Burkhalter loses bid to stop apartments’ sale

Pulaski County Circuit Judge Collins Kilgore on Tuesday ordered a Little Rock brokerage firm to move forward with the sale of an apartment complex coowned by John Burkhalter, a businessman and candidate for lieutenant governor,against his objections.

The ruling was the latest in a years-long lawsuit between Burkhalter and a former business partner, Kent Vestal, which has been heard by a jury and is on appeal to the state Court of Appeals. Both men own 50 percent of Burkhalter-Vestal LLC, a company founded in 2005 to construct the Lexington Park Apartments in North Little Rock.

Kilgore wrote in the order after a closed evidentiary hearing Monday, during which Burkhalter’s attorney objected to the sale, that if a buyer could not be found before the end of the year, “it may be impossible to sell the apartments” and it would cause “irreparable harm” to the company.

“Marcus & Millichap is authorized to select a prospective purchaser for Lexington Park Apartments based on the terms it can obtain now which are most favorable to Burkhalter-Vestal, LLC,” Kilgore wrote. “It may do so by soliciting ‘best and final’ offers from the prospective purchasers which have proposed the highest purchase prices or by other means, at its discretion.”

Kilgore announced in open court last week that Monday’s hearing would be closed to the public because proprietary information would be discussed. The judge cited Administrative Order No. 19, which states, in part that the state’s court records are governed by the Arkansas Freedom of Information Act, except in certain cases, including to protect “proprietary business information.”

Burkhalter announced in June that he would run for lieutenant governor as a Democrat. The office was left vacant after the Feb. 1 resignation of Mark Darr, a Republican from Springdale.

Burkhalter-Vestal LLC began construction on the 288-unit Lexington Park Apartments in 2006 with most of the work completed by late 2008, according to court filings. Construction of the complex cost more than $18 million.

Burkhalter filed a lawsuit against his former business partner in October 2011, stating that the company had become “deadlocked” because of disagreements between the two.

Burkhalter claimed that Vestal refused to provide him with financial information about the company until August 2011, when he said he discovered Vestal had taken part in several “improper acts” that were harmful to the company. Those acts included using the company credit card for personal expenses, contracting and paying himself for services that should have been done at no cost to the company, and moving a company depository account to a different bank,Burkhalter claimed in the lawsuit.

Vestal responded to the lawsuit with his own claims and filed an amended counterclaim in May 2012. Among Vestal’s claims were allegations that Burkhalter’s construction company overcharged for work it performed on the apartments, that he later built another complex nearby - the Fountaine Bleau Apartments - that hurt the business, and that Burkhalter broke into Vestal’s office when Vestal would not provide certain documents.

After a trial in January 2013, the jury found in favor of Burkhalter on all but one of his counts and ordered Vestal to pay $242,928.

The jury also found that Vestal was due $100,000 in restitution from the company for work he performed and $2,000 for invasion of privacy in connection with the claim that Burkhalter broke into his office. Burkhalter-Vestal LLC was also awarded $76,000 against Burkhalter for repairs the company had to make tothe complex after Burkhalter’s company finished construction.

Kilgore also ordered that Vestal be removed as manager, that an independent property management company and certified public accountant take over the day-to-day operations, and that the apartments be put up for sale. Vestal submitted a proposal for an agent in December, and Burkhalter opposed the proposal but did not offer a counter proposal, according to court filings.

Burkhalter filed an appeal in the case, including the awards to Vestal and the order to sell the apartments, which is still pending at the state Court of Appeals.

Burkhalter’s attorney, Joel Hoover, said a decision has not been made whether to appeal Tuesday’s ruling.

On Feb. 6, Vestal requested the hearing to review pending offers on the sale of the apartments.

Hoover wrote in filings with the court that there was no evidence that irreparable harm would be caused if the apartments were not sold or that an emergency existed to require the sale to be expedited.

Hoover also wrote in a proposed order that Marcus & Millichap had marketed the apartments only to a “limited number of recipients on its investor database” and that at least one person testified about difficulties finding the listing.

“Specifically, 300 members of the investor database received information and this has yielded 66 requests for information as a result of this electronic contact,” Hoover wrote.

The dozens of requests for more information resulted in six “prospective purchasers,” Hoover wrote, but details about bids and marketing information have been sealed by the court.

Hoover wrote in the proposed order for the brokerage firm to continue to market the apartments “for the remaining terms of the marketing agreement filed under seal” and allow Burkhalter the first right of refusal to match any offer.

Hoover said in an interview that he did not think the order prevented Burkhalter from matching an offer, but he said he had not spoken with his client about purchasing the apartments.

An attorney for Vestal did not respond to a message seeking comment Tuesday evening.

Arkansas, Pages 9 on 03/12/2014

Upcoming Events