Little Rock visitors bureau will buy downtown building for $3.35M

The Cromwell Building at 101 S. Spring St. in downtown Little Rock is shown in this July file photo.
The Cromwell Building at 101 S. Spring St. in downtown Little Rock is shown in this July file photo.

Little Rock's Advertising and Promotion Commission members voted 4-3 Tuesday in favor of purchasing the Cromwell Building for $3.35 million.

Commissioners spent more than an hour debating the purchase of the building for the Little Rock Convention and Visitors Bureau. The alternative was to let the visitors bureau remain a tenant of the building at 101 S. Spring St. in downtown Little Rock. Ownership could result in $4.88 million in revenue over a 20-year period, commissioners were told by Hank Kelley of Flake and Kelley Commercial.

Voting in favor of the purchase were Commissioners Rajesh Mehta, Pamela Smith, commission Chairman Capi Peck and Mayor Mark Stodola. Commissioners Warren Simpson, Philip Tappan and City Director Gene Fortson voted against the purchase.

Debate on authorizing the transaction primarily centered on whether the commission, which is supported by tax dollars, should position itself as a landlord.

"I believe in the numbers," the visitors bureau's chief executive officer, Gretchen Hall, said following the meeting. "I believe it's a good long-term investment with a positive return."

Owning the building would generate between $280,738 and $370,505 annually from 2022 until 2036, according to financial analysis provided by Flake and Kelley. Financing the building for five years through the city's short-term financing program would result in an average loss of $511,011.60 per year, or about $2.75 million total, until 2022.

Analysis on the debt service was compiled using a $500,000 down payment and a 2 percent interest rate, although it could be higher depending on state tax law. Interest rates on short-term financing through the city would have to take into consideration the mix of tenants in the building and their tax status.

Currently the visitors bureau leases the fourth floor of the Cromwell Building. Hall told commissioners last month that if the commission did not buy the building, the organization would spend about $4.3 million in rent over the next 20 years starting with its current annual lease rate of $155,000.

"I think we're the Advertising and Promotion Commission, and not the Advertising, Promotion and Real Estate Commission," Simpson said during the meeting. "I just think that we don't really belong in the real estate business. I think we're better off spending the money on exactly what we're supposed to do."

Tappan also expressed concern over the use of tax dollars to purchase the building.

"Where do you draw the line on what those dollars were intended to be?" Tappan asked, adding that the money used for the purchase might be better spent on developing a youth sports complex for the city to draw visitors.

Flake and Kelley's revenue projections are based on the building operating at a 10 percent vacancy rate. It is currently 100 percent occupied.

Purchasing the building would allow the bureau to move its staff under one roof. Moving staff from the Statehouse Convention Center could free up space that would generate an additional $40,000 per year that was not included in the Flake and Kelley analysis, Hall said.

The Bank of England offered $3.35 million for the property in July. That triggered a right-of-first-refusal clause in the lease, giving the commission the opportunity to buy the building. At that time commissioners exercised a 45-day window to determine if it were feasible to own the building.

Bank of England executive Brad Canada said via text message that he was "surprised and disappointed" by the commission's decision to buy the building. On Monday, Canada said the lender was interested in the property for future expansion. Previously he said that the bank might consider expanding outside of downtown or the city of Little Rock if the Cromwell Building were not available.

Business on 08/24/2016

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