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Commercial comeback.

Real Estate Worth Millions Is Moving in the Little Rock-North Little Rock Market

AFTER SEVERAL YEARS of absorbing retail space, the Little Rock-North Little Rock market is breaking loose with a growing lineup of projects propelled by new and expanding firms.

Commercial seers are forecasting $40 million worth of retailing development to come on line in 1993 alone. They see existing momentum more than capable of sustaining similar performances through at least 1995.

"The numbers are staggering," says Ramsay Ball of William Ramsay Inc. in Little Rock. "I've estimated there's easily 500,000 SF of pent-up retailing demand waiting to go in west Little Rock."

That could be a conservative estimate considering much of the space is likely represented in the form of only three companies.

Reports are that Target Stores Inc. intends to relocate farther west from its John Barrow Road location. Kmart Corp. is looking to counterpunch the expanded project of Wal-Mart Stores Inc. under development at the southwest corner of Bowman Road and Chenal Parkway with a new location of its own.

National Home Centers Inc. will renew its site search after being rebuffed in its effort to set up shop on a 17.7-acre tract at East Taylor Loop Road and state Highway 10.

And the current talk of retail demand doesn't take into consideration the 100-acre site of the ill-fated Summit Mall project at the southeast corner of Shackleford Road and Interstate 430.

Future retail growth is looking so bright that a new group is expected to bring another incarnation of the development on line during the next half of the decade.

No, really.

Reports from commercial circles are that Manufacturers Hanover Bank/Chemical Bank in New York is hesitant to break up the 100 acres and will remain content to hold the property intact for future sale.

The patient attitude of the lender, which took over the project following the bankruptcy of the would-be Summit developer, has surprised some real estate watchers.

Some deal makers have approached the New York bankers about buying chunks of the property, but to no avail.

"Manny Hanover" representatives aren't buying the sales pitch that the sum of the parcels actually might be worth more than the value of the whole tract.

Activity has reached the point that out-of-state speculators are scouting out the lay of the land.

"I've had investors from Los Angeles, New York and Colorado asking about raw land in the market," says Andy Collins of Cypress Properties Inc., which operates on both sides of the Arkansas River. "I've never had the number of these kind of unsolicited inquiries since I entered the market here in 1985."

There are even rumblings that redevelopment action will finally sweep through the Main Street space vacated by M.M. Cohn and Dillard's Department Stores Inc. Insiders will only disclose that creative plans are in store for the now empty buildings.

A few blocks away in downtown Little Rock, the five-story Fones Building is under contract. Visions of developing loft apartments on the upper floors in combination with retail and office space on the lower floors may finally become reality.

"It's not going to be easy, but it's something I think we can accomplish," says Jim Nosari of Moses-Nosari Real Estate in Little Rock.

The timing of the commercial comeback couldn't be better for Johnny Kincaid and his family.

The 39-year-old native of Magnolia moved to Little Rock from Dallas, where he worked for eight years developing, leasing and managing commercial property during a tough real estate cycle.

In January, Kincaid joined The Hathaway Group in Little Rock. His wife, Debbie, soon will be handling residential listings for Marcelline Giroir Ltd. in Little Rock.

"The real estate market has gotten more favorable here," Johnny Kincaid says. "But the main thing I was interested in was the quality of life and getting back home to raise my family."

Moving Pictures

Theater chains like United Artists Theaters Inc. and Cinemark are out eagerly looking for sites, too.

"As quick as you can bring a good site to market, it is under contract," Ramsay Ball says. "Virtually every new retailer that is coming to North Little Rock is actively looking for a site in west Little Rock."

Such is the case with newcomers like the Applebee's restaurant chain and familiar faces like Toys R Us Inc.

Reports are that Romano's Macaroni Grill has land under contract with The C.J. Cropper Co. near the northwest corner of Shackleford Road and Markham Street. The restaurant chain is owned by Brinker International, which owns the Chili's Grill & Bar and Regas Grill restaurants.

Cropper is putting together acreage that runs along the northeast corner of Hermitage and Bowman roads.

Some of the residential property is under contract for a reported $6 per SF.

"We have seen more retail interest on the part of national retailers," Jim Nosari says. "We'll have half a dozen to a dozen new faces in the market during the next 12 months. Our sense is the retail market has never been more active."

Some politically weary observers pooh-pooh the Clinton factor in all of this. It's true the presidential coattails aren't as long as some would like to believe, but the positive ramifications are undeniable.

"One national tenant I'm working with told me the favorable publicity generated by the presidential campaign caused it to move up Little Rock on its priority list of expansion markets from sixth or seventh to No. 1," says Rett Tucker of Flake Tabor Tucker Wells & Kelley in Little Rock.

"I have had a sense that since Clinton's election that there has been an increased interest in the Little Rock market. The morale and enthusiasm among real estate players is way up. I see Little Rock poised to move on to bigger and better things.

"If 1993 continues like this, we're going to have a great year. Little Rock is about to bust out."

Deals in the works are coming fast and furious in the Springhill-McCain area of North Little Rock and the Chenal Parkway corridor of Little Rock.

Two developments near McCain Plaza are in the works by out-of-state players. Hawkins-Smith of Boise, Idaho, is working a 19-acre project anchored by a Home Quarters warehouse store. Home Quarters is based in Virginia Beach, Va.

JDN Enterprises Inc. of Atlanta is planning a 55-acre development at the southeast corner of McCain Boulevard and Springhill Road in North Little Rock. Lowe's Home Center will anchor the project's first phase.

What attracted JDN to town?

"The main reason is that Little Rock has been overlooked and the growth of the city has been stable for a number of years," says JDN's Sheldon Whittelsey. "It's not because President Clinton is from Little Rock. We were in Little Rock looking way before Clinton was going to be president.

"I'd rather do business in a market like Little Rock that doesn't have all the peaks and valleys of a major metropolitan market like Atlanta or Dallas."

The retailing trend of so-called category killers like Sports Unlimited, Circuit City and Toys R Us with their larger-than-normal space requirements are driving much of the demand.

"These people are seeing Little Rock as a good market with good demographics, and they're expanding all over the place here," says Jim Hathaway of The Hathaway Group.

"The reason North Little Rock has been a leader in this area is really one reason: the plentiful availability of easily developable land with the proper zoning."

But topography and other variables can't hold back retailers chasing the affluent rooftops of west Little Rock. The Bowman Road-Chenal Parkway intersection represents the cross hairs of development activity in the area.

"You won't even recognize the area in three or four years," Hathaway predicts.

The highest-profile deal is at the southwest corner, anchored by the lethal retailing combo of a Sam's Warehouse and expanded Wal-Mart store.

Across Chenal Parkway, both an as-yet-unidentified national chain restaurant and a national retailing chain (said to be Best Buy Co.) have sites under contract near the northwest corner.

"We have others circling |the Parkway West subdivision, which wraps around the corner~ as well," Tucker says.

Reports indicate that Lowe's Cos. Center of Wilkesboro, N.C., made a foray to lock up the entire remaining acreage in Parkway West for development.

However, the home-improvements chain was unwilling to pay the asking price and resolve some other issues.

Activity is so hot and heavy in the area that Lowe's returned to the negotiation tables after a cooling-off period -- only to discover that part of the necessary land was now under contract by the two aforementioned tenants.

"That's what is so good about this activity; we're seeing people fighting over the same piece of property," says Jim Lawson, director of Little Rock's neighborhood revitalization and planning.

Reports now have tied Lowe's with a 17.6-acre site at the northeast corner of West Markham Street and Chenal Parkway.

And, just to keep everyone guessing, Lowe's also has been linked with a 7.8-acre site at the northeast corner of Bowman Road and Chenal Parkway.

Yes, if scenario No. 2 materializes, Lowe's would be located across the parkway from a 12.2-acre development by the competing Home Quarters.

But indications are that Lowe's would have to secure more adjoining land to handle the size project it envisions for west Little Rock.

And if Lowe's does pursue that, the Markham-Chenal site could very well draw attention from a third home-improvements chain. The location was on National Home Centers' list of options before the company became ensnarled in the rezoning battle for a site on Highway 10.

Circuit City has under contract the remaining undeveloped parcel on Markham Park Drive, adjoining the west side of the Megamarket Shopping Center.

The electronics chain intends to sell off a portion of the five-plus acre site to an as-yet-unnamed national restaurant chain that is new to the Little Rock-North Little Rock market.

Out-Back Steak House and Ryan's Family Steak House are two restaurant chains known to be snooping around for sites on both sides of the Arkansas River.

Other assemblage efforts are going on near the Markham and Chenal intersection as well.

The city of Little Rock is encouraging large, unified developments to keep curb cuts to a minimum and provide greater opportunities for landscaped buffer areas. Increased design requirements are apparently little hindrance.

"People are now believing that more things are possible in Little Rock and Arkansas, and the economy in general is on the rebound," says Dan Robinson III of Dan Robinson & Associates Inc. in Little Rock.

"Nationally, Little Rock has been identified as a strong market, and a lot of the bigger markets have already been penetrated by corporations."

Apartment Complex

As many as six apartment developers, including Chenal Properties, are considering new projects in the near future.

Among the players watching the apartment market closely is Lindsey & Associates Inc., which owns and manages 4,200 multifamily units almost exclusively in Arkansas.

The Fayetteville-based firm is most active in the northwest Arkansas market, where it is building new projects in Rogers and Fayetteville.

Lindsey's only project in Pulaski County is Beacon Hill Apartments, a 168-unit complex at 1801 Reservoir Road in Little Rock purchased in 1991.

The company is actively looking to buy or develop multifamily space as the occupancy level remains high and rental rates increase.

"Our interest is strictly on multifamily projects," says Jim Barre of Lindsey Management Co. "We're very bullish on the Pulaski County market, on west Little Rock in particular.

"We'd also like to look at some third-party management opportunities, but we just haven't put an emphasis on that yet."

Others are smiling at the future prospects, too.

"During the next 10 years, we're going to boom like people have never seen before," says Reed McConnell of Apartment House Builders, which owns and manages about 4,500 units around the state. "Even if Clinton wasn't elected president, we were on the edge of this.

"Everything is looking up, but the tragedy of it was that for six years there was a slump. About every year you need a 6 percent increase to stay even, but we had to even lower rates during that time."

McConnell believes rental rates still must increase before the market is ripe for new apartment construction.

"We're looking very eagerly toward that, but it still hasn't reached the point where you can build them and rent them for what it takes to cover the mortgage," he says.

Dickson Flake of Barnes Quinn Flake & Anderson Inc. in Little Rock reckons that rates are still 20-25 percent below the point of justifying new construction, although demand and occupancy figures are very strong.

"Refinancing at low interest rates is helping out, but many apartment owners are just now beginning to make up for the past seven years of overbuilding," he says.

The suburban office market is tightening dramatically, too, allowing owners to recoup from the impact of overbuilding.

"Everybody out here is filling up their buildings," says Ed Willis of Financial Centre Corp. "But it will be a while, probably a $2 per SF rental increase, before you see new construction. We as landlords are still trying to recover from the past five years of low rents."

Until the office market fully recovers, developers are expecting an increase in build-to-suit office space for tenants who cannot wait for the return of speculative building to crop up.

Of course, speculative building a la the 1980s may never be seen again, or at least until the memories fade and history repeats.
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Article Details
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Title Annotation:commercial real estate development in Little Rock, Arkansas
Author:Waldon, George
Publication:Arkansas Business
Date:Apr 26, 1993
Previous Article:Ensco expanding to L.A.
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