November 29, 2020

Two Little Rock buildings in online auction

Two prominent downtown Little Rock properties — the Hotel Frederica and the AT&T building, both on Capitol Avenue — will be up for online auction Sept. 21-23.

A starting bid of $600,000 has been set for the 107-year-old Frederica, formerly known as the Legacy Hotel and Hotel Sam Peck.

A starting bid of $500,000 has been set for the 47-year-old AT&T building, formerly known as the headquarters for Southwestern Bell Telephone Co.

Both auctions are being run by Ten-X Commercial, based in Irvine, Calif.

“All liens will be removed,” Eric Nelson with Newmark Knight Frank realty advisory company said of some $125,000 in taxes owed by the hotel’s previous owner, SHG Management. There also is a reserve price, or minimum, that he can’t disclose, Nelson said.

SHG, based in Sherwood, lost possession of the hotel last fall, after a $4.8 million foreclosure lawsuit filed in October by ReadyCap Lending LLC of New Providence, N.J.

SHG borrowed $4.6 million in 2016 from ReadyCap — a loan backed by the Small Business Administration — to buy the hotel for $2.85 million. SHG principals also said they spent $2 million in transforming the 82-room hotel into a “boutique” property. The $4.8 million foreclosure lawsuit includes penalties and interest.

The state Department of Finance and Administration closed the hotel last September for nonpayment of some $60,000 in sales taxes. SHG also owed more than $52,000 in property taxes and real estate taxes in Pulaski County and more than $12,000 to the Little Rock Advertising and Promotion Commission, according to court filings last fall.

“It’s a great property for downtown, and it needs to keep its history going,” Nelson said.

He said several potential buyers have visited the property in recent months. “There’s a lot of promising prospects,” he said.

The hotel has sustained a few break-ins and some vandalism since being closed. Prospective buyers “have come in with eyes open,” aware of those problems along with the hotel’s potential, Nelson said.

ReadyCap Lending has been working with the Newmark group and RPM Management, also of Little Rock, the last few months in securing, cleaning and marketing the property.

“I know there’s a lot of interest,” Vaughn McQuary, RPM’s president, said Wednesday, a few hours after giving a prospective buyer a tour of the hotel property. RPM was appointed receiver of the hotel in the foreclosure lawsuit in May.

David Jones, a former Little Rock businessman who now lives in Dallas and represents the AT&T building’s investors, still thinks the AT&T building is a good asset, but his partners are ready to move on if the market will allow them.

“It’s taking longer to lease than what we expected,” he said Wednesday. “My clients and I are not really in the office building business. We bought it because it was a good buy and it was a good building and we just basically decided to go ahead and see if we could get it sold to someone who might actually have more interest in that type of a project going forward.”

Jones represents Valk Properties Two LLC of Rockwall, Texas, which purchased the 10-story, 370,566-square foot building for $1.8 million from AT&T, which was known as Southwestern Bell Telephone when the building was built in 1973. The property has 134 parking spaces, including a 24-space garage.

When Valk completed the purchase, AT&T then leased the building back for one year. That agreement ended in December. Jones said when leasing efforts began in January, “we ran right into the face of covid-19.”

He declines to pin the blame solely on the coronavirus pandemic.

“I don’t think the covid stuff helped,” Jones said. “Whether it hurt us, I don’t know. I don’t want to blame it on that. I’m too much of an optimist.”

The auction by Ten-X Commercial, which specializes in online real estate actions for commercial real estate, will give the property wide exposure, Jones said.

Property information available on Ten-X says the building is an “opportunity to buy an entire, well-maintained, and secure building in the heart of downtown Little Rock, blocks from the State Capitol campus.”

Its possible uses include as a data center, a call center “or other back-office users with a 24-strand optical cable and one full story of raised flooring,” according to the information.

The building has “open-floor concepts that include perimeter executive offices, cubicles, and conference rooms, with office furniture available.” It also features an auditorium.

“We just thought with the Ten-X auction site, it gives us the opportunity to expose the property to thousands of buyers from all over the country,” he said. “It will be interesting to see what happens.”

Meanwhile, they will continue to try to lease the building. The state of Arkansas recently arranged to lease 17,000 square feet on the building’s sixth floor and are moving in this week or next, according to Jones.

“If it sells, fine,” he said. “If it doesn’t, fine. We’ll just continue to get it leased. We’re beginning to get some traction. It is what it is. Nothing negative. No hidden agenda. We’re just ready to get something done with it.”

Ten-X Commercial also has an online auction set Oct. 5-7 for the 224-unit Spanish Jon apartment complex in southwest Little Rock. The starting bid is $1.6 million.

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