THE IDEA OF BUILDING AN 18-20 story hotel/parking deck development in downtown Little Rock that could weigh in north of $50 million is gaining a wider audience. Who would make it happen and when the project would launch construction are among the laundry list of important details still up in the air.
On April 30, DTLR Partners LLC of Fort Smith (an affiliate of CSK Hotels) bought the parking lot for $950,000 from Block 2 Development LLC (formerly known as Block 2 LLC), led by Esterer and Rice.The grand redevelopment would require gutting the 84-year-old Democrat Printing & Lithograph Building, now home to apartments, retail space and Arkansas Business Publishing Group at the northwest corner of Scott and Second streets.His firm is interested in developing a $15 million Aloft Hotel on the parking lot. The project would have 130 rooms and rise to 10-12 stories, with on-site parking for about 30 vehicles.The remaining parking needs would be met through valet parking at nearby decks and lots, the same arrangement used by other downtown hotels.Property HistoryFor now, the idea is a drawingboard dream of convention boosters. One scenario receiving attention is to redevelop a parking lot and historic mixed-use building into a 300-400 room hotel with 20,000-25,000 SF of meeting space topping a 650-750-slot parking deck.Storm Nolan, CSK Hotels partner, isn't sure that the $50 million-plus dream project will ever become reality. And if it does, it won't involve his company.The 10-year agreement, set to expire in 2010, is a product of the renegotiated lease on the Peabody project between the Peabody Hotel Group of Memphis and the city.Rice said the offer from CSK Hotels came out of the blue during negotiations with the city's A&P commission.The "Tract B Agreement" was negotiated by the Peabody Hotel Group to protect its investment in redeveloping the Arkansas Excelsior Hotel into the Peabody. The city would have to own the property before provisions of the agreement could be triggered."We didn't find out about that until afterwards," Nolan said. "A week after we bought this, we found out they had been negotiating to buy it. We want to work with the city, and we don't want to be adversarial."The A&P Commission thought it was about to finalize a deal to buy the parking lot earlier this year only to discover that CSK had submitted a competing offer.A 30-foot wide strip on the south end of the parking lot later was peeled off to accommodate the development of a retail annex on the north side of the neighboring DP&L Building.The Chandler pieces of the parking lot were acquired on Nov. 4, 1998, as part of a $1.4 million deal with Block 2 LLC that included the seven-story, 85,000-SF Archer Drug Building at 107 E. Markham St.The facade of the DP&L Building could be incorporated into the parking deck's exterior to preserve its architectural character. The building was listed on the National Register of Historic Places on Dec. 17, 1998, as part of the failed Block 2 redevelopment.Following the unsuccessful attempt to buy the parking lot from Rice and Esterer, city officials have rattled the eminent domain saber as a possibility of forcing a sale outside the entangling restrictions of the option agreement.Today, that retail space is home to Crush Wine Bar, the vacant Block 2 management offices (which will soon be occupied by employees of Arkansas Business Publishing Group), River Market Wine & Spirits and Gifts of Arkansas. The row of parking slots in front of the annex is part of the Block 2 project.Gene Fortson, a member of the Little Rock A&P Commission, said Rice approached the city about buying the property and talks later shifted to the A&P Commission.That same day, Democrat Printing & Lithographing Co. sold its namesake 82,000-SF building at 114 E. Second St. to Block 2 LLC for $650,000.J. Chandler & Co., led by John Chandler, owned the eastern and western portions of the property, and Lawrence and Verna Fisher owned an 8,100-SF strip in the middle.Though assembled in conjunction with the Block 2 project, the parking lot was not used to secure the development funding, which included an $11.5 million government guaranteed loan. The DP&L Building, Archer Drug and Wallace Building were.Fortson said Rice relayed a verbal counteroffer of $950,000 with no conditions and closing in only a few days.A forced sale is among the possible courses of action on the table as the A&P Commission begins assessing the next move.Lone Star is clearing out apartment tenants in the DP&L Building as leases expire, a move thought to precede converting the 32 units to condominium space. The company also is pushing short-term leases for the office and retail tenants.By George Waldon"Right now, the option isn't doing anybody any good," Nolan said. "Downtown is a great area, and we hope we can contribute to it. I think the city will eventually allow us to build a hotel. We'll see."Ownership of the parking lot at the southwest corner of Markham and Scott streets in downtown Little Rock originally was split between two parties.Rice said it was at least six months from the initial contact about selling the property until the last contact with the city.Competing OffersCSK's plans for the property are on hold because the city has an option to purchase it. The agreement, tied to the property since 1999, includes conditions that now make it impractical for the city to buy the property by exercising the option as well as making it very expensive for CSK to buy out the city's option.The remaining parking area, about 0.4 acres, was kept separate.The counter offer was "destined to be turned down," Fortson said. "I was disappointed."CSK's Storm Nolan said his company had been scouting for a site in downtown Little Rock for awhile before Rice was first approached in February. He was surprised to learn the city had been trying to buy the property."They contacted us," Rice said. "They sought us out. We went under contract with them and closed the deal."These properties were taken over by LSF5 Block 2 LLC after the affiliate of Lone Star U.S. Acquisition LLC of Dallas bought the long-in-default loan for $7.5 million in September 2007 from the Department of Housing & Urban Development and foreclosed on it in March."It just didn't work out," he said. "There were details that were involved that just didn't work. The other guys stepped up and got it done, and the city didn't.""What they want is a full-service hotel with a lot more rooms than we're interested in doing," Nolan said. "We don't feel it's an appropriate investment. We look at the numbers and don't see how it will work."Although it was the smallest piece of the development puzzle, the Fisher property carried a premium price tag. Block 2 LLC, led by Paul Esterer and Todd Rice, paid $500,000 for it on June 29, 1999.CSK Hotels of Fort Smith, which owns the adjoining 0.4-acre parking lot at the southwest corner of Markham and Scott streets, has a different vision.An added layer of complexity to the property that could come into play is an agreement giving the operators of The Peabody Little Rock the first right of refusal to develop a hotel on the parking lot owned by CSK."We made a contingent offer of $900,000, subject to 45 days for due diligence and the approval of A&P Commission," he said.george@abpg.comThe Little Rock Advertising & Promotions Commission is mulling over its options after making an unsuccessful run to buy the parking lot from Paul Esterer and Todd Rice.
george@abpg.com
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