Fort Smith Builders Avoid Spec Development

If you build it, they might not come.

That’s what Fort Smith developers are thinking when it comes to upscale spec houses. The city’s struggling economy, along with the possibility of Beverly Enterprises leaving, has builders shying away from spec houses in favor of custom-built homes.

“[Developers] can get hung out to dry pretty quick if they have two or three half-million dollar homes gathering dust,” said David Hughes, executive director of the Greater Fort Smith Home Builders Association.

Fort Smith has long been known as a manufacturing town, with just a few major companies in the area. The city lost 800 manufacturing jobs in 2005, and more layoffs are expected because Whirlpool Corp. is moving assembly lines from the Fort Smith plant to a new one in Mexico.

But the big hit to the city’s upscale housing market could come if Beverly Enterprises moves its headquarters. With annual salaries in the $1 million to $2 million range, Beverly executives can afford upscale housing.

Eight Beverly executives announced their retirement on March 15, and the former CEO has put his house up for sale.

William R. Floyd is asking $1.8 million for his 7,488-SF at 1800 Innsbruck Lane. The six-bedroom house and 5.34 acres appraised for $1.29 million in 2002, according to records at the Sebastian County Assessor’s office. Floyd’s salary at Beverly was $2.3 million last year.

The eight execs announced their retirement the day after the nursing home healthcare provider merged with Pearl Senior Care, an affiliate of Fillmore Capital Partners LLC of San Francisco.

The other Beverly executives who are retiring are CFO Jeffrey Freimark; Douglas J. Babb, executive vice president, and chief administrative and legal officer; Steven A. Brigance, senior vice president of litigation; Pamela H. Daniels, senior vice president, controller and chief accounting officer; Lawrence Deans, senior vice president and chief human resources officer; James M. Griffith, senior vice president of investor relations and corporate communications; and Barbara R. Paul, senior vice president and chief medical officer.

Freimark purchased a 4,949-SF home in The Highlands on Riley Farm in south Fort Smith for $838,000 in January 2005, according to county records. His salary at Beverly was $861,000.

Babb purchased a house in Riverview Heights in Fort Smith for $765,000 in 2000. His annual salary was $812,000.

“It’s amazing how one corporation can affect the housing community and the economy of a city,” Hughes said.

Not only has Beverly’s questionable future shaken the housing market but two other million-dollar homes are for sale in Fort Smith. They are both in the Business Journal’s list of the city’s top 20 houses, (see list).

Jimmy and Carol Phelps’ 14,603-SF house is listed for sale for $2.8 million. It appraised for $2.09 million in 2002 (No. 2). And Michael S. and Rebecca A. Morton’s 6,573-SF home is listed for sale for $1.49 million. It appraised in 2002 for $1.26 million (No. 6). Floyd’s house ranks No. 5 on the list.

Home Economics

Hughes said developers will go with the demand in a city, and the demand in Fort Smith right now is for homes with a built-in owner. Spec homes are built by the developer, who is “speculating” that someone will buy the house after it’s completed.

“Part of the concern is what the economy is going to be doing,” said Ronald Rouse, a developer with Rouse Walker in Fort Smith. “I think every [developer] is thinking that way a little bit.

“When you get into the more expensive houses, there are still a good number of spec houses being built in the $300,000 to $400,000 range,” Rouse said. “When you get above that, you’ll see more custom houses.”

Rouse, who started Riley Farm in south Fort Smith with Paul Walker in 1998, said there are a few Beverly employees, like Freimark, in his subdivision with $800,000 to $900,000 homes.

ERC Land Development Group has been developing high-end residential subdivisions in Fort Smith for many years. Much of their subdivisions have been spec houses, said Steve Rucker, president of the development group.

But lately, he said, there have been a lot of inquiries from the general public wanting to buy lots on ERC’s new development, Brighton Place, in eastern Fort Smith.

“There is a continual demand that someone is looking for that preferred site to build on,” Rucker said. “There’s not many opportunities for premiere sites on the east side [of Fort Smith].”

Brighton Place will have 107 lots on 35 acres surrounding 8 acres of water, Rucker said. Lot sizes range from 0.20 acres to 0.27 acres and are priced from $40,000 to $70,000. Twenty lots will be on the lake, he said. Construction is set to begin in the fall.

Much of the new development is happening near Fort Chaffee and southern parts of the city around Greenwood and Riley Farm. That’s because there isn’t much land left inside Fort Smith proper. Still, developers like Matthew Horan and ERC with Brighton Place are finding land inside Fort Smith.

But many of the top upscale houses in Fort Smith don’t belong to one specific subdivision, Hughes said. Four of the top 20 houses, including the most expensive house in Fort Smith, are in Fianna Estates subdivision, and range from $946,000 to $2.25 million. Three of the houses are on Free Ferry Road, an older subdivision, and range from $949,000 to $1.52 million. And two are at Edgewater Estates, and range from $1.16 million to $2.08 million.

Horan’s Houses

Horan, a Fort Smith lawyer, said he has always wanted to develop a subdivision where there were custom-built houses. Having a neighborhood full of people who put their personality into the houses might keep them living there longer, he said.

“My view is that if you build it the way you want it, you will stay,” Horan said. “I think it’s important to have a real settled neighborhood. I think that holds value.”

Horan is developing St. Francis Crest — 47 lots on 31 acres of land on the east side of South 74th Street. The price ranges from $65,000 to $300,000 and range from 0.40 of an acre to over an acre in size, he said. But the price is for “location, location, location.”

The lots are on top of what “old timers” call Wildcat Mountain. The houses will have views of the Arkansas River and over the city. The development is close to Rogers Avenue, St. Edward Mercy Hospital and numerous shopping centers, which is something he said he thinks people want.

“I think now is a good time to initiate the development,” Horan said. “I think people kind of want to be a little closer to things when gas is $2.50 a gallon than 90 cents a gallon.”

Horan said streets have been put in and 14 lots have been sold, with construction started on one lot.

Rouse’s Riley Farm has four different areas with houses ranging from $300,000 to more than $1 million, he said, and it is a mix of spec houses and custom-built houses. But the only lots left are lots builders have bought and are waiting to build. The lots ranged from $32,000 to $94,000 for 2.5 acres, he said.

But Ron Calhoun, real estate agent and developer of Blackstone Ranch in south Fort Smith, said the need is really in the $150,000 to $250,000 range for housing.

“That’s because our land cost is much less than in Northwest Arkansas,” Calhoun said. “So we can still have luxury and class at affordable pricing. Our houses are not sitting. Houses are selling.”

Calhoun said the upscale housing market hasn’t changed over the past year, and that supply and demand for housing is in check. The biggest problem is the decreasing number of lots available.

That means whatever lots are available will become smaller in size and cheaper in price.

Calhoun’s Blackstone Ranch has 106 lots on 75 acres. Lot sizes range from 0.47 acres to 0.67 acres. The development is spec housing, and construction has begun on houses that range from $189,500 to $250,000, he said.