Posted 12/21/2012 02:49 pm
Updated 12 months ago
It’s that time again, time to close the books on the current year and look forward to the possibilities the new one presents.
Before we bid farewell to 2012 and plunge headlong into 2013, though, as has become the custom in our last issue of December, the Northwest Arkansas Business Journal staff has put together a list of what we consider the 10 biggest business stories of the last 12 months.
It’s always a tall task, and this time was no different. Deciding which story to put on top of the list was particularly tough.
In the end, though, we went with the one wrapped in Razorback red. Yes, we’re talking about the roller-coaster ride that actually started with an April motorcycle ride and recently culminated with Bret Bielema agreeing to become the University of Arkansas’ head football coach and, thus, the highest-paid state employee.
It’s more than Bielema’s $3 million-plus salary that makes his hiring a business story, of course. It’s the fact he’ll be the most recognizable figure in an athletic department that drives a lot of economic activity not just in this corner of the state, but from border to border.
Consider, for example, that Arkansas increased its revenue from $64.2 million in 2007-2008 to $99.8 in 2011-2012, according to the U.S. Department of Education’s Office of Postsecondary Education. That was good enough to move the Razorbacks from 27th nationally to 12th, and much of the credit must go to athletic director Jeff Long.
Other stories on our list include the historic wet-dry vote in Benton County, a topsy-turvy 50th year for Wal-Mart Stores Inc. and the ongoing health care overhaul known simply as Obamacare.
On a more local level, we continued to be intrigued by Fort Smith’s efforts to reinvent itself, a student apartment boom in Fayetteville that makes us more than a little queasy and a shrewd land grab in Benton County.
And while which stories are the biggest in any year almost always is up for debate, we’re sure you’ll agree there was plenty to talk about around your watercooler in 2012.
1. Razorbacks Rigmarole — From the moment word began to trickle in that former University of Arkansas football coach Bobby Petrino had been involved in a motorcycle wreck until the last seconds before press time, when updates on new coach Bret Bielema’s staff continued to flow fast and furious, Razorbacks fans were teased and/or tortured with every twist in the plot.
And, oh, were there ever twists. From a blonde passenger on said motorcycle to a replacement coach who implored the Razorback Nation to “Smile!” when absolutely no one felt like it to Jon Gruden rumors even the most Cheeto dust-encrusted message-boarder wouldn’t buy, Arkansas fans endured eight months like we’ve never before seen.
All the while, though, athletic director Jeff Long managed to keep the Hogs’ cash registers ringing. Athletic department revenue climbed to almost $100 million in 2011-2012, with about 64 percent of that total coming from football.
Additionally, during the 2012 fiscal year, $26.2 million was pledged to support Arkansas athletics and the Razorback Foundation. Then, in November, the department announced it’s moving forward with a feasibility study for a football stadium expansion project with a price tag in the tens of millions.
Most of us have accepted by now that college athletics — and football, in particular — is big business. In 2012, Arkansas produced numbers with enough zeroes to eliminate any doubt.
2. Booze on the Ballot — Booze was a big issue in three Northwest Arkansas counties in 2012.
Voters in Benton County, the second-most populated of the state’s 75 counties, went to the polls Nov. 6 and answered the wet/dry question with a resounding “yes.”
The vote to allow the “manufacture or sale of intoxicating liquors” was approved 65 percent to 34 percent.
The county, long recognized as the state’s “wettest dry county” with more than 130 private-club permits, had been dry since 1947. A question on the issue to go “wet” had not been put before voters since 1944.
Two grandsons of Wal-Mart Stores Inc. founder Sam Walton — Steuart and Tom Walton — were the main financiers of the effort through the group Keep Dollars in Benton County.
Supporters spent most of the year getting enough signatures of the county’s registered voters, about 38 percent, to get the question on the ballot.
Madison County voters also collected enough signatures to put the wet/dry question on the ballot there, and it passed with about 57 percent of the vote.
Benton County will receive 55 permits for package-liquor stores, based on the county’s population. Madison County will be allowed three permits.
In Washington County, which is already wet, voters in Springdale and Tontitown voted to legalize the sale of liquor on Sunday, a reaction to the anticipated loss of revenue to Benton County.
Sunday liquor sales began Nov. 21.
3. Wal-Mart Wrap — The New York Times dropped a bombshell in April when it reported on claims of systemic bribery at Wal-Mart Stores Inc.’s Mexican subsidiary around 2005 and a subsequent cover-up involving some of Wal-Mart’s highest executives.
The article claimed Eduardo Castro-Wright, former head of Wal-Mart de Mexico, approved more than $24 million in bribes to government officials to speed up construction projects.
It also claimed executives including then-CEO Lee Scott knew of the bribery at the time and ignored it.
After the article’s publication, Wal-Mart revealed it had already started an internal investigation into the matter. Castro-Wright retired July 1 as Wal-Mart’s vice chairman.
The story spawned a congressional investigation into whether the world’s largest retailer violated the Foreign Corrupt Practices Act. Also, a California pension fund sued Wal-Mart’s board of directors and several current and former executives in connection with the bribery scandal.
Wal-Mart’s reputation took another hit late last month after 112 people died in a fire at a Bangladesh garment factory that was used without the retailer’s authorization by subcontractors for at least two suppliers.
None of this seems to have affected Wal-Mart’s financials as it celebrated its 50th year in business. In its third-quarter earnings report, released Nov. 15, the company said profit rose 9 percent over the previous year, and it expects fiscal-year earnings per share between $4.88 and $4.93, compared to last year’s $4.54.
4. On Obamacare — Officially known as the Patient Protection and Affordable Care Act, Obamacare made plenty of headlines in 2012.
No sooner had the Supreme Court upheld in June the individual health-insurance mandate that is at the heart of President Obama’s legislation than Republican leaders began efforts to repeal it. Obama’s victory at the polls in November, however, effectively killed those efforts. Even House Speaker John Boehner deemed Obamacare “the law of the land” after the election.
Now the race is on to prepare for the imminent changes. Or, as Regions Insurance executive vice president Tom Hayes wrote in a guest commentary:
“Most everyone will pay something for health coverage, and that coverage will, at least in the short term, be more expensive. And the health care system this country has known is changed forever.”
5. Fort Smith in Flux — It was a sad day in June when Whirpool Corp. closed its doors in Fort Smith, leaving hundreds unemployed.
The closing had been announced in 2011, but that did little to lessen the sting. Perhaps that’s because Whirpool’s exit was just the latest in a string of events erasing — at least largely — Fort Smith’s status as a manufacturing hub.
We later were pleased to hear the success stories of the some of the displaced workers, and even more heartened by recent news that Walther Arms Inc. will move to the Chaffee Crossing development and share a campus with Umarex USA. Combined, the companies plan to invest more than $7 million toward expanding the facility and operations over the next five years, and the expansion should create between 70 and 120 jobs over the same period.
Fort Smith also made headlines in 2012 for ongoing fundraising efforts associated with the U.S. Marshals Museum, as well as efforts to deepen the Arkansas River and build a slackwater harbor. All of it makes us wonder if 2012 someday will be viewed as the year Fort Smith began to redefine itself.
6. Student Surge — Seeing record enrollment the last couple of years at the University of Arkansas, developers of multifamily housing rushed to meet the anticipated need for student apartments in Fayetteville.
The university enrolled 24,537 students this fall, up 5.8 percent from the previous year.
New apartment projects targeting the student market include a $26.5 million complex called The Grove at Fayetteville, which opened this summer with 632 beds.
The upscale Sterling Frisco, a $28.5 million project near campus, is pre-leasing for fall 2013. Other projects under construction include The Vue, valued at $25 million, and The Domain at Fayetteville, valued at $22 million. The three developments will add about 1,983 beds to the existing apartment inventory.
Another project, Fayetteville-based Specialized Real Estate Group’s planned development at 555 W. Maple St., hit a snag when the university’s board of trustees voted to acquire most of the 2.96-acre site for a parking lot.
Three more planned projects are apparently on hold, perhaps due to all the competition.
Kathy Deck, director of the UA’s Center for Business and Economic Research, urged multifamily developers eyeing the student population to exercise restraint.
In the Skyline Report real estate survey released in September, Deck said, “Given the history of enrollment growth, we are not going to see enough student population growth to fill all these new apartments together with the existing stock.”
7. Benton County Investment — Of all the land deals in Benton County in 2012, one stood out above the rest.
In March, Little Rock businessman Joe Whisenhunt made a significant investment that will cause ripples in the commercial real estate market for several years.
Whisenhunt, CEO of Whisenhunt Investment Group and one of the state’s wealthiest individuals, paid $19 million — in cash — for 375 acres of developable land along the Interstate 540 corridor.
The transaction was made up of three separate deals involving Other Real Estate Owned in the portfolio of Bank of America.
The acreage encompasses land in the Pinnacle Hills, Pleasant Crossing and The Grove developments, land that once belonged to groups that included Northwest Arkansas developers Gary Brandon, Charles Reaves, Bill Schwyhart and Robert Thornton.
Industry insiders said the transaction sent a clear signal that Whisenhunt, who was a key player in the growth and development of west Little Rock, believes the NWA market is positioned well for growth. And he intends to be a major player.
8. Crystal Bridges Impact — After the Crystal Bridges Museum of American Art opened in late 2011, the economic impact of the $800 million museum was felt throughout 2012.
The museum celebrated its one-year anniversary in November. There were about 600,000 visitors during the first year — more than double the initial projections — for an average of about 11,000 per week.
As visitors flocked to Bentonville to see Alice Walton’s colossal achievement, revenue totals rose in both the hospitality and restaurant sectors.
Revenue from the city’s hospitality tax increased more than 40 percent in 2012.
The effects of the museum were evident in the bustling downtown square, including the ongoing construction of the upscale 21c Museum Hotel, a $28 million property that will open in the first quarter of 2013.
There was also positive news in September when Tyson Foods Inc. gave Crystal Bridges $5 million to establish a research and residency program at the museum.
9. The Chancellor Opens — After years of enduring ups and downs, Fayetteville’s only full-service hotel finally had reason to celebrate on Sept. 14.
The Chancellor Hotel had a grand re-opening, a needed shot in the arm for the city’s downtown area.
The hotel, opened in 1981, is owned by Southwind Hospitality LLC, led by Sam Alley, the chairman and CEO of VCC Construction in Little Rock, and Ike Thrash, principal of Dawn Properties in Mississippi.
They paid $3.8 million for the property in 2011 and then closed it to complete a 10-month project to refurbish and modernize the hotel, with a cost of nearly $16 million.
Both men spoke prior to a ceremonial ribbon cutting, with Fayetteville mayor Lioneld Jordan, University of Arkansas chancellor David Gearhart, Panamanian president (and UA alum) Ricardo Martinelli and Gov. Mike Beebe.
The hotel, previously known as The Cosmopolitan, passed into receivership in December 2010.
The Chancellor offers 207 guest rooms and 15 luxury suites on the top two floors, making it the second-largest property in the area behind only the Embassy Suites in Rogers.
Three of the suites are 1,400 SF or larger, topped by The Chancellor Suite, a 1,800-SF space on the 16th floor with a view of the UA campus.
The re-opening also brought a new restaurant to the downtown area. Union Kitchen + Drinks, owned by Scott Bowman, is on the property’s first floor.
10. Notable Losses — Northwest Arkansas lost a colorful, often controversial figure when former real estate developer Gary Combs died Aug. 11 in a California hospital of cancer-related complications.
Combs, 59, was wanted on a contempt of court warrant at the time of his death. The warrant, issued in July by Washington County circuit judge Kim Smith, stemmed from a foreclosure suit between Combs and First State Bank.
Tom Terminella, a friend and former business partner of Combs, said Combs “was going to do things his way until the end.”
“He told me Kim Smith and the circuit court could kiss his ass,” Terminella said. “He was defiant to the end.”
Combs was instrumental in developing the Interstate 540 corridor with projects like Pinnacle Hills Parkway and the J.B. Hunt Parkway Tower, as well as many apartments and subdivisions throughout Northwest Arkansas.
Other notable passings this year include Ron Goforth, 74, an early proponent of high-tech industry in Northwest Arkansas. He co-founded EquityNet LLC and Virtual Incubation Co., and as a tenured professor at the University of Arkansas, helped found the UA’s Center for Artificial Intelligence and Expert Systems.
Also, retired Wal-Mart Stores Inc. executive Jack Moser died at 80; Fort Smith businessman Earl Q. Shipley died at 73; and Matt Turner, KNWA sports and news anchor from 2003 until July, died at 32.