Iconic Building Makeovers A Key to Downtown LR’s Next Chapter

The city’s core is Gabe Holmstrom’s workplace, his playground and his passion. A few minutes of conversation yields observations that speak to his trained eye: the proliferation of murals and outdoor art here being one positive, the mish-mash inconsistency of street signs posing a maddening distraction.

Mostly though, it’s people the head of the Downtown Little Rock Partnership notices, especially the ratio of people who only come to work or play, versus the ones for whom downtown provides office, residence and recreation in one. The latter group is far outnumbered by citizens who take their downtown experiences more piecemeal — holding a meeting, having dinner or attending a show, then heading home to other neighborhoods — and it is by this barometer that he gauges the overall health of the urban district, like a patient slowly on the mend.

“It’s density; it all starts from there,” he said. “By continuing to add more people to the urban core, a lot of other things follow. The people who are in the grocery store business, they’re going to follow rooftops, the people that are living down there. In five years, this is all going to look different just because of the stuff that is in the pipeline and the way the growth is already occurring.

“You have the veterinary and the dental schools that are going to bring over 1,000 new people downtown. You drive around East Village, you see a lot of new home construction. Same in the Pettaway neighborhood; you see a lot of people building there on empty lots or renovating old homes. It shows the desire. People want to be in a walkable area in a close proximity, and this is what they’re doing.”

The Bank of America and Regions buildings represent primary pillars of the Little Rock skyline. (Photos provided)

The kind of vitality Holmstrom envisions for downtown doesn’t happen quickly nor does it turn on one event, but the revitalization of two of downtown’s most iconic office towers is a giant step in the right direction. As announced last summer, Regions Center and Bank of America Plaza gained new owners, one local and one not, both of whom have pledged to return the buildings to their glory days. It was news that downtown advocates such as Holmstrom longed to hear, given the promise such projects hold for the neighborhood at large.

“I think this is exciting. Both of those buildings had seen challenges that have been written about in recent years,” he said. “It is going to take those buildings being reimagined and additional capital infused into both of them for the necessary upgrades, but the potential is just amazing to think about. You can easily see a Little Rock five years from now where the two empty towers on Main Street are reworked and have people utilizing and living in them. Having willing, engaged owners is a positive, and I’m nothing but optimistic and excited to see what the future brings for both of those.”

A panoramic shot of downtown, including Capitol Avenue in the middle, taken in 1910. (Courtesy UALR archives)

Jay Chesshir, president and CEO of the Little Rock Regional Chamber, visits often with his counterparts across the country about what to do with excess office space.

“Lots of articles are being written on ideas, especially in the redevelopment area of housing, and all of those are obviously part of the answer,” he said. “I just think it’s really indicative of what people believe the future of our economy is to have both existing investment and new investment from outside of the market coming in here at the same time.”

Beyond the square footage each building provides — 550,000 of it in Regions Center, about 291,000 more in Bank of America Plaza — the revival of the buildings represents something even more valuable, a bullish attitude about the direction downtown is heading as measured in multiple millions spent to purchase, update and ultimately reimagine two of its sentinel skyscrapers.

“It’s very dear to me being local, where my kids go to school and everything I’ve done,” said longtime real estate developer Keith Richardson, who bought Bank of America Plaza for $8 million last summer. “I’ve watched Main Street through the years, as it grew with the restaurants and how vibrant it is now. We’re going to see one or two, three more restaurants in the area and more walking traffic further down Capitol towards Main.

“We’ve also got the new hotel right across from our building as well, and we’re hopeful that will also start bringing people back to downtown and back out at nighttime. That’s the ultimate goal.”

Richardson came to prominence in the local real estate market by developing multifamily residential projects. The office tower, renamed 200 West, is not the first commercial project of his career, but it is by far the largest.

“The biggest difference for me is when I do multi-family, it’s ground-up new construction,” he said. “With this, we’re talking about a 50-year-old building, and there’s a learning curve that comes along with trying to figure out what’s been done before this when we start renovating the building. Some of the mechanical systems are different on a 25-story building versus a three-story or four-story apartment building.

“So that’s been the biggest challenge for me — going from a rehab building and trying to make it new again. With any kind of renovation, when you tear into the walls, you’re always going to find some surprises.”

So far, Richardson said, renovation work on the elevators and replacement of chillers and blowers has been completed, as has most of the rehab work on the 375-space parking garage and waterproofing the structure’s 500 windows.

“The next big improvement we’ve got is on the fourth floor; we’ve got a 26,000-square-foot exterior courtyard that is our next big capital improvement,” he said. “The ninth floor, we’re doing a fitness center, and then we’re going to relight the whole exterior of the building with LED lighting. If it’s gameday, we’ll do Razorback red; if it’s St. Patty’s Day, we’re going to have green on the building.”

In the midst of all this, Richardson said there has been brisk interest in the building from prospective tenants wanting to get a look at the space, located at 200 W. Capitol Ave.

“It’s amazing; without us doing any kind of marketing, the phone has been ringing,” he said. “We’ve shown the building to several groups. We’ve got a big group coming in Friday that’s wanting multiple floors. It’s going great.”

The current optimism surrounding the property is something unfamiliar here, given the exodus of office workers from the city’s core over the past couple of decades and a string of failed developers whose lofty promises of renewal ended in foreclosure. In the case of 200 West, the property had been in the hands of a California-based investors group since 2006.

In late 2021, First Security Bank of Searcy sued the owners for defaulting on an $8.4 million loan and $150,000 line of credit, recovering the property at a foreclosure sale in April 2022 for a credit bid of $7 million. As reported by AMP, Richardson then acquired the 24-story tower, the third tallest building in Little Rock, in a deal announced in June.

No one enters a project this big on pure nostalgia, especially a market-savvy veteran developer like Richardson. But he acknowledged a native Arkansan’s jolt of pride over being the one to bring the building back to its former prestige.

“I looked at some office buildings downtown, some of the taller ones, through the years, and it seemed like the right time, right place for me. That’s in essence how we ended up with the Bank of America building,” he said. “A broker showed us the building about three or four years ago, and one of the things that really attracted me to it is just the bones of it. It’s a solid building. When First Security Bank got it back, they asked me if I’d be interested in purchasing it. Timing happened to be right, and within 30 days we made a deal.”

In the case of Regions Center, the refrain follows a similar tune. In 2006, the bank sold the property — which when opened was the tallest in the state — to NNN 400 Capital, through a group of more than two dozen limited liability companies. A decade later, Wells Fargo Bank filed a foreclosure lawsuit claiming owners had defaulted on its loan, owing about $30 million.

In response, the owners filed for Chapter 11 bankruptcy in 2016 and in 2017 in U.S. bankruptcy Court in Delaware, with the apparent intent of reorganizing debt and paying off the note. Wells Fargo countered in court, convincing the judge to convert the bankruptcy filing to Chapter 7, allowing the building to be sold.

In June 2022, just a couple of weeks ahead of Richardson, New York hedge fund Taconic Capital Advisors announced it had purchased the 30-story building at the corner of West Capitol and Broadway for an undisclosed sum. In a press release, the new owners proclaimed the deal “a vote of confidence in the future of the [downtown] sub-market and the building itself.”

Matt Legge, principal with New York-based Polaris Properties Group, which is an ownership partner, is directly involved in the building’s redevelopment. He said the opportunity presented by Regions Center, the owners’ first Arkansas real estate holding, provided intriguing possibilities including the introduction of unique building amenities.

“It’s no longer as impactful just to have really great space. We’re planning on doing a number of things that will make for a differentiated experience, so people actually are happy to come to work,” he said. “Both in this market and other markets, a good baseline is nice space, but having nice space alone isn’t enough to be differentiating. We really believe in complementing those space services, and when I say services, I mean hospitality services, in this case.

The bustling intersection of Capitol and Broadway in downtown Little Rock, 1958. (Courtesy UALR archives)

“We’re able to do that via a public-facing hospitality feature, like the dining program that we’re intending to implement here. It enables us to have an on-site hospitality staff, and that on-site hospitality staff can be extended across the entire building to serve the building tenants. As an example, if you’re a tenant in this building when the dining program is implemented, there will be the opportunity to order vertical catering to your premises, pantry-stocking services, catering for meetings and depositions and conferences that you’re hosting on-site.”

Legge said the extensive design work for the project is nearing completion with construction slated for the second half of the year. Everything from building systems and elevators to the parking garage to the various internal spaces are targeted for sweeping improvements. While he declined to disclose specifics on what’s being spent on the project, Legge said “Suffice to say, it’s a really ambitious and robust amount of capital.

“We’re really pouring equal attention and capital into the back-of-house platform as we are to the front-of-house platform to make for not only a really appealing amenitized environment, but one that’s enhanced for the long term from a capital investment perspective.”

Legge echoed an optimistic view held by others as to the direction of downtown and the prospects for its future as a key element in entering the market in the first place.

“I think [Little Rock’s downtown] is not all that different from what’s happening in a lot of downtowns,” he said. “There’s been a challenge in bringing workers back downtown due to COVID, but also due to the ongoing work-from-home dynamic and offering. We’re very cognizant that part of our job as the landlord and owner is to create a compelling environment people to want to work in. So that even if you have the choice to work from home, we’re offering an experience that exceeds the experience they’re going to have at their home office, and that it’s a place that’s exciting, convenient and appealing to be.

“We’re hoping that we can help companies who want to be more competitive in attracting talent, retaining talent and encouraging the talent that they have to work from the office. We’re planning on doing a number of things that will make for a differentiated experience, so people actually are happy to come to work.”

Legge’s comments strike at the heart of recent trends in commercial real estate that have steadily drained office buildings of their tenants from coast to coast. Starting with COVID closures and work-from home restrictions, companies have reexamined their space needs given the success many have experienced in remote work arrangements. And while occupancy rates are rising in many areas, as commercial real estate adviser CBRE reports, the overall office vacancy rate nationwide reached 17.3 percent in the last quarter of 2022, a 30-year high watermark.

The firm also identified the common attributes of so-called “hardest-hit buildings,” which have added the most vacant space since the pandemic. Though representing a mere 10 percent of total office buildings, HHBs accounted for 80 percent of total occupancy loss by square footage between Q1 2020 and Q4 2022. Among these shared characteristics, HHBs tend to be larger, between 100,00 and 300,000 square feet, and suffer from lack of amenities in the neighborhood, such as nearby restaurants.

In Little Rock’s case specifically, downtown space has also been affected by large tracts coming online outside the city’s core. One of the most noteworthy was the repurposed former Alltel headquarters, which lured several large state government tenants out of office buildings to the nearby Riverdale neighborhood campus.

Another trend taking hold is companies’ willingness to build their own headquarters abutting residential areas and shortening commutes. Bank OZK, the state’s largest institution, would in previous eras likely have been a prominent tenant in downtown’s financial district. Instead, the bank is still breaking in its sprawling 248,000-square-foot headquarters, the first phase on its 44-acre compound far to the west on Cantrell Road. Arkansas Federal Credit Union and AT&T also occupy multistory office space in the vicinity.

But talk to any of the growing list of downtown boosters — from property management firms to the chamber of commerce — and they’ll say the goings on in the city’s core neighborhood have it poised for a major comeback. Projects like the office towers, located just two blocks apart, are a big endorsement of this view, they say, as well as potential catalysts for an entirely new concept in how downtown looks, moves and functions.

“With what’s happening in Little Rock, you look at the I-30 corridor project opening up 17-plus acres of green space that can be programmed from a park perspective, providing ingress and egress both from a vehicle perspective but more importantly from a walkable perspective between east Little Rock and downtown,” Chesshir said. “Then, with the potential of the deck park between Sixth and Ninth Streets that we’re now in the planning process of, you add that to MacArthur Park and the Arkansas Museum of Fine Arts reopening in amazing transformation.

“Now, all of a sudden, people think, ‘Wow, not only do I have the opportunity to work there, but now I can live there, now I can play there, now I can have a family there.’ What that will attract, in my opinion, is a whole host of things, services that truly will create a 24-hour economy. It’s not just going to be a weekend entertainment scenario. It’s not just going to be a special event scenario or an 8-to-5 office scenario. It’s going to be all those things and more. This renaissance of downtown Little Rock is happening right before our very eyes.”

Holmstrom is quick to point out that in addition to improvements being taken by the city and individual developers today, lawmakers across the board need to think more proactively about the kinds of incentives that would make additional development more attractive, thereby luring additional investment.

“While there have been some improvements that the legislature has made in recent years to the incentives available for historic structures, Little Rock and Arkansas as a whole still have a lot of possibilities there, and challenges,” he said. “One of the things that many other cities and states have at their disposal is the ability to abate property taxes and use that as an incentive. Arkansas is currently prohibited from doing that by our state constitution.

Richardson plans to help bring Capitol Avenue and the heart of downtown back to what it once used to be.

“Tax increment financing structures, while available in Arkansas, are not nearly as effective as they are in some of our neighboring states and in large part due to a Supreme Court decision of 2004. At some point in the future, that could possibly be looked at again.”

Holstrom also noted incentive ideas at the federal level, if formalized, could have a direct and lasting impact on the redevelopment of office space in Little Rock’s urban center.

“One of the conversations that is occurring at a national level in cities as well as on the federal level is an incentive program that would provide a tax credit for these large commercial office buildings to convert them to residential,” he said. “In the last Congress, there was a bill introduced that did not pass but the conversation is ongoing.

“The people at the International Downtown Association are working and lobbying on this because this is not just impacting towns in Arkansas, downtowns across the United States are still feeling the effects of people working from home and the lack of use of some of this previously used office space. Policymakers are continuing to talk about what is the best way to address this and incentivize the building owners to look at additional uses for the property.

“It would be fascinating if that is able to happen on a national level or at the federal level. Then if states mirror that legislation and offer an additional state tax incentive at the local level, it could really offset some of those costs. The challenge is creating the solution from a policy standpoint that will address the needs of the property owner and the developer as well as the potential residents.”

Meanwhile, the work continues as two of Little Rock’s most significant buildings find their way to a new chapter. Linked by their common past struggles and a shared orbit with the Stephens Inc. building as moons of the Simmons skyscraper, the city and state’s tallest, the two properties represent a bold new plot twist in the story of a resilient neighborhood.

“It just needs some TLC and some capital improvements to bring it back to life,” said Richardson, talking about his building — but he could just as easily be talking about downtown as a whole. “It’s not going to happen overnight, but it’s certainly my intention to renovate things and bring it back to what it can be.”