The Arkansas Teacher Retirement System's board of trustees on Wednesday approved a resolution authorizing the sale of system-owned property in downtown Little Rock that formerly housed the Arkansas Insurance Department for no less than $2 million.
The resolution approved by the board also authorizes the system's staff to take all necessary and proprietary steps to implement the sale of the property at 1200 West 3rd St., if acceptable terms are reached
Laterre Partners Holding LLC, a New Orleans-based developer, has asked the system to execute an option to purchase agreement for a sales price of $2 million, which is below the appraised value of the property, $2.35 million in May 2022, said Greg Joslin of Colliers International, the system's real estate manager.
"Earlier in 2023, we toured representatives of the Veterans Administration (VA) through the building and have been working with ... Laterre [Parters] Holding and their national broker who is interested in purchasing the building from ATRS, extensively remodeling to VA's specifications for reuse as a veterans [administrative] service center and entering a long-term lease with the VA/General Services Administration (GSA)," Joslin wrote in an letter dated Oct. 18 to the teacher retirement system's real and alternative assets investment manager, Jerry Meyer.
"They expect to get notification of award from the VA/GSA [in the first quarter of 2024] and if approved will close 60 days after award notification," he said. "If they do not receive the award notification, the Buyer will immediately terminate the Option to Purchase."
At the end of 2019, the Arkansas Insurance Department terminated its lease of the system-owned property at 1200 W. Third St. and relocated its office to the former Verizon headquarters in Riverdale as part of then-Gov. Asa Hutchinson's reorganization initiative, Joslin said.
The 60,000-square-foot office building in downtown Little Rock has been vacant and listed actively on the market since January 2020, he wrote in his letter to Meyer.
"To present, Arkansas Teacher Retirement system (ATRS) has been in/out of contract with three ... separate potential buyers," Joslin said. "One was an owner/occupant and the other two ... were local investors. Additionally, we had an additional low-ball offer which was not countered and have shown the property with regularity to numerous prospects."
He said Colliers Arkansas recommends the system move forward with execution of this option to purchase agreement with Laterre Partners Holding LLC.
System Executive Director Mark White told the system's trustees he agrees with that recommendation.
He said in an email dated Tuesday to the trustees that the system purchased the property in downtown Little Rock in 1995 for $4.25 million.
"Between the purchase in 1995 and now, the building has generated $18.7 million in revenue, with $6.4 million in expenses, for net revenue of $12.2 million," he wrote. "That equates to an annual return of 8.41% on our investment. So this building has been a good investment for the System, but our recommendation is that it can be more profitably used by another owner going forward."
White said the option of renovating the building to lease it out has been studied.
He said Colliers' experts estimated last March that it would cost a minimum of $3.7 million to get the building and its systems up to specifications, plus finishing costs for paint, flooring, etc.
"Given current lease rates in the Little Rock market, we don't think that makes sense," he wrote. "And the parking at the building is less than ideal for any sort of multi-tenant use, because there are only a handful of parking spots that are actually adjacent to the building itself. Most of the parking is on adjacent blocks (and those parcels would be included in a sale). That's a negative selling point for other uses and potential purchasers, but it's not an issue for this purchaser's intended use."
In other action Wednesday, trustees approved a resolution recognizing a vacancy for position 4 on the board in the 4th Congressional District as a result of the retirement of trustee Kathy Clayton of Malvern, effective Wednesday. Clayton had served on the board since July 1, 2013, according to the system's website.
State law requires the membership of the board to include one elected active member trustee who is employed in a position that requires a state teaching licensure, but not an administrator's license, in the 4th Congressional District, and an active member trustee is ineligible to serve on the board after retiring, according to the resolution adopted Wednesday.
The trustees on Wednesday also approved a resolution authorizing the system's executive staff to advertise the position 4 vacancy on the board and accept applications that the board shall review and use to appoint an eligible member to fill the vacancy until the next system election.
The 4th Congressional District covers the southwest quarter of the state, but it reaches as far northwest as Jasper in Newton County, as far southeast as Wilmot in Ashley County, and includes parts of Little Rock south of Interstate 30, White noted in his email to the trustees.
White said the board of trustees will fill the vacancy during its meeting in December.
The teacher retirement system is state government's largest retirement system with more than $20 billion in investments and more than 100,000 working and retired members.