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Retail Failures at UCA’s Donaghey Hall Offer ‘Lesson to Learn From’Lock Icon

7 min read

Four small retailers that took a chance on the University of Central Arkansas’ first mixed-use property have closed their doors. The beneficiary of that “lesson to learn from” will be food service giant Aramark, which will have advantages the first tenants of Donaghey Hall in Conway didn’t have:

  • Rent waived in exchange for a share of revenue;
  • Reimbursement for all of its build-out expenses; and
  • The ability to accept student meal tickets as payment.

UCA and some of the original tenants disagree on what led to their failure.

Tenants cited problems like build-out costs, a lack of marketing and inattention to issues with the building. The university said that the retailers’ prices were too high and their hours of operation too limited.

But one of the former tenants told Arkansas Business that having the same deal as Aramark, which had revenue of $14.6 billion last year, would have made a “huge difference.”

“That’s the exact plan that we presented to UCA, that we wanted to do, but they refused to allow us to do that. That setup would have been perfect for us. It would have made a world of difference,” said the retailer, who asked for anonymity for fear of retaliation by UCA.

The university denied discussions of that nature, but both sides were clearly too optimistic. “The initial concept was modeled after similar projects on other campuses in the state and the region,” UCA Chief of Staff Kelley Erstine said. “We liked the idea of locally owned businesses with the goal to attract more members of the community.”

The 67,500-SF, four-story building at 242 S. Donaghey Ave. has 13,194 SF of commercial space at street level and housing for 165 upperclassmen on the top three floors. Despite the business failures, UCA said the $16.3 million hall is a success because the student housing has been fully occupied since the project opened in August 2016.

The university’s new plan for the commercial space “screams student-focus,” Erstine told Arkansas Business.

That plan includes opening a university welcome center in the largest storefront and using another now-vacant space for meetings and events.

A Difference of Opinion
Five businesses once occupied the ground floor: Mosaique Bistro & Grill, Blue Sail Coffee, Uncle T’s Deli-Market, Trek Bicycle and Marble Slab Creamery/Great American Cookies. All but Marble Slab Creamery/Great American Cookies are gone, and it has contracted with Aramark, UCA’s food service vendor, in order to accept meal plan dollars.

UCA officials have speculated that the failed shops were too pricey for student budgets and didn’t stay open into the evening, when students like to go out. But two of the retailers — both successful at other locations — say UCA shares the blame.

“I’m not going to have any hard feelings toward UCA because I’m an entrepreneur and I take full responsibility, but it certainly wasn’t a one-sided failure,” Blue Sail owner Kyle Tabor said.

He said he would “use the experience as a lesson to learn from,” but didn’t agree that prices or hours caused the downfall. Instead, he said, surprisingly high buildout costs — $225,000 for plumbing, concrete work, electrical work, the HVAC system and more — hurt his bottom line and affected the other retailers.

UCA reimbursed the original tenants $33 per SF for build-out expenses. For Blue Sail, which occupied a little over 1,500 SF, that was less than $50,000.

“We took off out of the gate in bad financial shape because of that,” he said, a sentiment echoed by Bené Woods, manager of the Uncle T’s, which occupied the largest storefront at Donaghey Hall (3,722 SF).

Aramark will install a Tex-Mex restaurant, Twisted Taco, in the 3,500 SF that Mosaique formerly occupied, and Einstein Bros. Bagels in the former Blue Sail space. It expects to spend about $575,000 to reconfigure those spaces, but UCA will reimburse all of that expense by forgiving Aramark’s usual contribution to a renovation fund through the end of its existing contract in 2022.

Tabor complained that potential customers in Conway didn’t understand that the businesses in Donaghey Hall weren’t just for students, and Woods cited ineffective marketing of the development as the main reason his business failed.

Woods also said UCA was not willing to adjust the rent — $15 per year per SF — for slow times, like the summer months when students were on break, but that’s a problem that will be solved by Aramark’s revenue-sharing deal.

Erstine said UCA promoted Donaghey Hall’s retail tenants through emails, social media, flyers and paid advertising, and helped organize events like a block party and a car show outside the building. The university also used resources to pitch stories to local news outlets and to produce videos about the building.

Ultimately, expected traffic from outside the university community never materialized.

“We think it’s a great location, but, to some extent, people who live in Conway and who live outside this particular area, I think it was a heavy lift to draw them here,” Erstine said.

Student-Centered Offerings
The University of Central Arkansas says the new tenant lineup for Donaghey Hall makes the building more student-centered than before.

One example? When the university surveyed students before Donaghey Hall opened, a Tex-Mex restaurant topped their list of desires.

The Twisted Taco restaurant that Aramark will open in the fall will be the first in Arkansas for a chain that has locations in Georgia, South Carolina, Tennessee, Kentucky, New York and Pennsylvania — mostly on university campuses. The Donaghey Hall location will also apply for a permit to serve beer and wine.

Einstein Bros. Bagels is student-tested too, as Aramark already operates a location in the student center on UCA’s campus.

Donaghey Hall is also student-focused in another way, offering upperclassmen modern, apartment-like housing for which they pay a premium.

Students can expect to spend $2,150 a semester for a shared bedroom or $3,230 for a private bedroom at Donaghey Hall in the 2017-18 school year, about 20 percent more than in the least expensive on-campus housing.

UCA officials also hope that a new, more accessible and aesthetically pleasing welcome center in Donaghey Hall will elevate the school’s recruiting efforts with a “one-stop shop concept” for admissions and housing.

Tours of the campus will start from the center, and UCA Chief of Staff Kelley Erstine said major advantages it will have over the university’s current center in the middle of campus at Wingo Hall are easy accessibility on Donaghey Avenue and readily available parking. He added that the UCA Makerspace, which survived the mass exodus of first-floor tenants, could help attract new students to the campus.

The makerspace is operated by The Conductor, a public-private initiative of UCA, the Central Arkansas Venture Team and Startup Junkie Consulting of Fayetteville. The makerspace offers free classes and events to students, faculty, staff and the community.

Learning Experience
In addition to the high cost of opening and unexpectedly low traffic, Woods said Uncle T’s experienced sewer issues for most of the year it leased space. Customers walked out or bought to-go meals because of the smell, he said, and the issue wasn’t fixed until December.

UCA’s inexperience as a retail landlord was apparent, Tabor said. The original tenants were unsure about their contact at UCA when they encountered problems with the building. A student intern assigned to act as liaison was likable and a hard worker, Tabor said, but lacked retail development experience.

“There was a lot of poor setup on the front end,” he said.

Like Tabor, Erstine said Donaghey Hall’s first two years were a learning experience.

“All of us at UCA will always be appreciative of our initial Donaghey tenants and of their desire early on in the planning process to being a part of something that was deemed to be quite special for our campus and community,” Erstine wrote in an email. “We all had high hopes that each one of them would have been quite successful and profitable in their business.

“However, we learned, especially as it related to our students, there was a greater attraction to eating establishments where they could utilize their customized meal plans. In this new endeavor, already having an existing relationship and agreement with Aramark, we will simply be expanding upon that.”

Twisted Taco and Einstein Bros. will accept students’ meal plan dollars, and UCA said that’s the main reason it expects them to be successful. Every student who lives on the UCA campus must purchase meal plans, which range from $675 to $1,620 per semester. Students can also purchase dining dollars directly from Aramark.

Einstein Bros. is expected to reopen in the Blue Sail space over the summer, and Twisted Taco and the welcome center, which is moving into Uncle T’s space, may open as soon as this fall.

The 2,150 SF formerly occupied by Trek Bicycle will be used by UCA for meetings and events. The university is considering allowing the public to use that space and renting it out to the public.

Meanwhile, at Hendrix
The retail failures at Donaghey Hall stand in contrast to a similar project at another of Conway’s colleges, the Village at Hendrix.

The Village, which opened eight years ago, leases 37,000 SF to businesses. Donaghey Hall offers 13,194 SF for commercial tenants.

The Village has 13 tenants now and just one vacant space. All of the current tenants were the first to occupy their spaces, according to Shawn Mathis, associate vice president for business and finance/controller for Hendrix College.

The shops at the Village do not accept Hendrix meal plan dollars, but students can deposit money into their dining accounts and use that money at the Panera Bread and Zaza there.

Mathis said he is the primary contact for the tenants and interacts with them regularly. There is also a Village at Hendrix Assembly that oversees activities.

The Village has 59 single-family homes, a total of 29 units at the Row House at Hendrix Village and McKennon Apartments, also known as Village Flats, and 184 beds above the commercial spaces.

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