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Problems become projects in NLR.

Division of Matthews Family Fortune Spurs Lucrative Development

DEVELOPMENT ACTIVity in North Little Rock's McCain Boulevard-Landers Road-Warden Road area has generated more than $25.5 million worth of commercial projects since 1990.

Favorable market conditions, which include falling interest rates and aggressive lending by North Little Rock's Twin City Bank, are prime catalysts for the commercial building spree. However, one of the most significant yet most unheralded factors in the building boom is the 1990 Chapter 11 reorganization of The Crestwood Co., led by James Matthews.

The area's development during the past three and a half years equals the one-year high for the entire city in 1991, according to tallies kept by city officials. The impact on the city's tax base will be felt for years to come.

"Activity has been very brisk, and it looks like this year could surpass that," says Robert Voyles, director of North Little Rock community planning.

Crestwood's financial troubles have opened a watershed of development activity.

A proposed 157-acre project at the northeast corner of Interstate 40 and U.S. Highway 67-167 is the largest deal to enter the economic spillway. That land sale to Baptist Medical Systems could tip the scales at $8.5 million if the deal closes at $1.25 per SF.

BMS had envisioned developing a medical complex at the interchange since the early '60s, but that dream went unfilled for 30 years because of the Matthews family tradition of keeping its commercial real estate as a long-term investment.

John P. Matthews wasn't interested in selling to BMS, and his heirs, led by son James Matthews, maintained a similar posture.

"Normally, if we had our druthers, we'd keep the property and develop it ourselves," James Matthews said during a rare 1989 interview. "At this time, we're more interested in cash than leases."

Matthews was talking about The Crestwood Co.'s decision to begin selling commercial property four years ago, but the observation could easily be made about the Baptist site.

Crestwood's change of heart was prompted by economic necessity. The company was unable to support millions of dollars of short-term debt with its long-term assets. The cash flow from income-producing properties was unable to keep the company in the black without augmentation from land sales.

Crestwood began delving into its rich, real estate portfolio in 1989 and liquidating assets such as the four-acre site on East McCain Boulevard leased to La Quinta Inns and Furr's Cafeteria ($850,000). However, these moves came too late, and Crestwood ultimately had to file Chapter 11 to stave off creditors and realign its financial position.

The company's aggressive development strategy of the mid-1980s had backfired as the commercial market slowed down in the face of higher debt service.

But the Crestwood holdings are so lucrative that many real estate observers anticipate the company's creditors will end up getting repaid 100 cents on the dollar in the aftermath of the lengthy reorganization.

Proposed deals involving the 300-plus acres in the Springhill area, for example, could sell off an estimated 200 acres and repay in full First Commercial Bank in Little Rock and Boatmen's National Bank in St. Louis. That could leave Crestwood with 100 acres of debt-free, undeveloped land in the Springhill area and 90 acres in the northwest corner of the I-40 interchange with U.S. 67-167.

The pending $11.5 million sale of the Lakewood Village Shopping Center, a real cash drain for Crestwood, will also go a long way toward shoring up the corporate financials.

"We're wading through all the paperwork, and we ought to have it closed in two or three weeks," says Rick Ashley, who is part of an investors group that has the 172,230-SF project under contract.

Family Ties

The Crestwood Co., operated through General Properties Inc., emerged in 1975 after the death of John P. Matthews. Prior to that, the family's real estate holdings were administered through The Matthews Co.

John P. Matthews, the second son of real estate mogul Justin Matthew Sr., founded the company after he took a quarter of the family fortune following his father's death in 1955.

The other part of the family tree remained under the Metropolitan Trust Co. banner. Metropolitan also followed a philosophy of leasing rather than selling any commercial property it didn't develop.

The land lease on McCain Mall is the most high-profile example of this strategy.

Like Crestwood, Metropolitan has contributed to North Little Rock's development activity by selling raw land. The catalyst for this is a second split in the Matthews empire. One part of the family has gone its own way to form Cypress Properties, and other schisms are expected to further divide the holdings.

Favorable national publicity garnered during the 1992 presidential election is stirring up the mix.

"Too many national tenants have come here for it to be a coincidence," says Andy Collins, president of Cypress Properties.

The parade of companies coming to the North Little Rock and Sherwood areas include home improvement firms (Home Quarters and Lowe's), electronics chains (Best Buy and McDuff's) and restaurants (Golden Corral and Applebee's).

The first phase of an east belt project to extend Interstate 440 to south of Jacksonville promises to open up additional commercial development in the Springhill area.
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Title Annotation:North Little Rock, Arkansas
Author:Waldon, George
Publication:Arkansas Business
Date:Sep 13, 1993
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