The FBI has been asking questions about the planned sale of 6,300 acres by the University of Arkansas System Division of Agriculture, a deal that has drawn allegations that bid manipulation produced a lower sale price and a higher broker commission.
State Sen. Ronald Caldwell, R-Wynne, a critic of the sale of the recreational land in his district in St. Francis County, told Arkansas Business last week that the FBI interviewed him for about two and half hours in August. He declined to comment further on the FBI’s questions. “I wouldn’t want to say anything that would compromise that investigation,” he said.
Caldwell said he didn’t initiate a complaint, and an FBI spokesman said the bureau doesn’t confirm or deny any investigation.
An agreement for the timber and farmland to be sold to Lobo Farms of Fisher (Poinsett County) undervalued the land, Caldwell believes. And the firm that won a bid to broker the sale, Lile Real Estate Inc. of Little Rock, appears to have been coached on how to shape its proposal, according to emails obtained by Arkansas Business.
Internal emails also indicate that a contract with Lile Real Estate had been drawn up before a request for proposals was issued.
The Division of Agriculture said the transaction followed UA System policy and Arkansas law.
Robert Eason, principal broker and co-owner of Mossy Oak Properties Delta Land Management Co. of North Little Rock, said the University of Arkansas encouraged his firm to bid on the brokerage services. “But [it] didn’t allude to the fact that they had already pretty well selected somebody,” he said.
Mark Cochran, vice president for agriculture for the UA System, said the division has not been contacted by the FBI. He said he reached out to the FBI to offer help in any investigation, but had received no questions from the agency.
Cochran also denied that Lile Real Estate was coached in the RFP process, despite emails instructing owner Gar Lile on what to include in his response to the RFP.
Sen. Caldwell’s “issue,” he said, “is how quietly it was handled, got through the process without any of the public knowing that it was going on. There were no public hearings.”
The only public notice came when the UA System board of trustees approved the proposed sale in March, Caldwell said. “I didn’t find out about the sale until the last Friday in July. And [I] started doing some research on it and it just didn’t pass the smell test.”
The system’s trustees approved the sale on March 11, contingent on congressional approval, which is required under the terms of the contract by which the UA System acquired the land from the federal government 60 years ago. The purchase price was $16.5 million, plus the buyers agreed to donate $1 million to endow a program in waterfowl and wetlands conservation.
Mark Saalfield “Field” Norris Jr., the president of Lobo Farms, also agreed in February to increase the purchase price if an appraised value came in higher, which it did — slightly. Norris is a financial adviser for Raymond James & Associates Inc.’s Memphis office. The appraisal completed last month Lightle Appraisal Co. of Searcy listed the property value at $17.64 million.
“Neither Arkansas law or federal law require public hearings or notices before selling real estate held by the Board of Trustees,” the Division of Agriculture said in a list of “frequently asked questions” posted on its website in response to questions about the proposed transaction.
But Arkansas law does require competitive bidding for government contracts like the brokerage agreement with Lile Real Estate. Mossy Oak, which unsuccessfully bid against Lile, has raised questions about the RFP process and about the sale price, which it, like Caldwell, believes should have been higher.
The acreage could have gone for $20 million to $22 million or even more, Eason said. He said he had three groups of potential buyers who wanted to look at the property late last year but couldn’t get a showing or a list price for the property.
“I definitely have some concerns,” said Eason, whose bid included a commission of 4% as opposed to Lile Real Estate’s 6%. “It seems to have been handled completely wrong the whole way through.”
At $17.6 million, including the endowment, the additional 2 percentage points represent $352,000 in additional commission to Lile Real Estate.
State Sen. Caldwell said he will introduce legislation in the next session to use $20 million from the general fund to buy the land, plus an additional 1,100 acres, from the UA System and make it a permanent public wildlife management area. “My interest in the whole project is to keep the land in public domain for public access,” he said.
Lobo Farms said in a statement to Arkansas Business that it’s willing to work with the state to give it an opportunity to see if it’s willing and able to buy the land from the university. “If that doesn’t happen, the proposed buyers stand ready to proceed with purchase and partner with the State to make the property a world class destination for outdoor activity and research,” said its attorney, Justin Allen of Wright Lindsey Jennings of Little Rock.
Arkansas Business has reviewed hundreds of emails and documents, some of which were provided by the UA System under the state Freedom of Information Act and some of which were provided by other sources.
The Division of Agriculture had been trying to sell some of its nearly 12,000-acre Pine Tree Research Station property for years, Cochran said. It bought the land from the U.S. government in 1960.
While some of the land was being used for research, the rest was being underused, Cochran said. In 1999, the division signed a lease agreement with the Arkansas Game & Fish Commission that allowed for some public access for hunting and fishing on the property.
He said the plan was to sell part of the land and use $5 million of the proceeds to help pay for the Northeast Rice Research & Extension Center being built south of Jonesboro. Cochran said the division also wanted to spend $6 million on its programs in smart farming and precision agriculture. Other proceeds would be used to help manage other properties across the state, he said.
He said the division first approached Game & Fish to buy the land, but the commission didn’t have the money. Other talks involved the Arkansas Forestry Commission and the Nature Conservancy, but no sale resulted.
“We decided that we would go through a state procurement process and get a broker,” he told Arkansas Business.
However, emails show that the division was working with Lile Real Estate by June 2019, months before the RFP was issued on Sept. 19, 2019.
On June 13, 2019, Gar Lile sent an email on plans to market the property to Nathan McKinney, assistant director of the Arkansas Agricultural Experiment Station, the research arm of the Division of Agriculture. “After consideration and thought from our site meeting, and discussion. [sic] Our thought is to work on the project from both angles we discussed in the meeting,” Lile said.
One of those “angles” would keep the property intact and managed in conjunction with the Game & Fish Commission while at the same time pursuing a private sale. “If you are agreeable to this approach we would have two listing agreements,” Lile wrote.
McKinney replied that he had “run your ideas past my bosses and they like the approach. Two listing agreements sounds a little confusing, so I tried to hybridize the plan onto one agreement. See the attached DRAFT listing.”
On Aug. 6, 2019, Lile emailed McKinney to say the listing agreement had been formalized: “We utilized your marked up version which was perfect.”
McKinney requested documents from colleagues within the university and referred to Lile as “our real estate broker.”
But when the proposed listing agreement went for legal review the following week, Patrick Hollingsworth, associate general counsel for the UA System, questioned the contract. “I am assuming that this agreement was procured through an RFP, or through an appropriate sole source justification,” Hollingsworth said in an Aug. 13, 2019, memo to Cochran.
It had not been.
McKinney emailed Lile the next day. “The most surprising thing is that [sic] must justify your services through a Request for Proposals. … I will got [sic] to work on that and resolve it quickly.”
McKinney apologized and added, “Don’t spend any time on this project until I get the RFP mess behind us.” Lile responded that the RFP requirement was “not a shocker as we see that in big agencies and the feds.”
On Sept. 19, 2019, the University of Arkansas issued its request for proposals for the brokerage services to sell and solicit offers to buy part of the Pine Tree Experiment Station. Through email, McKinney forwarded the RFP to Lile.
“Just to make sure you got this,” McKinney wrote on Sept. 20. “I think documenting the sales you have had with forest/recreational land and especially with public/state agencies is key information. I also believe the narrative regarding a simultaneous pursuit of gift and sales arrangements is important to document.” Lile wrote back the next day and thanked McKinney “very much for providing this, we will work to get the proposal back to you as instructed.”
Lile told Arkansas Business last week that he wasn’t coached on the RFP.
Eason, the competing bidder with Mossy Oak, said the University of Arkansas reached out to him and encouraged his firm to bid on the brokerage services. “But [it] didn’t allude to the fact that they had already pretty well selected somebody,” he said, nor did Mossy Oak receive any advice on crafting its bid.
McKinney “didn’t tell us anything … and didn’t provide us anything besides a map,” Eason said.
Cochran, the VP for agriculture, disputed the idea of favoritism in the RFP process or that Lile was coached. “I don’t think that there were any assurances in August that Mr. Lile would have been given the contract. I think there were exploratory discussions of it,” he said.
Cochran said four companies were contacted to make sure they’d seen the RFP. “We were available to answer questions that were associated with their application in pursuit of the RFP,” he said. Cochran also said McKinney made himself available to answer questions.
“We agreed to meet with anybody that was interested in making an application for a tour of the facilities,” Cochran said, adding that representatives from Mossy Oak toured the property.
In an email to Lile, McKinney said that Lile was welcome to make the trip to Pine Tree for the showing.
“But I don’t have any additional information to share with you,” McKinney wrote on Sept. 20, 2019. “So I wouldn’t make the trip to Pine Tree merely to see what you have seen before.”
McKinney, who had been discussing a contract with Lile for months before the RFP, was one of the five people on the panel that scored the proposals. In an Oct. 17 disclosure form, McKinney wrote that he “was team chair and I spoke with and met with both respondents.”
Cochran said the other four members of the panel didn’t know either company. On Oct. 30, the UA announced that Lile Real Estate had won the contract.
About a week later, Eason asked McKinney in an email if the property was for sale because Lile Real Estate said it was trying to find a donor to make a donation for the property.
“I have 3 parties that want to look at the place,” Eason wrote McKinney on Nov. 7. “I do not want to waste anyone’s time here and just need to know from you that it is for sale if the right deal is presented (with the understanding of the congressional approval.)”
McKinney wrote back and said the property was for sale, if a donor makes an appropriate donation and would like to keep the land in the public domain.
“I encourage you to let the Lile firm know you have interested buyers and ask for appointments to show the property after we arrive on a price to represent to those buyers,” McKinney said.
Eason said he never could show the property and was surprised that a list price wasn’t available, because he had prices listed in his RFP (from $2,350 to $3,500 an acre, depending on the land use) and assumed that Lile did too.
Lile has a different version of the events. “As soon as we got the listing we called Mossy Oak and told them that we were doing our research,” Lile said, and in the next six weeks it would have an offering brochure.
He said that Mossy Oak’s clients “never came forward and nothing materialized from it.”
Setting the Price
Around Christmas, Lile reported that he had an offer on the property from Lobo Farms LLC. McKinney described the LLC as “a group of investors who have lots of resources and have been involved in big transactions before.”
By February, both sides had settled on $16.5 million for the land plus a $1 million donation for an endowment. The price increased after Lightle Appraisal Co. submitted its appraisal last month.
Lile said he did market research using comparable sales to determine the price of the land.
If an appraisal is done first, “that sets a ceiling in a buyer’s eye. A buyer doesn’t want to pay an appraised value or over an appraised value.”
In a typical real estate transaction, a buyer would have the appraisal done before the property is under contract — “that way he knows whether he’s getting a good deal or not.”
Lile also disagreed with Eason’s suggestion that the property could sell for between $20 million or more. “I don’t know what he’s basing that off of,” Lile said.
Cochran said the board of trustees’ standard for selling land is that “it needed to sell this property at appraised value or higher.” Cochran said the transaction went through the proper process, like other UA System land transactions.
He said the division wanted the funding to start research at the rice station. With the proceeds from the land sale, “we could have a bigger impact on Arkansas, and the Arkansas agriculture and, in particular, the rice industry,” Cochran said.