Capitol real estate | Arkansas Blog

Tuesday, May 27, 2008

Capitol real estate

Posted By on Tue, May 27, 2008 at 4:43 PM

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-- Brian Chilson photo

The former Dillard's headquarters building at 900 W. Capitol Avenue has been sold for $800,000 to a partnership headed by a couple of Dallas developers, Ed Massman and Charles Edwards.

The sale could trigger a move of two state agencies from the Big Mac building behind the Capitol and an interesting decision on new use of that vacated space, perhaps for legislative offices. The deal represents a significant loss by the seller, the Union Rescue Mission.

Read on.

The Dallas developers -- Massman turns up in an Internet search as a redeveloper of a former Nabisco building in Des Moines -- closed the deal on the strength of strong interest from the Arkansas Building Authority in leasing the building. State Sen. Steve Faris has been a driving force in pushing for new office space in the immediate vicinity of the Capitol, as an alternative to his preferred plan for a Big Mac II office building. That has been too expensive for the legislature to swallow. Faris has been talking to various agencies about their interest in moving into the building. He said he didn't know the developers, who approached the Building Authority with the idea.

So why lease instead of a state purchase? Building Authority director Anne Laidlaw said the developers will qualify for tax credits that should produce a decent lease rate and the state would have had to issue interest-bearing bonds pledged to revenue to purchase it. If the lease deal is struck, the state would have an option to buy the building in six years or so, after the developers have maxed out their tax credits.

Tenants? The Arkansas State Library is prepared to take about 60,000 square feet of the 110,000 square feet in the building. Several other agencies are being considered. One candidate is the History Commission, which, like the library, is now in Big Mac. Workforce Education, in an older building on the Capitol mall, also is looking for new space.

Carolyn Ashcraft, the state librarian, said she'd initially been resistant to the idea of moving because of the work her agency does for state officials But, she said, she's now excited about the possibility. There'll be 90 parking space outside, for one thing, and the building will still be in view of the Capitol, if not next door. She'll get 2,000 more square feet and the building is, according to Laidlaw, going to be rebuilt from the concrete decks outward into virtually new space.

The space the library leaves behind will be avidly sought. Faris confirms it's being considered for use for legislative offices. Senators have private offices in the Capitol, but most members of the House do not. Past efforts to win legislative approval of a building for legislative offices have been unsuccessful.

Faris said the Legislaive Council and Audit staffs have grown and also need new space. He said, too, that it would make sense to return the attorney general's office from the downtown Tower Building to a place on the Capitol grounds. He said an existing tunnel could be renovated and used to connect the Capitol with Big Mac.

Laidlaw of the Building Authority said she hoped to be able to commit to lease the entire building by September. It probably couldn't be occupied earlier than roughly September 2009. The library alone can't justify the move. The 2009 legislature would have to provide moving costs and budget for an expected rent increase from around $11.20 to $14 a square foot for the state library and likewise for whatever other agency or agencies make a move. Faris said that though costs would increase, new space is needed and this will be cheaper than new construction.

Faris said he'll be continuing to work long-term on creation of an advisory commission that could work to provide other new office space in the Capitol neighborhood, perhaps even on the west side of the railroad line that borders the Capitol. He said some substandard neighborhoods could be improved by conversion to state office use. He said it made no sense to build agency headquarters far from the Capitol. He specifically mentioned the new quarters of the Department of Environmental Quality. He also said he preferred ownership to leasing, though he acknowledged political pressure from the real estate community to put state offices in downtown buildings.

Union Rescue Mission bought the building in 2003 for $1.2 million. Director William Tollett said the $400,000 loss was a blow, but he said Union Rescue had operated successfully for 65 years and had assets sufficient to weather it. He said the agency has $280,000 in debt still to pay on the ill-fated purchase. But he said the agency wasn't suited to being in the real estate business and the time had come to cut losses. The building had languished on the market since the mission decided not to develop it as a new home. Downtown oppositiion was stiff to a mission on Capitol Avenue. Union Rescue also was set back after the death of a key backer, wholesale grocer Jerry Davis. Tollett said the agency now would focus on rehabilitating and growing at its current site on Confederate Boulevard.


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