A developer from Albany, Ga., has spent almost $5 million to purchase the former U.S. Veterans Administration Hospital on East Roosevelt Road and the former AT&T Building on Capitol Avenue with ambitious plans to redevelop both Little Rock properties.
Pace Burt said Tuesday that he intends to convert the 520,000-square-foot hospital into market-rate loft apartments and that he sees the 315,000-square-foot AT&T Building as a mixed-use office and residential development.
A limited liability company called Princeton Place Apartments, which is affiliated with Burt, purchased the VA property for $2.7 million.
The AT&T Building went on the auction block in September and fetched a $2.25 million bid. The deal hasn't closed, according to the Pulaski County assessor's office website, but Burt said Monday that he was able to negotiate a lower price.
The seller of the VA property was the Institute in Basic Life Principles. The nonprofit, private Christian ministry operates one of its training centers on the site. Oklahoma-based Hobby Lobby Inc. purchased the 11-story building for $300,000 in 1998 and donated it to the ministry.
The Little Rock Police Department has operated offices at the building since 2002.
When the hospital opened in 1950 at a cost of $11 million, it was the largest in the state. At the time, it contained 500 beds and employed 600 people. It closed in 1984 after the John L. McClellan Memorial Veterans Hospital was built.
The federal General Services Administration planned to auction the old hospital in June 1986 but returned it to the VA that March because asbestos was found covering pipes. Proposals to house homeless people in the main building or turn it into a state-run jail were rejected as too costly.
In July 1989, the federal government leased part of the property rent-free to Our House II, a local homeless shelter that moved into seven of the surrounding buildings.
Burt likes the vibe of the 70-year-old building, suggesting its Art Deco elements would not be out of place in a Las Vegas hotel.
"It's a really neat building," he said.
The deal has been in the works for six months, and Burt said he has been "overwhelmed by the response from the city."
Burt's expertise is in redeveloping old, large and often vacant downtown properties. He has been doing historical renovations since 2004, completing projects totaling more than 5 million square feet. His niche includes redeveloping old textile mills into luxury loft apartments.
They include the 190-unit Lofts of Greenville, an $18 million redevelopment of the Monaghan Mill, which operated for all of the 20th century in Greenville, S.C. He has gone on to redevelop four other mills.
"We saw a great opportunity in Little Rock to come out there," Burt said. "The VA hospital, I know, has been an eyesore since the late '80s or early '90s. We're excited about the building."
He also called the AT&T Building "a great building with great views and a great location."
Burt said he plans to develop the hospital property first. He said he already has people working to "clean it up and stabilize it ... but we have a long way to go."
It helps that the properties were acquired without debt in tax exchanges in which they were purchased with proceeds from the sale of other properties. This allows purchasers to avoid taxes on capital gains if the proceeds are reinvested.
"We're not in any huge rush," Burt said. "We're just trying to figure everything out right now."
The hospital property is in an Opportunity Zone, which is a federally designated economically disadvantaged area where private investment can qualify for capital gain tax incentives.
"That wasn't the reason we bought it," he said. "We bought it because of its historical significance of the building and working with the National Park Service on, hopefully, some historical tax credits.
"We've got a long way to go. It's a massive building with massive costs associated with it."
Plans are to set aside 25,000 square feet in the hospital building for low-cost housing for artists. "It really brings some energy into the building," Burt said.
Word of the project has created an "explosion of interest in the area surrounding the hospital," he said, adding that it will be a "game-changer" for the area.
"We're going to set the bar on how historical renovation should happen," Burt added.
Hillis Schild, a local banking executive who has been involved in downtown redevelopment, said she was unfamiliar with the project specifics but knows Burt's reputation in redeveloping downtown properties.
"Based on some of his projects, which I am vaguely familiar, I agree with Mr. Burt that this will be a game-changer," she said. "We would love to have new, quality living accommodations in and around SoMa while putting vacant and underutilized spaces back into use. This so important to the overall development of the area."