Posted 4/8/2013 12:00 am
Updated 11 months ago
Developers hoping to lock up a long-term lease with a state agency might want to study a page from the playbook of Little Rock’s Moses Tucker Real Estate.
The company drew up a winning proposal founded on a rent-neutral lease formula for space in a sustainable project as part of a historical redevelopment.
Adding juice to the deal is the promise of a purchase option that could allow the state to buy the building at 322 Main St., now dubbed Mann On Main.
The purchase option wasn’t formalized as part of the 13-year lease agreements with three state agencies for legal reasons tied to the use of New Market Tax Credits to help fund construction.
Those legal considerations go away after seven years, which opens the door to a sale by Mann Development LLC, a joint venture between Moses Tucker Real Estate and the Doyle Rogers Co.
“The owner-developer made it very clear they would love for the state to buy the building,” said Anne Laidlaw, director of the Arkansas Building Authority. “That was the whole basis for getting into this. The owners assured us that nothing has changed about their intention to provide us with a purchase option.”
A combination of tax credits (New Market and Historic) is providing about $7.3 million in the $19.6 million funding equation to convert the former Blass Department Store into the Mann on Main as well as redeveloping the adjoining 310 Main St. annex building. A $12.3 million loan from IberiaBank completes the financing.
The option price for the project has yet to be determined.
“It’s based on us agreeing on an appraiser who will prepare an appraisal, and then we will negotiate from there,” Laidlaw said.
The bell cow tenant making the Mann on Main redevelopment a possibility is the Office of Child Support Enforcement, which has been housed in Arkla Plaza since July 2000.
The agency with its 230-member staff and 55,000-SF block of office space was put in play when state officials learned Arkla Plaza was marked for future teardown.
That notification came from the building’s landlord, Moses Tucker Real Estate, which said it would relocate OCSE to new quarters.
“Moses Tucker approached us that they had other ideas for the Arkla building and that we would need to find new space, and they were willing to help us do that,” said Dan McDonald, administrator of the state Office of Child Support Enforcement.
Envious leasing agents and developers wish they could have made a pitch with a competing proposal. But the project followed a path that didn’t include an open request for proposals.
“When the state is going to be a future owner, then the RFP process is not required,” Laidlaw said. “We pretty much get to handpick those. It’s far more subjective. It’s what the private sector is willing to do for us.”
Moses Tucker entered the ownership picture at Arkla Plaza in October 2005 when the project was purchased from the Arkansas Teacher Retirement System, and the firm soon had an eye toward redeveloping the property.
“I think 2009 was initially their schedule to begin the redevelopment of the property, but of course, all the stars did not line up, so we extended the lease for another two years,” Laidlaw said.
“During that two-year period, a number of maintenance issues began mounting up, and it was clear that the building was in much need of some repairs. So, we re-negotiated the lease in late 2010 for a number of improvements and repairs to be completed and extended the term until June 30, 2013.”
Along the way, different options were explored for housing OCSE, including new construction on property controlled by Moses Tucker. However, the numbers for developing a new office building didn’t work from the pricing standpoint.
The focus shifted to redeveloping an existing building, the former flagship of the Blass Department Store chain, a property owned by Doyle Rogers since December 1999. Rogers died in February.
Moses Tucker gave verbal notice in mid-2011 of its intention to relocate OCSE from Arkla Plaza as soon as feasible accommodations could be secured. That was when the Blass Building redevelopment proposal (later renamed Mann On Main) was presented to state officials.
Building a 300-slot parking garage on adjoining property would provide the dedicated parking to support state employees. Moses Tucker joined the ownership of the former Blass property in June 2012 after the needed tax credit financing was squared away.
The Mann On Main deal was examined by the Arkansas Department of Finance & Administration as part of the review process.
“The project is a furtherance of what people want to see happen in downtown Little Rock and along Main Street,” said Richard Weiss, director of DF&A. “For that, it sounds like a good deal that meets several needs.”
The Arkansas State Board of Pharmacy, which needed more space, was the second state tenant to sign aboard the Mann on Main project.
“We didn’t have state-owned space for them, and we wanted to relocate them into sustainable space,” Laidlaw said. “They liked it and they decided to do it. The Crime Information Center came out of the blue.”
The CIC was in three different spaces in the Big Mac Building on the Capitol grounds, and the Mann On Main project offered a chance to consolidate and provide all its staffers with equitable space.
Laidlaw is under a green mandate to reduce utility consumption for state agencies, and that was a consideration in the Mann on Main project.
“We’ve already met our 20 percent reduction goal (by 2014), but we’ll need to lower it to 30 percent by 2017,” she said. “The money we’re saving is paying for more and more improvements throughout our portfolio.”
Laidlaw expects the Mann on Main project will follow a lease-to-own track similar to the former Dillard’s headquarters at 900 W. Capitol Ave. The 120,000-SF property, acquired by the state for $18.5 million in March 2010 has gradually improved to an Energy Star rating of 90.
“Based on the systems and construction, the Mann on Main project should have an Energy Star rating of 75 when it starts operating,” Laidlaw said. “We will encourage the owner to tweak that. We found that you have to work very closely with a control specialist and operating team to really maximize the efficiencies.”
Blass Building Became Mann On Main
The historic Blass Building in downtown Little Rock was going to retain its name after undergoing redevelopment for state office space. But diplomatic considerations led to a name change.
Members of the Blass family didn’t want their name associated with the property they hadn’t owned for years and a project that didn’t involve them.
Now, the seven-story building bears the name of George Mann, the famed architect who designed it as well as the State Capitol.