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The project that won't go away.

The Project That Won't Go Away

With Millions A Year At Stake, Realtors Wary Of New Big Mac Attack

Early returns in the November race for House District 6 were a source of delight for more than a few members of the Little Rock real estate community.

Veteran legislator John E. Miller of Melbourne (Izard County) was trailing, and it looked like the chief proponent of the Big MAC II development might not be around to advocate his pet project a third time.

In the end, however, Miller finished strong and survived the negative fallout from his support of the regional prison in Calico Rock and the proposed 591,000-SF Multi Agency Complex on the state Capitol grounds.

"I don't think that the local real estate industry contributed to my opponent's campaign," Miller says. "I don't think the central Arkansas real estate folks have wanted to get rid of me because of Big MAC II."

Perhaps not publicly, but privately some players in the Little Rock office market preferred to see Miller defeated rather than risk the chance that he just might be able to get Big MAC II off the ground this legislative session.

If the project becomes reality, it could cost office landlords an estimated 221,348 SF in lost space previously leased by various state agencies.

That translates into $2.16 million in annual rents when using today's average lease rate of $9.75 paid by state government for space in the private sector.

State agencies lease 1.02 million SF of space in Pulaski County, according to the Department of State Building Services. Those 159 leases, primarily office space, will generate annual payments of more than $9.95 million during fiscal year 1990.

With this kind of money at stake, real estate interests have fought Big MAC II tooth and nail when Miller has brought it before the legislature the last two times in 1987 and 1989.

The Downtown Partnership has been the most vocal group to oppose Big MAC II. Others have joined in too through the Committee For Fiscal Responsibility.

It looks as though that lobbying vehicle will remain parked during the current legislative session. Early indications are that the Downtown Partnership will not publicly oppose Big MAC II.

A five-phase development spread over 10 years has made the project less distasteful to the Partnership. That doesn't mean an endorsement is forthcoming. Some members have merely agreed not to oppose a phased-in approach.

Or, will this cross-section of business leaders rally to the cause once again? There's some confusion over what the answer to that question is.

"There's been a lot of talk about what we're going to do," says Stephen Chaffin, new executive director the Downtown Partnership. "We will have an executive committee meeting in the coming weeks."

That meeting could take place as early as Jan. 17, according to George Wells, new president of the Downtown Partnership and a partner in the real estate firm of Flake, Tabor, Tucker, Wells and Kelley.

Members could adopt a formal position on Big MAC II and pull together a unified front. Some folks were stunned and even angry to learn there might be a compromise with Miller.

"That surprised me," remarks Sterling Cockrill, former secretary of the Downtown Partnership and executive director of Metrocentre Improvement District No. 1, which covers an area bounded by Markham, Ninth Street, Cumberland and Broadway on the west. "I was unaware of any change from the old position.

"A phase-in is a good way to do it after there is a need for a new state building. We have plenty of office space available at very reasonable rates. As a former legislator and taxpayer, I don't feel there's a real need [for Big MAC II]."

The anger, expressed by others privately and off-the-record, was directed at John Flake. These businessmen think Flake was speaking out of school when he was quoted as saying he thought members of the Downtown Partnership wouldn't oppose Big MAC II in a Dec. 22 Arkansas Gazette article.

Some wondered aloud if Flake had sold out the cause and cut a side deal with Miller. One conspiracy theory involved a future pay back from state government to use or buy some of the old Wrappe property across from Dillard's new HQ. Flake has a financial interest in this land, which backs up to the state Capitol grounds on the north end.

"We've had no discussions with Mr. Miller or anyone else at the state regarding any development of this property for the state," laughs Flake.

Flake is sorry if he's inadvertently stepped on anyone's toes. He describes his work on the compromise as aboveboard, and feedback from peers has been favorable.

"The [property] owners I've talked to are relieved that we have been able to achieve this compromise," Flake reports. "I think our group has always been willing to discuss a phased-in development, and it's only been recently that it's been mutually agreeable to both parties."

What Happened?

A changing of the guard is one factor that has helped create confusion on whether the Downtown Partnership will oppose, endorse or remain neutral on the phased-in development of Big MAC II.

Every two years, new officers take over the leadership reins of the partnership. These officers also serve as the executive committee, the group's policy-shaping arm.

1991 is a transition year. Added to that is a new executive director, Stephen Chaffin, who has been aboard now for only a few weeks.

The new players aren't privy to some of the compromise talks with Miller that were spear-headed by Dickson Flake and John Flake on behalf of the partnership last year. The Flake brothers, who served on last year's executive committee, have done yeoman's work in fighting Big MAC II in the past.

Other observations about the possible compromise?

"I think there's been some apparent confusion as to what the Downtown Partnership's public position is, and we will clear this up," notes Jim Moses of AMR Realty, a new officer at the Partnership who still opposes Big MAC II in any form.

"I don't think anyone is trying to undermine anyone. We need to communicate better. Downtown Little Rock cannot afford to have anything undercut its current viability. It's so inappropriate to be talking about building a new office building at this time.

"If the state wants ownership in essence, I think they could acquire some properties at a bargain. Instead of building a building for $100 per SF, you can buy one for $30-$40 per SF. There's enough Class B office space to take care of the state's needs for the next 10 years, and that's where they should be looking."

"We were trying to achieve some medium between absolute devastation versus not doing anything to meet Mr. Miller's objectives," reports John Flake. "I think the phased-in development allows a balanced withdrawal from the market and not cause shell shock in the local office market. I think what we're basically agreeing to do is not oppose it."

"To the best of my knowledge, the partnership has not taken a position on this so-called compromise," Dick Herget, chairman and founder of the Downtown Partnership. "It's my understanding that any compromise is informal at this point. The [Downtown] Partnership and other interests are refocusing on this issue now."

"We don't lease any space to state offices, so it won't directly affect us," points out Bob Beal, president of RPM Management Co.

"But it will create a lot of vacant space in the market. I really don't think it's the thing to do, but apparently there's a deal been struck."

"I think there may have been some statements made on behalf of the Downtown Partnership without the endorsement of the full membership," says Tom Prince, who served on the Downtown Partnership's executive committee last year.

"We've had a number of discussions with Rep. Miller and feel like we have a liveable compromise that would allow the implementation of his program without having a shock effect on the [downtown office] market," states Dickson Flake, choosing his words ever so carefully. "The rest will be up to the General Assembly to see if it's financially feasible."

Big MAC II: Round 3

Miller is confident that this will be the year that Big MAC II makes it through the state legislature. Some still express doubts that the proposal will gain approval in the Senate even if Miller can shepherd the project through the House of Representatives.

"I haven't got my bill drafted, but I plan to get it ready for early introduction," Miller reports. "I just believe I'm going to be successful this time."

Off the top of his head, Miller cites three state agencies he would like to see back on the state Capitol grounds:

* The Office of the Attorney General, which leases 27,915 SF in the Tower Building at an annual cost of $300,000 ($10.75 per SF).

* The Department of Labor, which leases 19,511-SF in the Cone Building I in west Little Rock at an annual cost of $172,500 ($8.84 per SF).

* The administrative offices of the Department of Computer Services, which leases 21,158-SF in the Koger Office Park at an annual cost of $110,823 ($5.24 per SF).

These three leases total 68,584-SF and represent about 31 percent of the estimated 221,348-SF that Big MAC II will draw away from the private sector.

Initially, the phased-in development would focus more on expanded parking at the Capitol with more office space coming on line on the back end. This is designed to lessen the negative impact Big MAC II would have on the private sector.

"Of course, I've never thought it would have that effect," Miller remarks. "I've never wanted to turn downtown Little Rock into a ghost town."

In his two previous attempts with Big Mac, Miller placed interest caps of 10 percent and 8 percent on the bonds that would be used to finance the building.

"I suspect I'll put another cap on this one, too, to alleviate the fears on how much it will cost," he says.

Some question why Miller doesn't advocate buying existing office buildings as opposed to building new. "It's a buyer's market, and the state ought to take advantage of it," says Ramsay Ball of AMR Realty. "The state doesn't have a lot of capital and needs to focus its resources and not build edifices."

Some would like to see the state buy the MainStreet Mall and the old Stephens complex at Capitol and Main. That move would further bolster the downtown market and provide the state with the long-term benefits of ownership.

Several state agencies also have considered building or purchasing a building. The list includes Workers' Compensation Commission, Cosmetology Board, Arkansas Teacher Retirement System and Public Employees Retirement System.

In any case, Miller is convinced that building on the Capitol grounds is the route to go. The state already owns the land, and it would make more state agencies readily accessible in a central location.

He is determined to see Big MAC II built, no matter what his past opponents choose to do this time. Miller believes it's in the best interest for Arkansas even if Little Rock landlords think otherwise.

Proposed Phase-In Of Big MAC II

The five-phase project will involve 591,000-SF of office space and 2,420 additional parking spaces. A new phase will be built every two years beginning in 1992. The initial emphasis will be placed on expanded parking instead of new office space.

Phase I: An 11,000-SF Visitor's Center attached to the first floor of the Capitol and 45,000-SF of office space. Plus a 600-space parking deck on Seventh Street between Marshall and Wolfe and a second parking deck at the west end of the Capitol grounds near the State Department of Education.

Phase II: Two office buildings with 110,000-SF of space and 600 spaces in the western parking deck.

Phase III: An 89,000-SF office building and 340 parking spaces.

Phase IV: A 112,000-SF office building and a 360-space parking deck on top of an existing parking lot north of the Big MAC Building, near Third Street.

Phase V: Two 112,000-SF office buildings and a 200-space parking level on the west deck.

PHOTO : ANOTHER LOOK: Big MAC II, as portrayed in this rendering by the Cromwell architectural firm, will give a new look to the state Capitol grounds. It will also draw an estimated 221,338 SF of rental space from the private sector. Landlords around Little Rock are nervous about what economic impact this will have on an already depressed local office market.

PHOTO : BIG MAC II BOOSTER: State Rep. John E. Miller of Melbourne believes a new development package (five phases spread over 10 years) will be approved in this third legislative attempt on the Big MAC II project.

PHOTO : FAUX PAS OR FACT: Some businessmen think John Flake was speaking out of school when he was quoted as saying he thought members of the Downtown Partnership wouldn't oppose Big MAC II in a Dec. 22 Arkansas Gazette. article.
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Article Details
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Title Annotation:Multi Agency Complex II
Author:Waldon, George
Publication:Arkansas Business
Date:Jan 14, 1991
Words:2192
Previous Article:Legislators to referee fight between large, small banks.
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