition trail the company began blazing earlier this year.

Cooper Realty paid Nabholz Properties Inc. $13.2 million for 19 different commercial projects totaling 318,000 SF. The properties are all in Conway except for one each in North Little Rock and Arkadelphia.

Cooper Realty followed that in buying the 70,500-SF North Park Village Shopping Center in Monticello from David and Chuck Dearman, who continue managing the project. The $5.5 million deal included an undeveloped 15,000-SF outparcel.

The company recently added the Shackleford Corporate Center in a $5.7 million deal with the project's namesake limited liability company, led by L. Dickson Flake.

The 12.5-acre west Little Rock development at 4201-4217 S. Shackleford Road is home to five office/warehouse buildings with 177,650 SF under roof.

Differing Plans

As part of its refocused efforts, Cooper is selling its six apartment projects in Memphis and Atlanta and reinvesting the funds into commercial projects.

The company has contracted to sell 350 units in two Memphis projects to TVO Realty of Chicago. Cooper purchased Blair Tower and Gardenwood Apartments in 1992.

Berkshire Realty of Boston has bought 1,076 units in Atlanta from Cooper, acquiring The Pines at Dunwoody, The Highlands at Briarcliff, Essex House and River Parkway in 1995.

While Cooper Realty is leaving the apartment market and expanding its commercial ownership, Bailey Properties is making a move in the opposite direction. Bailey will use sales proceeds to expand its multifamily portfolio that now contain 10 apartment projects with 2,073 units.

"During negotiations, we joked about wondering what the other party knew that the other didn't," Bailey says. "We just got done with a strategic planning exercise, and this fit it in well with what we were wanting to do."

The sale will leave Bailey Properties with only three office-related projects. The trio, all near the State Capitol, are: Union Station, a 103,000-SF office/retail project at 1400 W. Markham St.; Station House, an 18,445-SF office project with 20 apartments at 101 S. Victory St.; and Capitol Place, a 12,000-SF office project at 1610 W. Third St.

"Our future is going to be more in a single-asset category, the apartment community arena," Bailey says. "We'll be able to devote more of our time and attention to managing apartments, which we feel is our strength. We're still a small family business, and this will help us keep focused."

Bailey declined to name pending acquisitions. The current roster of apartment projects include: Brightwaters, Wentwood Valley, Bowman Heights, Markham Oaks, Chenal Lakes, Waterford in Little Rock, Overbrook and Indian Hills in North Little Rock, Ridgewood in Hot Springs and Westwood Village in Shreveport.

Public vs. Private

Some have speculated that Cooper Realty is building its commercial assets with an eye toward launching a publicly traded real estate investment trust.

"As long as we can borrow funds at a price that is substantially equal to what REITs do, there is no economic reason to go public," says John Cooper Jr. "The possibility of converting it into a REIT is premature.

"One of the advantages of being a private company is you don't have to hit a certain growth target. We've let the economic circumstances dictate to what we grow annually. We hope we're successful."

The creation of Cooper Realty is an outgrowth of a 1997 corporate restructuring at Cooper Communities that ultimately led to the exodus of Roger McMennamy as CEO and his replacement by John Cooper Jr.

"We basically broke into five subsidiary companies with its own CEO and line of business," says Dewitt Smith III, president and CEO of Cooper Realty. "By our roots and heritage, we have an interest in Arkansas."

Annual revenue was stagnant the past several years, hovering around the $130 million mark. Diversifying from its core retirement-related properties is expected add a financial boost to the overall company bottom line.

"We're comfortable with that, and establishing liquidity is not a primary issue for us right now," Smith says. "We see being a private company as an advantage.

"We're long-term holders and operators. We don't need a group of investors foaming at the mouth wondering if earnings are up and down. We feel the market is far too short term for long-term holdings."

The company has looked at buys in Fort Smith and Jonesboro, but nothing is in the immediate future.

"We're an Arkansas-based company with obvious ties to our retirement properties," says Smith, a Forrest City native. "We've looked in the areas of our villages for expansion. We like Arkansas. We're a northwest Arkansas company, and, ironically, we haven't been able to find anything in northwest Arkansas except for our retirement properties."

RELATED ARTICLE: Bailey Properties Sold

Temperance Hill Square Shopping Center, Hot Springs

The 124,000-SF center (originally knows as the Factory Outlet Mall) was purchased in 1996 for $5.37 million from R.I. Waterman Properties Inc., an affiliate of Fleet National Bank of Providence, R.I.

Bowman Curve, Little Rock

The two-phase 80,000-SF project at 200 and 400 N. Bowman Road was developed in 1988-89. The development was most recently backed by a $5.35 million loan from the ARkansas Public Employees Retirement System.

The Baileys assembled the 5.68-acre site in two buys totaling $2.33 million ($9.42 per SF). The sellers were LIttle Rock West Land Partners, composed of Chris B. Burrow, Robert E. Chowning, John M. Graham and First Southern Service Corp., the real estate arm of the now-defunct FirstSouth Savings & Loan Association; and Kerry Ozment, $930,000.

Market & Merrill Center, Little Rock

The 122,439-SF mixed office/retail project at 1525 Merrill Drive was bought for $3 million in January 1994 from Guaranty Federal Bank of Houston.

Rock Creek Square, Little Rock

The Baileys purchased the 46,000-Sf retail center at 12111 W. Markham Street in 1994 for $2.77 million ($60 per SF) from Rock Creek Square Ltd., led by Don and Janet Woodberry and E.R. Davis.

Pavilion in the Park, Little Rock

The 82,000-SF mixed office/retail project at 8201 Cantrell Road was acquired in September 1994 for $2.6 million from P.I.P. Inc., led by Norman L. Burnette.

Riverdale Building, Little Rock

Virginia Bailey bought the 11,000-SF office building at 2224 Cottondale Lane in August 1983 for $630,000. The sellers were Riverdale Development Co., led by King Crow, W. David Watkins, Robert East and Tom Harding Jr.

Overbrook Office Building, North Little Rock

The Baileys acquired the 7,800-SF building at 5515 JFK Blvd. in 1997 as part of a $3.3 million deal that included 102 units of the Overbrook Apartment project.