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Commercial shakeout; splits, alliances and bankruptcies dot the Little Rock real estate market.

More than five years have passed since the Tax Reform Act of 1986 began radically altering the landscape of commercial real estate firms.

Familiar old-line Little Rock companies like Block Realty and Fausett & Co. vaporized in the financial pressure cooker of foreclosure suits and bankruptcy filings.

The impact of insolvent banks and thrifts in the nationwide real estate crash is still sending ripples throughout the local market, too.

A continuing sign of the times is low development activity, which has prompted a formal split between two companies synonymous with projects in downtown Little Rock.

After a decade, the common ownership in AMR Real Estate and AMR Architects is now history.

The "M" remains in the name, but developer Jimmy Moses has no affiliation with AMR Architects.

Architects John Allison and Rick Redden no longer have a connection with AMR Real Estate, which is transforming into Moses-Nosari Real Estate.

"This is a culmination of splitting the two companies," says Moses. "It's a formal recognition of how we've been running the company four or five years now."

The AMR Architects/Moses-Nosari Real Estate split also will help draw distinctions between the two firms. People often were confusing the roles and functions of the two companies.

"Most people think I'm an architect," says Moses, an urban planner by training.

The change five years ago dovetails with commercial broker Jim Nosari joining the AMR lineup. Nosari, now a partner with Moses, left the local office of the Dallas-based Trammell Crow Co. in January 1987.

Nosari's move may not have precipitated the separate directions of the companies, but it did coincide with the early fallout from sweeping tax changes that did away with passive losses and other tax incentives.

"We realized that if we were going to have a real estate company that would have to pay its own way, we would have to do more," Moses says.

Staffing up for more outside brokerage, management and leasing work was the game plan, and AMR's development and architectural work began to drift apart in the absence of internally generated, tax-driven projects.

Joint in-house deals, once made possible by investment tax credits and other incentives, gave way to more and more third-party transactions.

Finally, a point was reached where it made sense to convert the autonomous operations into separate ownership.

"In our minds, it's been like this for five years," Allison says. "The benefit of being together is gone."

Missed Opportunities

In fact, the affiliation was often a competitive detriment for the architectural side of the business. Developers were loath to work with AMR Architects because they viewed the firm as a contributing source of revenue for AMR Real Estate.

For many developers, the idea of indirectly sending money to a competing firm was unacceptable.

"With that perspective, I guess if I was a real estate developer, I wouldn't have wanted to do business with us, either," Redden says.

Moses agrees that AMR Architects missed out on business opportunities because of the overlapping ownership in AMR Real Estate.

"Had they not been affiliated with us, they would have had more opportunities to work with other developers," he says. "Our arrangement worked best when we were acting as developers and owners in a project."

The close relationship also created a fiduciary conflict of interest between developer and architect on public sector jobs, even under the unbiased umbrella of a competitive bidding process.

The strong ties of AMR Real Estate and AMR Architects proved to be an awkward arrangement on projects like the new Pulaski County Health Center.

The cross ownership in the firms was reduced three years ago. But the growing discomfort of public sector clients like the Pulaski County government was the final push to full divestiture.

"Ten years of working together doesn't get split up overnight," Moses says. "We wanted to do it slowly so everyone could keep having a good working relationship."

The unsuccessful Project 2000 development, offering possible spinoff projects in downtown Little Rock, was an emotionally draining, if not financially draining, disappointment that added to the mix.

The multi-purpose arena, to be called the Diamond Center, could have rekindled the downtown dynamics of the AMR development and architectural firms. That was not to be, though.

"It's sad to break up the group, because we were so effective as a group," Redden says.

Joint venture projects like the 52,000-SF Heritage West and 28,000-SF Heritage East buildings in downtown Little Rock and the 51,000-SF Bowman Curve Center and 27,000-SF Bowman Curve II in west Little Rock stand out.

But the firms became most identified with downtown renovation and conversion projects, many of which never made it beyond the drawing board.

"You'd be so surprised to see all of the projects we never got to do," Allison says. "And we still get calls about projects we did 10 years ago. Once you conceive these children, they don't go away."

One dream deal involved converting the empty Fones Brothers Building into an office complex with an atrium and several skyline homes built on top of the building.

"In the early days, we thought we couldn't do deals unless they were downtown," says Redden. "But people like FirstSouth weren't interested in financing most of them. They laughed at us and said they had all these great deals down in Texas."

Bad deals weren't confined to America's Oil Patch, either.

Attrition And Alliances

The attrition rate of leasing agents and brokers at the commercial real estate firm of Flake Tabor Tucker Wells & Kelley underscores the local real estate shakeout.

Pat Morrison, a former executive with the firm's predecessor entity (Flake & Co.) recently filed bankruptcy, listing assets of $187,933 and debts of $946,002.

A stack of the money owed is related to Flake & Co. projects, where Morrison was given an ownership position. The interest in various projects was supposed to be a compensation and retirement perk.

Non-performing projects like Little Rock's Westchase Plaza and First Federal Plaza in Shreveport, La., became cash drains instead of money makers.

Morrison's Chapter 7 liquidation brings the total personal bankruptcies from Flake & Co. alumni to four.

David McCreery, Linda Faulkner and Tom Holiman unsuccessfully fought to steer clear of bankruptcy court, too.

The post-1986 real estate market also pushed others into bankruptcy court. Dan Robinson is one of the few back making a go of it.

Others like Max Hooper, Boyd Bond and John McClellan are off doing other things.

The shifting and realignment of the commercial market isn't over as others leave the profession.

"I got into the business because it was a challenge, and I wanted to learn the business," Chris de Bin says. "But when even the well-established companies are having problems, what do you do?"

The market slowdown prompted de Bin to leave Financial Centre Corp. last month.

The 26-year-old was in the business four years, long enough to acquire a lingering taste for commercial real estate work.

"It's like a drug," says de Bin. "Once you've done it, it's in your blood. I'm not sure what I'm going to do now, but I'm always going to dabble in real estate."

Others preceded de Bin in leaving the business as well. Jim Mitchell left Barnes Quinn Flake & Anderson to work at Ward Bus Co. in Conway. Paul Riviere, former Arkansas Secretary of State, once plied his trade with The Wengroup Cos.

Elvin Sheffield left the volatile commercial brokerage business for more stable work as an appraiser.

"The hard, tough years were the ones that I made the most money," says Steve Smith, a 20-year veteran of selling real estate. "When interest rates were high, it caused people to make things happen one way or another. During the good times, people were fat and sassy and willing to wait."

Smith left Prudential McKay Properties two years ago to become assistant director of the Arkansas Game & Fish Foundation, the non-profit fund-raising arm of the Arkansas Game & Fish Commission.

Even with a career change, Smith maintains an active real estate license and continues paying his dues to the Little Rock Board of Realtors.

"You never lose your interest in it," he says. "Land is forever. Whenever I don't own any real estate, I have an empty feeling."

Others have formed alliances in hopes of creating synergy and a broader base to ride out the market.

Several months ago, Morrison joined with Larry Jacimore and Sharon Cain to form Morrison Jacimore & Cain.

Jim Irwin left The Hathaway Group and formed Irwin Bentley & Rystrom with former Trammell Crow brokers Mark Bentley and Tom Rystrom.

Brad Walker and Larry Lichty are working together.

Commercial players are waiting for the up cycle to begin, and the bad days to become a distant memory.
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Article Details
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Author:Waldon, George
Publication:Arkansas Business
Article Type:Industry Overview
Date:Sep 7, 1992
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