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Double identity: City of Maumelle struggles to separate itself from controversial legacy of the Maumelle Co.

MORE ELBOW ROOM and shade weren't the only considerations for moving Maumelle's recent Fourth of July celebration from the open spaces of Lake Valencia to the woodlands of Lake Willastein.

City fathers also wanted to put some geographic distance between the large "4th Fest" crowds and a business that has cast Maumelle in an unwelcome light.

The Maumelle Co. headquarters on the shore of Lake Valencia serves as an unpleasant reminder of a public relations problem.

Foreclosures, lawsuits and allegations of fraud against the real estate firm, led by John W. "Jay" DeHaven, are reflecting poorly on the city. As the company's problems have mounted, Maumelle's reputation has suffered and somehow become sullied in the process.

The term "buyer beware" has taken on more ominous overtones for Maumelle land deals, and the city is attempting to dispel any image of shady dealings.

Any PR work likely will be a low-budget affair funded by civic-minded folks. With an annual budget of $2.5 million, the city doesn't have much money lying around.

The perceived association between The Maumelle Co. and the city is such that some angry property owners called up City Hall to demand refunds for lot purchases made from the company.

"One of the things the city has been trying to do is to develop the difference between the two," says Gerald Boon, Maumelle city manager. "The problems of The Maumelle Co. are not the city's fault. Maumelle is a great place to live."

Some public confusion should come as no surprise to a city whose identity has become historically intertwined with its developers.

The city was even a one-third partner with The Maumelle Co. in the 5500 Edgewood Drive building that houses city offices, which lies within a stone's throw of The Maumelle Co. across the parking lot.

Until Maumelle became incorporated in 1985, the developer was essentially the city government through a property owner's association. But that was when Maumelle Land Development Inc. called the shots.

And until last year, Maumelle was still fighting another battle to establish a separate identity as a community. The struggle ended in victory as the U.S. Postal Service opened a Maumelle post office and assigned the city its own ZIP code, 72113.

This bureaucratic validation might seem trite, but it served as a final break from North Little Rock. Its eastern neighbor once owned the land that became Maumelle and intended to develop much of it into an industrial park.

Covering eight square miles, Maumelle has grown from 1,368 residents in 1980 to an estimated 7,000 today. However, earlier demographic studies forecast a population of 8,100.

"We haven't been setting the world on fire," Boon says.

Compared with the glory days of the mid-'80s, that's true, but new housing starts are rebounding. Residential construction dropped by a third after The Maumelle Co. entered the development picture in 1988 -- along with the desegregation of the Pulaski County School District.

Home building in Maumelle took a further tumble in 1991, when questionable business practices of The Maumelle Co. began to surface as the driving force behind speculative lot sales. A 6 1/2-year snapshot of housing starts reads this way:
1987 144
1988 143
1989 90
1990 89
1991 47
1992 66
Through June 1993 36

Uncertainty surrounding financial liability of special improvement taxes guaranteed by The Maumelle Co. has some potential home builders in a holding pattern.

"Improvement district taxes are finally out into the forefront," says one Maumelle watcher. "It seems like nobody really knew about them until after they bought the lot."

In the cases of some if not all buyers, they were told The Maumelle Co. would pick up the tab. The company apparently made good on those promises until the Resolution Trust Corp. permanently disrupted the financial pipeline by taking over the Texas-based savings and loan association that bankrolled the company.

The liability for those improvement taxes has apparently fallen back into the laps of individual property owners with the forced exodus of The Maumelle Co.

Most of the building activity now occurring is in the few subdivisions that have no link with The Maumelle Co. or any special improvement taxes.

The Maumelle real estate firm of Lynda Thomas & Associates is a guiding force behind St. Thomas Phase II. Of the 42 available lots, 32 have sold.

"Sales have picked up tremendously in the past nine months," one real estate agent says.

That's welcome news to help deflect the unmet census projections, which have paralleled failed development expectations for The Maumelle Co.

"The cloud of DeHaven hangs over the whole city," Boon says. "I have to give him credit, though. He built a bunch of the |residential and commercial~ lots, and a lot of the growth since 1989 was through Jay DeHaven and The Maumelle Co."

The skies that once rained upscale growth on Maumelle through residential lot sales, housing starts and commercial development are now casting uncertain shadows on the landscape.

This mixed blessing phenomenon is the city's normal pattern. Maumelle's fortunes rise and fall in large part with the successes and failures of whoever happens to own its vast undeveloped acreage.

Economic growth for the city is wedded to the developer's performance -- for better or worse, for richer and poorer.

The city has undergone three of these shotgun marriages, with one ending in separation and two ending in widowhood. A fourth, and perhaps the most complex union of the bunch, is still forming.

The sooner Century Realty of Dallas begins to stride out, observers say, the sooner this quiet bedroom community can distance itself from negative perceptions and get back to the business of growing rooftops and its tax base.

Developmental Lineage

The first marriage of developer and city began in 1966, when Maumelle Land Development paid the city of North Little Rock $1 million for the old Maumelle Ordnance Works.

Spread over an estimated 5,000 acres, the project produced munitions for the Army during World War II. Some of the concrete storage bunkers still remain.

Maumelle Land Development Inc. was led by insurance executive Jess Odom and included Hollywood names such as Roy Rogers and Douglas Fairbanks Jr. The star-studded relationship ended in separation when another group, led by one-time land mogul Tommy Goldsby Jr., bought Maumelle Land Development in 1982.

A year earlier, David Kane's Summa T Corp. came courting. Those overtures came to naught as Kane was swept away by financial woes.

Foreclosures and ultimately bankruptcy also removed Goldsby from the picture in 1985 and ushered in Worthen Banking Corp. The bank holding company was forced into the union in an effort to recoup bad debts spawned by Goldsby.

Worthen ended its involuntary conservatorship role in 1988 by selling 3,250 acres of undeveloped Maumelle land for $11.1 million to DeHaven Todd & Co.

Operating through The Maumelle Co., the partnership unleashed a real estate sellathon -- the likes of which Arkansas has never seen. Droves of prospective lot buyers were attracted through a marketing blitz of promotional giveaways akin to time-share condos.

In its first 13 months of operation, The Maumelle Co. sold 775 lots. During the week of June 26-July 1, 1989, a record 67 lots totaling $1.7 million were sold.

The money machine came to a halt, however, when federal regulators cut off the company's financial lifeline to San Jacinto Savings Association of Houston, which financed the purchase from Worthen. Other outlets for selling the company-financed mortgages on the secondary market dried up and ultimately forced The Maumelle Co. into default. Earlier this year, the RTC finally sold off the loan used to buy Maumelle Land Development.

The $10.58 million of debt is secured by more than 2,094 acres of undeveloped property, which encompasses 1,137 acres of raw timberland, 563 acres zoned for multifamily development, 250 acres for single-family residences, 134 acres for industrial use and 10 acres for commercial use and the partially completed Dogwood subdivision and golf course.

A mystery buyer, Davister Corp. of Dallas, purchased the two mortgages for $2.62 million. The debt was then assigned to GraPat Group and finally passed on to Century Realty, which recovered the property through foreclosure proceedings on the courthouse steps.

Reports are that Century Realty intends to divide the acreage into manageable sections and sell it off. That hasn't stopped the rumor mill from churning that all of this Dallas-based activity is somehow connected with DeHaven, reportedly in "the Big D" working on some unnamed business venture.

Some even believe DeHaven is the guiding force behind this new effort, effectively shielded by a corporate veil and paper transactions.

Such a ploy would effectively circumvent RTC prohibitions of reselling the foreclosed property to its previous owners. By passing title through a series of owners, the restrictive proviso is lost.

DeHaven, or whoever is behind the latest effort, could conceivably get back in the saddle with a much-unburdened debt load.

The RTC transaction has drawn the scrutiny of Sen. David Pryor, D-Ark., who requested a review of the deal. However, the sale will likely stand in any case.

But what about all those legal problems from property owners and bondholders who remain irate with DeHaven?

Maumelle watchers say the string of litigation will continue playing out in the courts as lawyers search for hidden profits they believe DeHaven stashed away.

And if DeHaven is truly working behind the scenes, his former high-profile status will go on a vacation of indeterminate length -- at least until all the lawsuits are resolved.
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Author:Waldon, George
Publication:Arkansas Business
Date:Jul 12, 1993
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