Printer Friendly

Big doings in Russellville; a $15 million shopping center project reshapes the local commercial scene.


A $15 Million Shopping Center Project Reshapes The Local Commercial Scene

The Newton family homestead in Russellville was once the hub of a successful 91-acre farming operation devoted to cotton and corn. Things changed forever when highway planners decided to cut a 16-acre swath through the property to build Interstate 40.

A recent real estate sale that weighs in at about $2.25 million (perhaps the biggest land deal in Pope County history) is about to radically alter this landscape once again. The new owners will transform 62 of the remaining acres into a $15 million commercial hub that will attract shoppers from miles around.

The bulldozers and earthmovers are set to roll this week and begin site work on the largest shopping center between Little Rock and Fort Smith. At 285,000 SF, Valley Park Centre will rank as the 14th largest shopping center in Arkansas when it is completed by early 1992.

Workers haven't turned over a spadeful of dirt, but the regional retail development has already had a big impact on the local commercial scene. The City Mall in downtown Russellville will lose about a quarter of its tenants when J.C. Penney and Beall-Ladymon move out east to Valley Park.

This familiar scene of downtown retailers leaving for more spacious parking and better accessibility in the suburbs could be a harbinger of things to come in Russellville.

Observers believe the new shopping center will reshape local growth patterns, drawing from the city's north-south commercial corridor along Hwy. 7 to build up an east-west corridor along U.S. Hwy. 64.

Harvesting The Land

Reaping the immediate rewards of this demographic realignment are James Newton, 72, and his brother Stanley, 70. Born and reared on the old family farm, they are the final caretakers of the property bought by their grandfather back on June 27, 1908.

"Everybody's looking forward to having a heavy concentration in one area, so it will be easier to shop," James Newton, Russellville mayor 1955-61, says of the retail center.

The Newton brothers have sold 62 acres for nearly $1 per SF to Valley Park Limited Partnership, an investment group put together by Clary Development Corp. in Little Rock. (Steve Clary, company president, couldn't be reached for an interview during the hectic days of closing last week.)

Other players in the limited partnership include associates of Dial REIT Inc., a publicly-traded real estate investment trust based in Omaha, Neb. (See sidebar on pg. 15).

Clary's plans have 35 acres devoted to the shopping center with the balance marked for future development or resale. In addition to Penney's and Beall-Ladymon, the tenant mix includes Wal-Mart, Hasting's, Payless Shoes and Cato Fashions.

Sovran Bank in Nashville, Tenn., is financing the construction of Valley Park Centre. Steelman & Associates in Little Rock is the project architect, and Development Consultants in Little Rock is the project engineer.

This lineup has been more than five years in the making, the end result of a series of up-and-down negotiations that have seen at least three would-be developers come and go since 1985.

"In terms of complexity, I'd say it ranked a 9.5 on a 10-point scale," estimates Jim Hathaway, who brokered the sale. "It had a lot of nuances."

The stack of paperwork necessary to close the land sale stands more than two feet thick. The complicated transaction involves players stretching from Omaha, Neb., to Nashville, Tenn., with Little Rock and Russellville in between.

Who's On First?

Among the first developers with big plans for the Valley Park Centre location was Tom Davidson, who developed the Outlet Mall in southwest Little Rock. Back in 1985, he wanted to construct a 358,000-SF enclosed mall located on 31.4 acres.

He put the land under contract but eventually defaulted on it. The Newtons had to go through the unpleasantries of a foreclosure suit to recover control of the acreage.

"A lot of people don't want to go in and buy 62 acres of land in one whack," James Newton notes. "We had originally agreed to sell part of it, but they didn't do it. We decided to go for broke, all of it or none of it."

A developer's rule of thumb calls for 10,000 SF of retail space for every acre. Using this measuring stick, there wasn't enough demand to develop the whole 62-acre tract in one swoop.

The all-or-nothing approach posed a problem in striking a deal, but in the end the strategy paid lucrative dividends and made the wait worth while for the Newtons.

"They recognized the value of this was not in cutting up this big tract into smaller parcels but delivering one large site with frontage on the interstate," Jim Hathaway adds.

The head of The Hathaway Group in Little Rock has worked on selling the property since the fall of 1988. Hathaway entered the picture when one of his sons' fraternity brothers contacted him on behalf of The Vanderbilt Group in Mission Viejo, Calif.

"Long story short, they wanted me to find out if the property was available," Hathaway remarks.

In mid-February 1989, VP Thomas Thurber optioned the land, and the stage was set for Vanderbilt to develop it. Shortly afterward, Thurber left the company under a cloud, and Vanderbilt walked away from the property.

"That was a little blip on the radar screen of life," quips Hathaway, who in the aftermath signed up to broker the land for the Newton brothers. "But I could see the potential."

Next up was Michael Rue, president of Marketplace Properties in Tustin, Calif. By May 1989, the whole 62 acres was under contract.

"He couldn't get Wal-Mart and Penney's lined up as anchor tenants, and the bottom line is he defaulted or terminated the contract," Hathaway recalls. "Now, we're like the little boy crying wolf, but I became even more convinced this deal would work."

The local owners of Russelville's City Mall (Cliff Goodin, Vernon Howard and Mac Van Horn) weren't oblivious to this competitive activity.

City Mall forces saw the handwriting on the wall and tried to turn the uncertainty surrounding the Newtons' property to their advantage. They pointed to its track record of aborted development efforts in hopes of keeping anxious tenants from seeking greener pastures out east.

All the while, they tried to quietly market their retail center. City Mall, with 125,000 SF of net leasable space, carried a price tag of $4.1 million back in September 1989.

Heading For Home

After the Marketplace Properties deal fell apart, Hathaway approached Clary Development Corp. in the fall of 1989. The company had just completed River Park Plaza, a 125,000-SF strip center in Malvern.

The crew of Steve Clary, Sean Glancy and Keith Jacks hopped aboard and stuck with the Russellville project despite a 15-month roller-coaster ride that nearly derailed several times.

One of the first challenges was wooing Wal-Mart into Valley Park, which involved working out a deal to cover Wal-Mart's unexpired lease at a Russellville location.

Associated Wholesale Grocer, a co-op outfit which is the biggest grocer in the Kansas City market, is lined up to take over Wal-Mart's lease at last report.

That will create a 55,000-SF grocery store for Russellville. That's a few thousand SF shy of a Megamarket but still one of the largest grocery stores in the state.

This was a cakewalk compared to getting financing for Valley Park, even though it was 83 percent pre-leased.

No Arkansas bank would touch the deal, even on a syndication basis. Clary Development hooked up Sovran Bank, and even then it was touch and go because of the new stringent criteria for real estate loans mandated by the feds.

"This is what's depressing real estate activity and what makes it so difficult to do good projects, not pie-in-the-sky developments," Hathaway observes. "It's more difficult to put these deals together than at any other time in the 25 years I've been in business because you can't get any money."

Given the current setting for commercial real estate lending, big proposals like Otter Creek Mall and The Summit in Little Rock seem destined to languish on the backburners for years.

Meanwhile, the Valley Park Centre in Russellville is moving ahead. The project is coming against the better wishes of competitors, but the Newton brothers, Hathaway and Clary Development Corp. et al are happy to get this deal done.

PHOTO : COMPLEX DEAL: "In terms of complexity, I'd say it ranked a 9.5 on a 10-point scale," estimates Jim Hathaway, who brokered the land sale for Valley Park Centre. "It had a lot of nuances."

PHOTO : TOUGH FINANCIAL SLEDDING: The financial terrain is rough for real estate developers these days. Even at 83 percent pre-leased, Clary Development Corp. had trouble working-out a loan to get Valley Park Centre off the ground. Arkansas bankers wouldn't touch the deal, and the loan went out of state to Sovran Bank in Nashville, Tenn.
COPYRIGHT 1991 Journal Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Waldon, George
Publication:Arkansas Business
Date:Apr 8, 1991
Previous Article:Jay DeHaven in a gold coat?
Next Article:Dial REIT Inc. Omaha, Neb.

Related Articles
Ground broken for new Bronx retail plaza.
Entertainment destination centers emerging.
Bryant Building Boom Continues.
Kappa funding.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters