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Arkansas Business Power List 2016

John & Hank

BY ARKANSAS BUSINESS STAFF, Arkansas Business Publishing Group

Arkansas Business introduced “The Power List” in 2006 and last updated it in 2014. There is value, for our readers and for us, in having just a little bit of insight into the people who are leading the largest companies and institutions in the state.

John Flake, 68

Chairman
Flake & Kelley Commercial, Little Rock
John Flake made his reputation as a deal-maker with a string of apartments, office buildings, medical space and retail projects primarily in Arkansas. He was a leading player in making the tallest office building in Arkansas happen: the 40-story Simmons Tower in downtown Little Rock, which opened in 1986 as Capitol Tower and later was called TCBY Tower and Metropolitan National Bank Building. He established Flake & Co. in 1979, the foundational firm of today’s Flake & Kelley Commercial.


Hank Kelley, 60

CEO
Flake & Kelley Commercial, Little Rock
Hank Kelley has helped amass and oversees more than 4.7 million SF of commercial space, one of the largest commercial property portfolios in Arkansas. Perhaps his most recognized works are the tech-related developments for Acxiom and Arkansas Systems in west Little Rock. He became a 2012 member of the Counselors of Real Estate, a professionally prestigious invite. Kelley started his climb with appraising work followed by an associate partnership at Barnes Quinn Flake & Anderson.


CREATING NEW OPPORTUNITIES

BY CODY GRAVES, Downtown Little Rock Magazine

Looking at the landscape of downtown Little Rock, there is one thing on the horizon that is hard to miss. It’s the Simmons Tower, and the company responsible for this structure has big plans for the downtown area.

Flake & Kelley Commercial is a real estate, property management and brokerage firm based in downtown Little Rock. With a variety of projects in the area, the company’s leadership and employees help to create new opportunities for local businesses, residents and visitors alike.

The company started out as a small brokerage firm opened by John Flake, current chairman and a partner, in 1979. In 1984, Hank Kelley, current CEO and partner, joined the company to help build its management portfolio, expand accounts and build the business.

“We really take a lot of pride in not only helping others do it — investing in property — but we are active investors in proper-ty, as well,” Kelley said. “So we try to bring people in who are compatible — clients and investors — with us to do things that will help build the community and invest in property.”

Flake & Kelley has been located downtown since its inception, Kelley said. The firm’s offices are in its largest property, the Simmons Tower, located on West Capitol Avenue. The tower was built in 1986 and is the largest private office building in the area. At 40 stories, the Simmons Tower has 625,000 square feet of office space.

“It’s been our flagship and one of our main projects for many, many years in Little Rock,” Kelley said. “This has been a real constant opportunity for us to contribute to downtown.”

One of the company’s main projects in the Simmons Tower is the business-incubation program, which allows business start-ups to lease space in the Simmons Tower with flexible lease agreements, furniture, wireless Internet service and access to conference rooms.

“We like to think, in our little way, we’re incubating; we’re helping businesses get started by lowering the barrier of entry into getting into [office] space,” he said.

Kelley said these office spaces will be a nice complement to the Little Rock Technology Park that is being developed on Main Street.

“The Tech Park is going to do a really nice job of taking care of people to a certain point,” he said. “We want to be the solution for that tech company when they are ready to move out of the Tech Park or if there’s not enough space for them between now and when the Tech Park is ready.”

A few other projects Flake & Kelley is involved with include the Rock Street Lofts, a residential development with 47 loft apartments. Kelley said this was one of the first loft developments in the city, and the space was converted from the former home of Dalton Daily & Associates office furniture.

Flake & Kelley has also created The Residences at Gracie Mansion in the Quapaw Quarter, which is a re-adapted 1840s Antebellum mansion. The Davidson building at the corner of Capitol Avenue and Louisiana Street is a mixed-use development with retail and residential spaces.

Kelley said he’s been impressed with the progress that has been made downtown recently, and there is more to come in the future. Kelley said he looks forward to the completion of the renovated Robinson Center auditorium, which is scheduled to be completed in fall 2016.

“I think it will provide the downtown area with an asset that can’t be reproduced in the marketplace,” he said. “It’s unique. It adds to the quality of life, and it’s going to be a trophy as people enter the market from across the bridge. Our cultural assets are vital, and important for us to protect.”

Kelley also emphasized the expansion of the hospitality industry downtown. With several new hotels having been completed or in the planning stages, he said these businesses will help attract visitors to the area.

“It’s been really nice when our clients come in and want to meet with us — whether we’re meeting here or meeting out in the field, they like staying downtown,” he said. “It’s become an amenity to have an office here and have hospitality in proximity, along with the fine dining that goes along with that.”

As for the legacy his company has left on the area, Kelley said he hopes Flake & Kelley Commercial has left a lasting impact.

“I hope we leave a legacy that, through our investments and properties and the time we’ve spent downtown, we’ve helped advance downtown,” he said. “I like to think we’ve helped with creating a balance between work, life and play.”

Benton to Build Utilities to Shops

Benton is dedicating up to $1.4 million from its general fund to extend utilities and infrastructure to an area where a Tennessee developer wants to put a new 160,000-square-foot shopping center.

The $29 million project, Shoppes at Benton, is planned for an area north of the Interstate 30 interchange and west of Alcoa Road and is being developed by GBT Realty Corp. of Brentwood, Tenn. The center will have two main anchors — a soft goods, apparel and home decor store that will use 41,000 square feet and a hobby and craft store that will utilize about 55,000 square feet.

Officials from GBT attending a news conference at Benton’s city offices Tuesday declined to name the two large retail tenants. Clients listed on GBT’s website include Hobby Lobby, Sprouts Farmers Markets, Kohl’s, Bed Bath and Beyond, T.J. Maxx and Marshalls, among others. The Shoppes at Benton also will have a row of four fast-casual sit-down restaurants.

The developer has contracted to buy one parcel from Mike Sylvester and Pat Sylvester and another from Mount Carmel Investment Co. LLC. Both deals are set to close in late March.

Construction is expected to start in the first quarter of next year, and the shopping center is expected to open about a year later. Jeff Pape, managing director of GBT’s shopping center division, said construction should generate 450 to 500 short-term construction jobs. Once it’s open, the center should employ 200-plus full-time workers and more than 300 part-time people.

He said he expects the development to be at least 80 percent leased by the time builders break ground. GBT’s average occupancy upon opening is 94 percent.

“We have several retailers that are confirmed and that we are moving forward with now,” Pape said of the Shoppes at Benton. “We won’t build a bunch of buildings and hope they fill up later.” The group recently finished a project in Louisville, Ky., and one outside Savannah, Ga.

The Benton City Council passed a resolution Monday that laid out plans for the city and the Benton Public Utilities Commission to work with the Benton Investment Partners LLC, which is GBT. The roughly $1.4 million contributed by the city and its separate utilities commission will be in the form of materials and equipment needed to extend water, sewer and electrical services to the site, said Mayor David Mattingly.

Those costs, coming from reserves in the city’s general fund, are expected to be made up within the first year to 14 months the shopping center is open, he said. Raising taxes or issuing bonds was not an option, the mayor said, because he was not in favor of “mortgaging the city’s future.”

GBT has developed more than 6 million square feet of retail and commercial space in the past 6-8 years, which have been the most economically challenging for real estate development in recent times. GBT’s projects span 21 states.

The deal was put together by Flake & Kelley Commercial of Little Rock. Flake & Kelley represents one of the two large retailers planned to go in the development. Partner and CEO Hank Kelley said the retailer had been looking in the area of Interstate 30 in Benton for some time and had tried twice before to secure a location.

“Instead of the developer coming in here and trying to figure out what retailers will come, the retailer picks the location and it works right,” Kelley said.

More Preleasing, Money Upfront on NWA Properties

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.