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Using Jay DeHaven as an agent, two insurance companies bought Winrock Grass Farm's 814 acres in West Little Rock at a foreclosure sale in July 2005 for $4.5 million.
The property fronts the Big Maumelle creek, which feeds into Lake Maumelle, the source of drinking water for nearly 400,000 people in Little Rock and North Little Rock.
Central Arkansas Water did not bid on the property in 2005. The decision turns out to have been a bad one: Now, the agency wants to buy the land to protect the watershed of Lake Maumelle, and it looks like it will have to pay much more than DeHaven did four years ago.
The big question is: how much more?
In a recent article in the Democrat-Gazette, DeHaven, who now is part of a group that owns the land, was quoted as saying he paid $12 million for the 800 acres he wants to sell plus adjacent parcels, and that he outbid another offer of $11.5 million for the land. He offered to sell the land to CAW for $15 million two years ago.
But DeHaven, who's had a long and controversial history as a real estate speculator (his legal battles include acquittal on a fraud charge in 1994), didn't mention any competition from other buyers when he was deposed in July 2006 in connection with CAW's condemnation suit against Deltic Timber on other property (later settled).
In that deposition, DeHaven explained the land transaction.
For his trouble as agent, Liberty Bankers Life Insurance Co. and American Reserve Life Insurance (since merged under the Liberty name) paid DeHaven $1.5 million for making the successful bid at the foreclosure sale. The following March, DeHaven and what's called the Canterbury Park Limited Partnership bought the land from Liberty, along with some additional acreage.
In the deposition, DeHaven said the Canterbury partnership paid $11.5 million for a 965-acre parcel that includes the former Winrock Grass Farms. No major work has been done on the land to justify such a jump in value.
To buy the land, he put up $1.5 million (the fee he got from Liberty), other local investors put up $1.5 million and the seller — Liberty — put $8.5 million into the same escrow account with the $3 million from investors. DeHaven described the deal as “seller-financed.”
But it gets more complicated.
The Canterbury partnership — DeHaven and investors — then paid Liberty back the $8.5 million it had put in the escrow account. At the time of the deposition, four months after the March 31 closing date, DeHaven had paid himself $105,000 from the remaining $3 million in escrow for what he described as a “partnership, overhead and supervision fee.”
That version of events would make it appear — after all the swaps — that DeHaven had paid $3 million for the property. Documents indicate the insurance company might have an additional amount in the land, but DeHaven refused to talk to the Arkansas Times about the deal or explain how the valuation of the land had risen to more than $11 million.
A recent appraisal of the 804 acres DeHaven wants to sell by the Trust for Public Land put the land's value at $5.4 million, or $6,750 an acre. The Trust — which would buy the land and hold it until CAW could buy it — has an option to buy the land, but DeHaven called the non-profit's appraisal “seriously insane,” according to the Democrat-Gazette. He signed an option with the Trust last year but, he's been quoted as saying, the deal is off.
Still, even CAW thought the Trust's appraisal was off. “We were shocked the number was as low as it was,” CAW chief executive Graham Rich said Monday.
Last year, CAW paid $27,000 an acre for 115 acres in the watershed. The Bodenhamer tract was a critical acquisition, thanks to its proximity to the lake's water intake structure and steep grade. But CAW paid about a half million dollars more than the land appraised for, and two members of the public at a CAW Commission meeting where the purchase was discussed criticized the agency for creating a precedent. Barry Haas said he warned the commission the price “would put dollars signs in the eyes of every property owner out there.”
There aren't a lot of sale comparables for appraisers to use, CAW chief Rich said, and values vary considerably. The view from the Bodenhamer tract enhanced that land's value; its 2.5 miles along the Big Maumelle River is a plus for the Canterbury tract, Rich said.
In other acquisitions last year, CAW paid $7,344 an acre for the 75-acre Kendrick property and $12,768 an acre for the 5.8-acre Harmon property, both beside the Canterbury property.
The legislature appropriated $4 million in the session that just ended to the Forestry Commission for purchase of the Canterbury property. (Its investors include Little Rock steelmaker Thomas Schueck, a major financial supporter of Gov. Mike Beebe and the Arkansas Democratic Party, and NBA star Joe Johnson.) CAW and possibly federal grant money would make up the rest of the purchase price. “I think we'd be willing to pay what would be considered fair market value,” Rich said.
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