Taconic Capital Advisors Ltd. has built a reputation investing in big, troubled commercial real estate properties during the past six years. The May acquisition of downtown Little Rock’s Regions Center is among the most recent additions to the New York group’s growing portfolio.
Taconic emerged with the keys to one of the most prominent properties in Arkansas after the 30-story building operated under the shadow of bankruptcy for more than half a decade.
William Callahan, senior vice president and principal broker for the Little Rock office of CBRE Group, views the effort to restore the fortunes of the Regions Center as a 2.5-year process.
That will entail Taconic Capital spending millions of dollars in bankruptcy-delayed updates to position the 547,000-SF office tower as a top-notch destination.
“They knew exactly what was needed,” Callahan said. “They know the potential with the way the building is structured.
“We’re not here to be the cheap alternative.”
CBRE Group of Dallas came to the Regions Center as a tenant in 2016 and took over management and leasing duties after Taconic entered the ownership picture.
Rebuilding the rent roll will include refilling space in flux before the bankruptcy sale.
The 25th and 26th floors are opening up as a long-time tenant, the accounting firm originally known as BKD, prepares to migrate three blocks away to the Stephens Building. (BKD is now called Forvis after its merger with Dixon Hughes Goodman LLP.)
The law firm of Munson Rowlett Moore & Boone is preparing to vacate the 19th floor and set up shop in Building 1 on the former Alltel campus in the Riverdale area.
Taking into account these moves, Callahan estimates the Regions Center occupancy at about 60%.
He’s optimistic about attracting office tenants new to the market to help refill the building, citing interest in landmark downtown locations with covered parking.
Returning the one-time home of Jacques & Suzanne/the Little Rock Club to a drinks-and-dining destination on the top floor is among the priorities.
“It’s the absolute best view in Little Rock, bar none,” Callahan said. “There’s a lot of pretty cool things on the drawing board. The menu has got to have the right ingredients. We’re working on it. In the relatively near future, there will be some announcements.”
Seeing renewed financial commitment to the high-rise office building is considered a big step in gaining redevelopment momentum for the heart of Little Rock.
“It’s an important piece of getting our downtown going,” said Dan Andrews, CEO of Little Rock’s Tempus Realty Partners. “Hopefully, they will pull it off.”
The local private real estate investment partnership wasn’t among the 40 would-be bidders who signed confidentiality agreements with Chicago’s Jones Lang Lasalle Inc. to examine the property and its financials before this year’s sale.
In the end, JLL’s national marketing effort to solicit offers on behalf of the bankruptcy trustee generated only five written bids.
The effort to drum up interest in the Regions Center by the commercial real estate services giant was a checklist item in bankruptcy protocol but ultimately amounted to window dressing.
Taconic Capital Advisors was already in the driver’s seat for control of the Little Rock office tower.
The global institutional investment firm gained that position in June 2017, six months after the office project was steered into U.S. Bankruptcy Court in Wilmington, Delaware.
Taconic entered the picture by acquiring the delinquent debt secured by the Regions Center. With that move, Taconic stepped to the front of the line of creditors with claims against the amalgamation of owners put together by Triple Net Properties LLC of Santa Ana, California.
That secured claim purchased by Taconic, which totaled more than $29.8 million in December 2016 when the bankruptcy case began, had grown to more than $44.2 million by July 2021.
The change of ownership was accomplished with a credit bid of $31 million and no exchange of money by Taconic. But the actual purchase of the office project and its adjoining six-story parking deck can be traced back to the undisclosed price paid for the project’s debt five years ago.
“These guys own some trophy buildings,” Callahan said of Taconic. “This is right down their fairway.”
In a news release, Taconic described its goals for the downtown property.
“We really like the proven stability of the submarket and the very limited supply that’s been added here for the past 30 years, which in our minds provides an extremely rare opportunity to own what can easily be the best building in the market with the right attention and strategic investment into the building,” Alex Fleming, director of asset management for Taconic, said in the June 1 announcement of the purchase.
“Our goal is to do just that — be the premium space offering with the most attentive level of customer service to our tenants. We’re ready to hit the ground running to realize that potential as soon as possible.”
While recruiting new tenants to flesh out the rent roll is important, Fleming noted in Taconic’s announcement that tenant retention is a point of emphasis.
“Our first priority is making sure that our in-place tenants are happy and appreciated, so we’re looking forward to hearing how we can work with them to make this a place that they’re proud to call home for many years to come,” he said.
“They, as well as many local brokers and vendors, have been very patient during the trailing years of inactivity and challenged ownership, and we intend to make up for lost time so that their patience is rewarded.”
During the past six years, the New York hedge fund has expanded its bargain-hunting forays in search of financially distressed properties.
The timing of Taconic’s Regions Center investment coincides with its launch of a series of “commercial real estate dislocation funds” distinguished by sequential roman numerals.
The Park Avenue-domiciled venture with offices in London and Hong Kong started its first such fund in 2016. That $350 million pool was followed by a $400 million offering in 2018 and a $500 million fund in 2021.
During the past few years, Taconic Capital Advisors has emerged as a player in large real estate acquisitions around the country.
In the Dallas metro, the company made news for its 2018 purchase of the 13-story International Plaza I and 15-story International Plaza II. At the time, the two empty buildings were portrayed as housing the largest block of vacant office space in north Texas: 757,000 SF.
The dwindling occupancy of the building’s namesake tenant, Regions Bank, has led to a soft rebranding of the office tower as 400 W. Capitol.
Regions Bank has downsized its floor plan in a big way since acquiring the property in 1998 as part of its $2.7 billion stock-swap acquisition of First Commercial Corp.
Once occupying multiple floors, the bank has receded to space on the second floor after its last round of consolidation in 2020.
The waning presence of Regions mixed with tenant turnover has increased the likelihood of naming rights coming into play in the future. For now, Regions remains as the lone name gracing the building despite the bank’s reduced footprint.
“They have some contractual rights to maintain signage on the building and the building nomenclature,” Callahan said of Regions.
But another name could join the Little Rock skyline atop the Regions Center if a large tenant were to move into the building.
“We do have rights to remove signage,” Callahan said. “There’s a trigger that allows us to have additional signage for another tenant.”
That would result in two sides of the tower sporting a new corporate moniker while the others display Regions and its green triangle logo.