UNHAPPY: Agency head says landlord Richard Mays (left) and tenant Bill Walker (right) werent happy about tough negotiating on real estate deal.

  • UNHAPPY: Agency head says landlord Richard Mays (left) and tenant Bill Walker (right) weren’t happy about tough negotiating on real estate deal.

I wrote yesterday about a new state lease agreement by which a division of the Arkansas Department of Career Education Department, headed by Bill Walker, will occupy an expanded building at 525 W. Capitol Avenue owned by an LLC headed by his friend, political ally and fellow Beebe supporter, Richard Mays.

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Walker and Mays have not returned my calls. But Anne Laidlaw, director of the Arkansas Building Authority, has now provided me more history on the lease arrangement, which dates back to 2009, and the costs. She reveals that circumstances about the original deal raised questions with her sufficient that the state broke off negotiations until questions about ownership were resolved. In the end, she said, she believes the state made a good deal and that, as a result, “Bill Walker wasn’t very happy with me for a while.”

Bottom line remains the same, if appearances matter: Bill Walker’s agency negotiated a long-term lease on space in a building that he knew Richard Mays intended to buy. And Richard Mays knew he was buying a building that had a pre-committed state tenant.

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Laidlaw said the purchase was intended to consolidate two locations of Arkansas Rehabilitation Services. Walker believed it was inefficient not to have the locations combined. That is a decision the Building Authority doesn’t review, Laidlaw said. Its job is to make the best deal possible on leases and purchases.

The first lease between the state and Capitol Place LLC was entered Nov. 19, 2009 (this lease actually was with a previous building owner but taken over by Capitol Place) for 28,964 square feet of the old Arkansas Baptist Convention headquarters on Capitol Avenue. The Mays-led Capitol Place LLC bought the building a month later for $3.2 million. This relocated staff from 1616 Brookwood. Cost comparison:

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Capitol Avenue: $405,510 annual rent for 28,964 square feet and a six-year lease.
Brookwood: $207,615 for 21,035 square feet.

The Building Authority notes that the state received $1 million for improvements to the new quarters and 100 parking spaces, valuable in downtown Little Rock. In December 2009, the state leased an additional 1,524 square feet of storage in the basement for $9,525 a year.

In May, the state agreed to increase the Capitol Avenue space to 48,963 square feet, with rent beginning at $782,444. This included $1.1 million for tenant improvements. The building will add a third floor. Costs above the allowance will be amortized in the six-year lease. The expansion will bring staff from 26 Corporate Hill Drive, currently costing $538,000 for 30,000 square feet.

SUMMARY:
1616 Brookwood & 26 Corporate Hill = 51,035 s.f. @ $745,615.45 combined annual rent (at time of relocation)
525 West Capitol Avenue (after expansion) = 48,963 s.f. @ $782,444.72 annual rent + $9,525.00 for storage

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So the move means at least 6.2 percent increase in leasing costs for 2,000 square feet less space, but achieves Walker’s aim of consolidation. I don’t have figures yet on what building the improvement costs into the lease will cost the state. Laidlaw said the expansion is being priced now and a final figure on amortized costs isn’t known yet, though it’s expected to increase the lease cost because the expansion will exceed the allowance. If it’s too expense, the state can terminate the contract before construction begins, she said.

The negotiating road wasn’t easy. Laidlaw acknowledges that she looked askance at appearances when she learned during original lease negotiations that the building was to be changing hands to a business headed by someone associated with Walker. Here’s her account of events: