by Luke Jones
Posted 10/28/2013 12:00 am
Updated 11 months ago
The saga of Little Rock’s embattled Henry Corp. and its subsidiaries seems to be in its epilogue, with the company’s various managed properties falling under foreclosures and being scooped up by banks and other property management groups.
The company’s website is gone, the office lines are disconnected and founder David Henry is unreachable. But what happened to his company can be gleaned through the stories told by those who lived near his properties and the trail of lawsuits left in his wake.
Perhaps the most notorious example of a Henry property gone bad is the Valley Heights complex at 6900 Cantrell Road near the Kingwood neighborhood.
In 2002, a year after his company started, Henry, now 50, purchased the 126-unit complex from Robert Wilson Sr., who had developed the complex in 1970. Henry paid $5.35 million for it along with the 56-unit Windsor Arms project at 1601 N. Bryant St. In 2004, Twin City Bank of North Little Rock provided Henry a 16-year loan of about $4.5 million to refinance Valley Heights.
In 2007, he added 72 units to the complex, backed by a $4.3 million bond issue through the Pulaski County Public Facilities board. The bonds were secured by a $4.3 million letter of credit from Regions Bank of Birmingham, Ala.
Valley Heights was already known for crime, but the situation escalated after the apartments came under Henry’s management.
In 2010, a group of Kingwood residents started a petition railing against the constant noise coming from the apartments.
“This had nothing to do with the neighborhood association,” said Paul Remmel, vice president of the Kingwood Neighborhood Association, a native of Little Rock and a six-year Kingwood resident. The residents, he said, “just took up their own initiative.”
The group took the petition to some city officials, and soon a meeting was arranged with other residents about the apartments.
“It was a lively, open discussion,” Remmel said. “Henry Management was there. David Henry was there, as well as the city director and city manager. That was the first of a series of meetings. We got some face time with David Henry and a lot of suggestions were thrown back and forth. At least once a year a similar meeting would come about.”
Remmel said Henry deserved credit for walking into a hornet’s nest.
“He was receptive to some ideas,” Remmel said. “He did take action in the form of changing pool hours and repairing some fence lines, stuff like that.”
But Remmel said ultimately Henry didn’t address the root cause of the problem: the apartments’ long history of harboring a criminal element.
“When I was young, I remember those apartments under the name of English Village,” Remmel said. “I actually had siblings who lived there at that time, and it was a very nice apartment complex back then.”
But by 2010, it was a different story. Rocks thrown at houses. Gunfire. Sirens at all hours.
“There were many instances, anecdotal and recorded, of petty theft in the neighborhood,” Remmel said. “The perpetrators would sneak back through the fence line into the Valley Heights complex. That doesn’t mean, necessarily, that they were tenants there, but that was kind of a conduit for that kind of activity.”
Remmel said he’d watched “kids” from the apartments kick down the privacy fence separating the apartments from Kingwood, steal small items from Kingwood homes and run back through the fence.
“I’ve witnessed young children playing in the pool area, unattended, when the pool was closed,” he said. “I live close enough to where I could hear adults screaming and cursing out at the pool.”
Part of the issue, it seemed, was that Henry had started accepting more Section 8 vouchers. The property had previously allowed low-income tenants whose rent was subsidized by the federal Section 8 program, but the increased number of them also seemed to come with increased crime.
“And there was such a high density of Section 8 housing right in that one complex,” Remmel said. “That was the issue.”
Henry had offered the neighborhood association some good suggestions for improvement, Remmel said. Unfortunately, they didn’t come to fruition.
“But by the time all of them jelled, he was, I think, approaching bankruptcy,” Remmel said. “A lot of the changes just were not feasible, financially, for him.”
Henry Corp. was indeed approaching terminal failure. Problems for the company were starting to manifest as early as July 2010, when Henry revealed to the Kingwood Neighborhood Association that he had fired the manager of the Valley Heights apartments for violating rent collection policies and failing to forward the neighborhood complaints to the proper staff managers.
“Early on in these neighborhood meetings he brought his entire staff,” Remmel said. “But at a follow-up meeting, he came back and revealed he had fired his property manager, and when he had done so, the rest of his staff just walked out and quit. He had to scramble to get the people to man his apartment complex.”
Then, in 2011, Henry discovered that he had lost thousands of dollars to embezzlement from his controller and general manager, Samuel and Landan Mitchell, whom he hired in 2009.
Henry told Arkansas Business in 2011 that he interviewed Samuel and performed a criminal background check, which came up clean.
A few months later, Landan said his family business, a car dealership, was being shut down, so he too needed a job.
Henry told him he wouldn’t be able to pay Landan what he was expecting, but he could hire him.
“I started out with a criminal background check,” Henry said. “Nothing showed up. Both of them were clean.”
“I found that very ironic,” Remmel said. “In some of our previous neighborhood meetings, we were hitting pretty hard on David about his lack of background checks [for tenants]. He talked about how they were adequate and he had full confidence in them.”
He deemed that ironic because it turned out that one of the cousins had a history of criminal behavior.
The Mitchells were fired and later convicted of crimes, but Henry Corp. apparently never recovered from the damage.
Henry said after he fired the Mitchells he hired a CPA with 20 years of experience.
“He’s now my controller,” Henry said in 2011. “The saving grace, the silver lining, is I’ve got awesome talent now on board. I’m enthusiastic and excited about our future.”
His enthusiasm proved to be unjustified.
Between 2011 and 2013, Henry’s properties were slammed with lawsuits.
The city of Little Rock brought a lawsuit seeking to have Valley Heights declared a nuisance. His Plaza Towers Apartments experienced both fire and flooding.
St. John’s Apartments in southwest Little Rock was sued by Regions Bank, a trustee in the loan agreement for the complex, for mismanagement.
The suit said Henry had made an urgent call to some of his partners in August 2012 for $63,000 just to keep some basic services running in the apartments.
In October 2012, Regions filed foreclosure suits on Valley Heights and the Arrington Apartments at 6301 Camp Robinson Road in North Little Rock. In March, Centennial Bank, successor of Twin City Bank, recovered the original portion of Valley Heights in a $2 million foreclosure sale. In August, Regions recovered the 2007 expansion in a $3 million foreclosure sale.
Since then, evidence of what used to be Henry Corp. has all but disappeared.
So what’s happened at Valley Heights in the meantime?
In March, Henry’s brother-in-law John Bailey, head of BSR Trust of Little Rock, paid $4.4 million for Centennial’s portion of the apartments. (Bailey’s sister, Madeline, is now divorced from Henry.)
The expansion is still owned by Regions.
Remmel said this summer, since Bailey’s purchase of the complex, has been “great,” but mainly because the pool is closed and there are fewer tenants.
Bailey is renovating the part of the complex that it owns, Remmel said, and the company has evicted a large number of its tenants, leaving between 30 and 40, and many of the buildings are boarded up for the renovation process.
“I give them credit because they’ve been very proactive, reaching out to the neighborhood,” Remmel said. “They’ve had several meetings with us and seem very cooperative.”
Bailey’s idea, Remmel said, is to bring the apartments up to “market value.”
Remmel said the neighborhood association is “cautiously optimistic” about its future relationship with Valley Heights. John Bailey did not return several calls seeking comment.
“The big elephant in the room right now is the fact that this place has two owners,” Remmel said.
“They have what they call a cross-easement, meaning that tenants from two different complexes could share parking lots and all that. It’s kind of strange that Bailey is trying to bring his side up to market value while the side owned by Regions is still subsidized housing. What their intent is is not clear.”
George Waldon contributed to this story.