Matthew Dearnley, 42, is the CEO of Flake & Kelley Commercial Northwest.
Dearnley, a native of Brooklyn, graduated from Hobart & William Smith Colleges with a bachelor’s degree in history. He received an MBA in finance and investments from the University of Miami in Florida. He worked as a paralegal but soon realized he’d rather be a dealmaker. He has worked in commercial real estate since 2002 and arrived in northwest Arkansas in 2004. He is the son-in-law of Flake & Kelley Chairman John Flake.
Ten years ago, Arkansas Business quoted a real estate broker from northwest Arkansas who said, “You’d have to be a total village idiot not to make a lot of money if you had a couple of million dollars [to invest].” How have attitudes changed in the past decade — or have they?
I think most investors who have been in the business through the recession have seen the good and the bad in the real estate market. It seemed, 10 years ago, that an investor could buy a property sight unseen and make money on it. There were a lot of bankruptcies, OREO properties at banks and bank failures because of that line of thinking. There is still money being made in the real estate market, but there is no longer a sense that it can be done by “the village idiot.” I think people have more respect for the real estate market and the degree of professionalism it takes to work in it.
There have been a lot of built-to-suit office spaces for specific clients to relocate. What are the prospects for the old spaces to be filled? Is backfilling abandoned space a concern?
The growth of the market in population and the continued growth at our big four — Wal-Mart, Tyson, J.B. Hunt and the University of Arkansas — are driving a lot of growth. The backfill second-generation space is being aided by the high cost of tenant finish-out. With finish-out of new construction running between $55 and $70 per SF, property owners are less willing to “turnkey” space. Tenants can get much better lease rates on second-generation space, which is helping fill a lot of buildings. You can’t overlook location as well. Being along the I-49 corridor is very important to most businesses.
What are your overall thoughts and predictions about the northwest Arkansas market? Are there any concerns or prime opportunities?
The market has clearly reached a point of possible correction. Certain areas have overbuilt, and caution is the word I would use in evaluating opportunities.
How did Flake & Kelley handle the recession and what did you learn? Do you think players in the market are wiser now?
Flake & Kelley has always had a policy of not having debt. Partners, of course, invest but not the company; hence, the livelihood of our colleagues is not jeopardized by a bad decision by one person. As for people being wiser, I would say yes. You are not seeing as many projects being built purely speculatively anymore. Buildings are being preleased, and people are no longer buying land with the intended use being to sell it in six month to someone else for twice what you paid.
How have new bank lending regulations affected the commercial real estate market?
You are seeing more preleasing and the requirement of more money down. The days of 100 percent financing may be over. You are also seeing the banks consolidating and changing to a world of haves and have-nots. You are seeing a lot of Arkansas banks aggressively expanding both within our state borders and outside of them.