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Back on track.

Back On Track John Bailey's Dream: Union Station Boon Or Boondoggle?

It's a long way from the frenzied activity on the trading floor of the Chicago Mercantile Exchange to the slow deterioration of Little Rock's Union Station.

But Little Rock native John S. Bailey is looking forward to the change.

Bailey and his wife, Patricia, are the new owners of the historic train station following a complicated transaction that added up to $540,000.

All of Little Rock's business community seems to be pulling for the Baileys in their effort to resurrect the property from the slow, death spiral of a bankruptcy that dates back more than nine years.

The way John Bailey tells it, buying the train station is almost conincidental to his desire to return home. The Baileys and their three children will move to Little Rock as soon as their suburban home in Wilmette, Ill., sells.

They've already bought a house in the Heights near the Country Club of Little Rock.

"The main thing was Patti and I wanted to move back home to Little Rock," Bailey says. "Now is a great time to come back ... what with the Diamond Center project and everything. It's a new beginning. Things have really turned for the better."

But will this new beginning for John Bailey prove to be a financial success?

Or will the curse of Union Station, which has cost so many previous investors dearly, also haunt Bailey?

The den of commodity brokers buying and selling pork belly futures and the like is audible in the background as Bailey talks by telephone about his desire to join Little Rock's revitilization movement.

While many hope Bailey is successful, few believe his efforts will be quick or inexpensive. Previous investors poured more than $4 million into the property only to see their dreams derailed.

The redevelopment history of Union Station reads like a series of train wrecks, with each of the three successive crashes worse than the one before.

Under Bailey's ownership, Union Station is back to where it began more than 18 years ago when the Missouri Pacific Railroad Co. unloaded it - in need of development with investors willing to take on the task.

The depot retains Amtrak, Buster's and Slick Willy's as ground-floor tenants. That provides a small degree of comfort and cash flow.

Earlier efforts spruced up the 70-year-old structure, but a comprehensive rehabilitation project has never been completed. Immediate needs, including mechanical and electrical work, are many and costly.

Much of the interiow will have to be gutted because of mildewed walls and rotted floors. Bailey's most pressing concern is replacing the roof.

The Little Rock architectural firm Allison Moses Redden is putting bid specifications together for the rehabilitation project. Bailey hopes to let a contract soon so work can begin before the end of the month.

Bailey seems undaunted by the enormity of the task ahead.

A comprehensive study of the property and its potential uses is scheduled to follow roofing project.

"It's a tremendous challenge and [will take] a tremendous amount of capital and time to get the property going again," Bailey admits. "I'm thinking that's why no one wanted to deal with it.

"Since we don't have definitive plans, we don't know how much work and capital will be needed. I'm not afraid of getting the property back to the look

and feel of its heyday."

"The size of [Union Station] in many cases overwhelmed [potential buyers]," says Ron Tabor, who brokered the sale. "But that's an advantage because the cost of redevelopment can be spread over more square feet, which is beneficial to the tenant and the landlord.

"I have some crazy ideas, and I told Johnny I would be happy to talk with him about them once he gets down here."

Three Derailments

Developers long have viewed the Union Station area as ripe for redevelopment as an entertainment-office-retail zone. The historic district is overflowing with potential.

The four-story train station has 110,000 SF and 5.6 acres. There is ample parking and vacant land with development possibilities.

There's also the Ottenheimer Building, a former mail-handling facility that sits across the street and covers an entire city block.

The setting has the makings of a commercial mecca.

James Nettles, general manager of Union Square Associates Ltd., was one of those who couldn't restrain his enthusiasm.

Nettles was so upbeat that he made a prediction in January 1984.

"In 24 months, the train station area, which includes about 12 acres, will be one of the most renowned entertainment-office complexes in the country," Nettles said.

The prediction flew in the face of an earlier redevelopment effort that landed in bankruptcy court - Train Station Inc.

In fact, Union Square Associates was itself in the throes of bankruptcy when Nettles looked into the future.

That bankruptcy, which began in 1982, so entangled the property that it is only now emerging from the legal morass.

Little Rock attorney Greg Graham considers that a miracle in itself.

"It sounds like hype," says Graham, who helped close the sale to the Baileys. "But this is good for the city because someone now owns it, and it's not held in some trust while the building deteriorates.

"We were told by some real estate people we would never get rid of it."

State First National Bank of Texarkana took title to Union Station as trustee for a $4-million bond issue Union Square Associates defaulted on.

Bondholders, the Resolution Trust Corp. and various creditors from past bankruptcies created a maze that had to be negotiated before the sale could be closed.

Tabor, a partner in the Little Rock real estate firm of Flake Tabor Tucker Wells and Kelley, calls it "one of the most complicated transactions I have been involved with, in 28 years, from a technical standpoint. But you might expect that with a property that has been in bankruptcy for nearly 10 years ... There were times in the negotiations that I even wondered why I had gotten involved."

Joseph N. Lombardi, a Chicago investor and friend of the Baileys, bought Union Station from State First as the first part of a tax-deferred exchange.

The Baileys then swapped two parcels of farmland in northwest Illinois, near Dixon, for the station. The 300 acres, purchased in 1987, primarily are devoted to corn and soybean production.

Bailey managed and developed real estate in the Lincoln Park area of downtown Chicago prior to becoming a floor trader at the Chicago Mercantile Exchange in 1982.

The Lincoln Park total of 50,000 SF - 24 apartments with eight retail stores - is dwarfed by the Union Station project.

But Bailey's real estate roots go back to the family tree. His parents, Dr. H.A. "Ted" Bailey, 67, and Virginia Bailey, 65, operate Bailey Corp.

The Little Rock-based corporation developed most of the 275-acre St. Charles subdivision in west Little Rock, the St. Thomas subdivision, Andover Square, Foxcroft Square Townhomes, Riverbend Townhomes and the Riverside and Riverdale buildings.

Bailey Corp. made news last year when it bought the 256-unit Brightwaters Apartments complex for $5.47 million from the RTC.

Now, John Bailey is coming home to join his parents in buying, developing and managing property. His brother, Ted III, may even return home from Dallas.

"My brother has his own real estate interests in Texas, and I don't know what his plans are," John Bailey says. "I know he would like to get back to Little Rock."

Bailey will be leaving the exchange, a place he considered his office each day from when the market opened at 7 a.m. until 2 p.m.

Bailey reportedly has done well for himself in Chicago.

"I'll put it this way," he says. "I've stayed out of trouble. The commodities business has really been fun, and I've enjoyed it. I think 11 years is long enough to be in it, but I suppose I will miss it a little."

Now, John Bailey faces a new challenge.

Will his investment skills keep the train station out of further trouble and turn the property into a community asset?

Or will Union Station continue to be an embarrassing liability for Little Rock?

The task makes figuring out the complex commodities market almost seem easy.

PHOTO : THE NEW CONDUCTORS: Little Rock native John S. Bailey is returning home from Chicago in grand fashion. The 33-year-old investor and his wife, Patricia, have climbed aboard as the new owners of Union Station. The Baileys hope to halt the historic property's streak of bad luck. Three earlier redevelopment efforts were derailed.

PHOTO : EIGHT YEARS LATER: Little Rock's Union Station has been tied up in bankruptcy and foreclosure since 1982. John and Patricia Bailey represent the fifth ownership group to take on the project since 1973.

PHOTO : TRIO OF TENANTS: Slick Willy's is one of three tenants to survive the 1980s at Union Station. Buster's and Amtrak round out the short list.
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Title Annotation:John S. Bailey buys Little Rock's Union Station
Author:Waldon, George
Publication:Arkansas Business
Date:Aug 19, 1991
Previous Article:Worthen Banking Corp.
Next Article:Head for cover.

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