LR Developer Clary Facing $17 Million In Defaults; Shackleford Crossings Not in Jeopardy

by Mark Hengel  on Monday, Jun. 15, 2009 12:00 am  

Shackleford Crossings shopping center in west Little Rock is being developed by Steve Clary?s Clary Development Corp. of Little Rock.

The developer behind the Shackleford Crossings retail development in west Little Rock has defaulted on more than $17 million in personal and commercial loans since July, and his creditors have gone to court to protect their interests.

None of Roger S. "Steve" Clary's defaulted loans lists Shackleford Crossings as collateral, although the personal loans are secured by future proceeds generated by the shopping center.

Clary, chairman and CEO of Clary Development Corp. of Little Rock, said last week that he is currently closing transactions that will allow him to make good on the debts. The transactions should finalize in about two weeks, Clary said. And he insisted the defaults would have no impact on the 80-acre-plus Shackleford Crossings. Shackleford Crossings appears to be in good standing on its loans.

Clary has not responded to collection suits filed against him in several jurisdictions. In two brief interviews last week, Clary said he had explained his financial situation to each of the creditors and to Shackleford Crossings' primary lender, Marshall & Ilsley Bank of Milwaukee. (To view a timeline of Clary's borrowing, click here.)

"We had a number of debts coming due and a number of transactions coming to a close," he said. "In the meantime, the debts came due" before the transactions finalized.
"They are good people who lent the money, and they took the action that any lender would take," he added.

Clary would not disclose what transactions he is currently pursuing to repay the debts, which include:

  • $2.97 million in personal loans and interest from four private parties;
  • $3.8 million that Banc of America Leasing & Capital LLC has filed suit to collect, money that was lent to Clary and his wife, Cynthia, to purchase six buses;
  • $1.35 million that was borrowed from Regions Bank in July and on which Clary defaulted only three months later; and
  • $9.2 million that BancFirst of Oklahoma City lent to Clary's CZ - I-40 Development LLC of Little Rock to buy land for a shopping center in Oklahoma.

Judges issued default judgments against Clary in the Banc of America and Regions cases after he failed to respond. In the BancFirst case, a judge issued a summary judgment without receiving a response from Clary.

The Investors

On May 27, four parties that lent Clary nearly $2.85 million filed suit in Pulaski County Circuit Court. Clary has not responded to the case. The four are seeking $2.97 million for the loans plus interest, according to the complaint.

"We have and we had a number of businesses that were starting up that required capital to be started. They had large future potential. And simply put that was the purpose of" receiving the loans, Clary said.

According to the complaint, Clary borrowed:

  • $1.1 million from the Hendren Family Limited Partnership LLLP, led by James Hendren of Little Rock;
  • $250,000 from Hank Kelley, CEO of Flake & Kelley Commercial of Little Rock;
  • $500,000 from the Naftal Family Limited Partnership LP of Atlanta, led by Mark Naftal; and
  • $1 million from Whiz Kid Ventures, led by Phil Whisenhunt, the former Little Rock entrepreneur whose last known residence was in the U.S Virgin Islands.

Kelley and Naftal declined to comment. Whisenhunt could not be reached for comment, and Hendren did not return calls seeking comment.

The lenders granted eight loans to Clary between May 2007 and August 2008, according to the complaint filed by David B. Vandergriff of Quattlebaum Grooms Tull & Burrow PLLC of Little Rock. After entering a forbearance agreement with Clary in February, the group is attempting to recover its losses and rights to collateral from the original loans and the forbearance agreement.

Clary secured each of the original loans with future proceeds from his stake in Shackleford Holdings LLC, the parent company of Shackleford Crossings LLC. To obtain the forbearance agreement, Clary granted each lender a security interest in a $15 million loan Clary granted to Delphis LP of Little Rock.

Delphis is registered in Texas but lists Clary Development's Rodney Parham Road address as its headquarters, according to the Texas Secretary of State's office.

Clary described Delphis as an account receivable he has that "simply owes me money for transactions in the past." Clary described himself as a minority stakeholder in Delphis, which he said has a variety of interests, but he would not elaborate and nothing more about Delphis is available in court documents.

Although the loans entitle the individual lenders to proceeds from Clary's share of revenue earned by Shackleford Crossings, the lenders will not become active in the development's management, a source close to the lenders said.

Bank Loans

It's unclear why Clary took out nearly $3 million in loans from individuals, but it appears the loans flowed in as Clary began to have money problems and also took on greater debt for projects. (See timeline.)

As the credit markets tightened in the fall, Clary said, many business partners backed out of deals, causing his troubles.

"Many investors backed out of funding agreements starting in September 2008," he said. "I'm not blaming anybody. Since that point in time, we've been in a bit of a scramble to secure additional" capital.

In May 2008, CZ - I-40 Development and BancFirst amended a loan the developer took out to buy about 80 acres near Oklahoma City for a shopping center. CZ - I-40 bought the property in May 2006 for about $13 million and received a $10.2 million loan from BancFirst in the same month, according to documents filed in Canadian County (Okla.) District Court.

Clary defaulted on the amended BancFirst loan July 18, only three months after the two parties finalized the agreement.

Then on July 23, Clary received the $1.35 million loan from Regions, according to court filings. Clary said he received the loan for working capital. Clary defaulted on the Regions loan on Nov. 15, and the bank filed a writ of garnishment against Clary on June 2. Regions has asked that Clary disclose all his assets.

Steve and Cynthia Clary also signed on June 30 for a $4.3 million loan from Banc of America Leasing & Capital LLC of San Francisco. The Clarys signed on behalf of Destination Adventures LLC of Missoula, Mont. The loan was for six motor coaches, according to filings in the U.S. District Court for the Eastern District of Arkansas. The high-end coaches were purchased for leasing to people in the entertainment industry, Clary said.

Banc of America received a judgment Jan. 5 against Clary for $3.8 million. Court documents do not state when Clary defaulted on the loan, and Banc of America's attorney, Valerie Nation of the Mitchell Williams firm in Little Rock, declined to comment.

The only case in which a lawyer has filed objections on Clary's behalf was BancFirst's successful foreclosure on the 80-acre commercial site in Oklahoma City.

The court auctioned the property in April. BancFirst entered the successful bid of $5.3 million, which Clary's attorney, Leif Swedlow of Oklahoma City's Andrews Davis Law Firm, called a "shockingly low amount for a property that BancFirst itself valued at over $12,800,000.00 approximately three years ago," according to Canadian County court filings.



Please read our comments policy before commenting.