Back in October 2017, I wrote a story about a New Hampshire-based investor named Tom Reilley. He's the man behind the Highland Pellets plant at Pine Bluff, a $229 million facility that manufactures wood pellets for the European market.
Reilley is a former senior managing director for the investment banking firm Bear Stearns. He moved to London in 2002 to establish a wealth management division for the firm, then left Bear Stearns in 2007 to open a private equity company.
When Reilley decided to put together a partnership to supply wood pellets needed to generate electricity in Europe, he knew nothing about Arkansas. His goal was to find a place with a good transportation infrastructure, competitive utility rates and lots of timber within a 100-mile radius of the plant.
Along the way, Reilley fell in love with Pine Bluff and its people. I wrote at the time about how he had acquired the former Hotel Pines from previous owner Elvin Moon. Reilley announced several months after the purchase that not only could the building be saved but that he wanted to raise $35 million for a complete renovation.
The hotel had opened in November 1913 in the booming downtown business district. It was designed by architect George Mann, who also designed the state Capitol and the Marion Hotel at Little Rock. At the time, it was described as one of the finest hotels in the South. Reilley wants an 84-room upscale hotel along the lines of the Capital Hotel in Little Rock.
Reilley hasn't given up on those plans. But something happened in late 2017--congressional passage of the Tax Cuts and Jobs Act--that caused him to expand his vision. The act added two sections to the U.S. tax code that provide tax incentives for investments in targeted areas through investment vehicles called Opportunity Funds. Such funds are designed to promote development in so-called Opportunity Zones.
In Arkansas, a state that traditionally has lacked capital for projects such as the Hotel Pines renovation, Reilley sees potential. He thinks Arkansas, which continues to gain population at a time when neighboring Louisiana and Mississippi are losing residents, is under-valued. If Arkansas were a stock, Reilley would list it as a "buy." So the vision has been expanded to include projects not only in Pine Bluff but also in Fayetteville, Springdale, Fort Smith, North Little Rock and possibly Hot Springs.
Reilley and his partners created Catalytic Management LLC and are now trying to raise $100 million for a private equity fund that will invest in Arkansas Opportunity Zones during the next decade. Reilley's team includes architect Nate Drinkwine, investment expert Stuart Hee and and the man I've nicknamed the City Whisperer, Daniel Hintz.
With a background in film, theater, restaurants, urban planning and economic development, Hintz formed a consulting firm known as the Velocity Group. It does planning work for cities across the region. Prior to starting the Velocity Group, Hintz was the executive director of Downtown Bentonville Inc.
Hee, who was a managing director at Bear Stearns, worked in Boston for three years and London for six years. Drinkwine, meanwhile, formed the real estate management company HEM Real Estate Solutions in Denver in 2013.
Catalytic recently brought on Baron R. Ah Moo of the BLI Capital Group, who has been involved in large hotel projects around the world. He holds a master's degree in hospitality marketing and finance from the famed hospitality program at Cornell University and has done work in Vietnam, Mexico and islands in the Pacific.
"We needed someone who has done big things in the hotel sector, and Baron has done big things," Reilley says.
A division known as Front Porch Hospitality has begun partnering with culinary entrepreneurs to create new dining concepts while also bringing talented young chefs to the state. Glenn Mack, former executive director of Brightwater culinary school at Bentonville, will be the chief executive officer of Front Porch. Jennifer Hill Booker, who became well known as a personal chef and cookbook author in the Atlanta area, will be the executive chef. She will be based out of the Hotel Pines once the renovation is complete and also will operate the new Southern Culinary Center & Cooking School at Pine Bluff. Front Porch is also planning at least two craft breweries, one of which will be Delta Brewing Co. at Pine Bluff.
"Front Porch will elevate the conversation about food and drink statewide," Hintz says. "At the same time, we're going to make solid investments. The Opportunity Zone legislation expanded our ability to make that happen, which is why we're taking a statewide approach. We're looking for places where the government entities, the nonprofit sector and the for-profit sector are willing to work together."
In his speeches, Hintz often talks about "nowhere everywhere," those cookie-cutter strips of retail establishments, restaurants and motels that can be found across the country.
"We're looking for communities where there's already an aligned vision, where there's momentum," Hintz says. "The towns we've targeted have that."
"We want to create a somewhere," Reilley says. "We have to get more creative in Arkansas when it comes to projects such as these."
He lists things he says are missing--downtown residential complexes in the college towns of Fayetteville and Jonesboro, a downtown hotel in Springdale and a fully developed riverfront in North Little Rock.
Catalytic's literature notes that it's intent on "engaging in transformative projects that leverage the power of the federal Opportunity Zone program by offering investors substantial federal tax advantages while also fueling the ideas and the audacious visions of local entrepreneurs. Catalytic combines the positive power of the free market with the high standards of great placemaking, making this fund a profoundly unique investment opportunity. . . . Not all regions are equal. Catalytic has targeted specific areas that we believe to be the most compelling investments."
Reilley explains his interest in Arkansas this way: "I came here for profit--trying to get a 10-year contract from a wood-pellet customer in the United Kingdom, raising the money to do it. I flew in. I flew out. I rarely stayed. But I made relationships over time."
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Rex Nelson is a senior editor at the Arkansas Democrat-Gazette.
Editorial on 02/03/2019