In The News

Benton is dedicating up to $1.4 million from its general fund to extend utilities and infrastructure to an area where a Tennessee developer wants to put a new 160,000-square-foot shopping center.

The $29 million project, Shoppes at Benton, is planned for an area north of the Interstate 30 interchange and west of Alcoa Road and is being developed by GBT Realty Corp. of Brentwood, Tenn. The center will have two main anchors — a soft goods, apparel and home decor store that will use 41,000 square feet and a hobby and craft store that will utilize about 55,000 square feet.

Officials from GBT attending a news conference at Benton’s city offices Tuesday declined to name the two large retail tenants. Clients listed on GBT’s website include Hobby Lobby, Sprouts Farmers Markets, Kohl’s, Bed Bath and Beyond, T.J. Maxx and Marshalls, among others. The Shoppes at Benton also will have a row of four fast-casual sit-down restaurants.

The developer has contracted to buy one parcel from Mike Sylvester and Pat Sylvester and another from Mount Carmel Investment Co. LLC. Both deals are set to close in late March.

Construction is expected to start in the first quarter of next year, and the shopping center is expected to open about a year later. Jeff Pape, managing director of GBT’s shopping center division, said construction should generate 450 to 500 short-term construction jobs. Once it’s open, the center should employ 200-plus full-time workers and more than 300 part-time people.

He said he expects the development to be at least 80 percent leased by the time builders break ground. GBT’s average occupancy upon opening is 94 percent.

“We have several retailers that are confirmed and that we are moving forward with now,” Pape said of the Shoppes at Benton. “We won’t build a bunch of buildings and hope they fill up later.” The group recently finished a project in Louisville, Ky., and one outside Savannah, Ga.

The Benton City Council passed a resolution Monday that laid out plans for the city and the Benton Public Utilities Commission to work with the Benton Investment Partners LLC, which is GBT. The roughly $1.4 million contributed by the city and its separate utilities commission will be in the form of materials and equipment needed to extend water, sewer and electrical services to the site will be made by Rob Martin Electrical, said Mayor David Mattingly.

Those costs, coming from reserves in the city’s general fund, are expected to be made up within the first year to 14 months the shopping center is open, he said. Raising taxes or issuing bonds was not an option, the mayor said, because he was not in favor of “mortgaging the city’s future.”

GBT has developed more than 6 million square feet of retail and commercial space in the past 6-8 years, which have been the most economically challenging for real estate development in recent times. GBT’s projects span 21 states.

The deal was put together by Flake & Kelley Commercial of Little Rock. Flake & Kelley represents one of the two large retailers planned to go in the development. Partner and CEO Hank Kelley said the retailer had been looking in the area of Interstate 30 in Benton for some time and had tried twice before to secure a location.

“Instead of the developer coming in here and trying to figure out what retailers will come, the retailer picks the location and it works right,” Kelley said.

Matthew Dearnley, 42, is the CEO of Flake & Kelley Commercial Northwest.

Dearnley, a native of Brooklyn, graduated from Hobart & William Smith Colleges with a bachelor’s degree in history. He received an MBA in finance and investments from the University of Miami in Florida. He worked as a paralegal but soon realized he’d rather be a dealmaker. He has worked in commercial real estate since 2002 and arrived in northwest Arkansas in 2004. He is the son-in-law of Flake & Kelley Chairman John Flake.

Ten years ago, Arkansas Business quoted a real estate broker from northwest Arkansas who said, “You’d have to be a total village idiot not to make a lot of money if you had a couple of million dollars [to invest].” How have attitudes changed in the past decade — or have they?

I think most investors who have been in the business through the recession have seen the good and the bad in the real estate market. It seemed, 10 years ago, that an investor could buy a property sight unseen and make money on it. There were a lot of bankruptcies, OREO properties at banks and bank failures because of that line of thinking. There is still money being made in the real estate market, but there is no longer a sense that it can be done by “the village idiot.” I think people have more respect for the real estate market and the degree of professionalism it takes to work in it.

There have been a lot of built-to-suit office spaces for specific clients to relocate. What are the prospects for the old spaces to be filled? Is backfilling abandoned space a concern?

The growth of the market in population and the continued growth at our big four — Wal-Mart, Tyson, J.B. Hunt and the University of Arkansas — are driving a lot of growth. The backfill second-generation space is being aided by the high cost of tenant finish-out. With finish-out of new construction running between $55 and $70 per SF, property owners are less willing to “turnkey” space. Tenants can get much better lease rates on second-generation space, which is helping fill a lot of buildings. You can’t overlook location as well. Being along the I-49 corridor is very important to most businesses.

What are your overall thoughts and predictions about the northwest Arkansas market? Are there any concerns or prime opportunities?

The market has clearly reached a point of possible correction. Certain areas have overbuilt, and caution is the word I would use in evaluating opportunities.

How did Flake & Kelley handle the recession and what did you learn? Do you think players in the market are wiser now?

Flake & Kelley has always had a policy of not having debt. Partners, of course, invest but not the company; hence, the livelihood of our colleagues is not jeopardized by a bad decision by one person. As for people being wiser, I would say yes. You are not seeing as many projects being built purely speculatively anymore. Buildings are being preleased, and people are no longer buying land with the intended use being to sell it in six month to someone else for twice what you paid.

How have new bank lending regulations affected the commercial real estate market?

You are seeing more preleasing and the requirement of more money down. The days of 100 percent financing may be over. You are also seeing the banks consolidating and changing to a world of haves and have-nots. You are seeing a lot of Arkansas banks aggressively expanding both within our state borders and outside of them.

The Village Shopping Center at Asher and University avenues changed hands last month and with it came the decision to raze the old Cinema 150, one-half of the first dinner-and-a-movie date place in Little Rock.

The shopping center was owned for at least 20 years by an out-of-state investment group,Flake & Kelley Commercial brokered a deal in which Greater Missouri sold the property for $3 million to a longtime client, North MacArthur Investments LLC. Flake & Kelley will handle leasing and property management for the Village Shopping Center, which is to undergo major improvements starting with the removal of the movie theater.

“More than anything, it’s a cleanup of a property that has been a problem” safetywise, said Hank Kelley, chief executive officer of the Little Rock-based commercial real estate firm.

Tearing down the domeshaped theater will make the 153,400-square-foot shopping center more visible and provide an opportunity for North MacArthur Investments to lease the land where the theater now stands or replace it with a new building for a restaurant, retail or some other use, Kelley said.

The theater building was erected in the late 1960s but has been vacant for several years. It’s functionally obsolete, Kelley said.

Another of the center’s mainstays, Casa Bonita, is not being torn down but is also dormant and has been vacant for some time. In the ’60s and ’70s, the two went hand in hand.

“You’d go to the theater at the Cinema 150 and go to Casa Bonita, which was [among] the first generation of Mexican restaurants in the state,” Kelley said.

“The Cinema 150 is definitely one of those things remembered for first dates and great movies seen, but literally there’s not a theater operator that has any interest in trying to make a single theater work, and that building has lived past its economic life.”

Danny-Joe Crofford, director of marketing for War Memorial Stadium but formerly with United Artists, said the theater was named the Cinema 150 because its screen curved at a 150-degree angle, unlike the regular flat screen.

It opened with The Odd Couple in 1968, only because the science-fiction film 2001: A Space Odyssey was delayed in getting to Little Rock.

The longest-running films over the theater’s career, he said, were: Indiana Jones and the Temple of Doom, 13 months; Titanic, 10 months; and Top Gun, nine months.

After it closed as a theater in 2003 – the last movie was X2: X-Men United – it was reincarnated as a music venue, but even that didn’t last very long, said Matt Smith, owner of the Riverdale 10 Cinema in Little Rock, the Searcy Cinema 8, the Cabot Cinema 8 and the Hot Springs Mall Cinema.

It’s not that theaters are going away, it’s just that smaller cinemas are being replaced with bigger venues with more screens, he said.
For example, when the 18-screen Rave Motion Pictures theater opened, the same number of screens went away, one of them being the Cinema 150.

“What happens in movie exhibition – new theaters come in, old theaters fold, but the screen count pretty much stays the same,” Smith said. “New theaters typically cannibalize the business of ol! d theaters.”

When the sale to North MacArthur Investments closed on Dec. 18, the shopping center was about onehalf leased.

Notable tenants include Family Dollar; City Trends, a national urban fashion store; Aaron’s Rent-to-Own; and Sherwin-Williams Paints.

In addition, a furniture store has committed to lease 15,600 square feet, and Flake & Kelley is negotiating with a small grocer to take another 16,800 square feet.

Traffic counts in the area are high for in-town shopping centers, Kelley said: 40,000 cars a day traveling north and south on University Avenue and 29,000 cars a day traveling east and west on Asher Avenue, which becomes Colonel Glenn Road.

Kelley said those businesses are expected to be open for business within the next six months.

Arkansas Democrat-Gazette/RICK McFARLAND
The boarded-up Cinema 150 at the Village Shopping Center in Little Rock has been vacant for several years and is described as functionally obsolete.
Copyright 2015, Arkansas Democrat-Gazette