Steve Clary Established High-Risk Success With Spring Creek

Steve Clary just knew he was sitting on a can’t-miss opportunity, but he didn’t have the cash to push the deal forward. Clary turned to individuals in the Little Rock business community to raise the needed funds, armed with promises of lucrative returns.

The situation sounds eerily similar to Clary’s efforts to borrow money in the months before debt swamped the Little Rock developer this year and sent him and his wife, Cynthia, to bankruptcy court.

Their Chapter 7 filing lists assets of $1.4 million and liabilities of $168.6 million, which includes unsecured debt of $135 million. Efforts to keep his disintegrating financials intact allegedly drove Clary to commit loan fraud in 2008, setting him up to face federal criminal charges this year.

However, the aforementioned can’t-miss investment isn’t part of Clary’s business problems or legal woes. The deal happened nearly 20 years ago, and Clary made good on his pledges.

Investors received double their money from Clary within 18 months, and also received a minority stake in what would become his biggest deal to date: Spring Creek Centre in Fayetteville.

“He did his part 100 percent,” said Jim Hathaway, a veteran Little Rock commercial developer and Spring Creek investor. “He did everything he said he would do.

“I’m real sorry about what’s happened to Steve.”

The 58-year-old businessman didn’t respond to a request for an interview for this story.

“Your paper hasn’t been kind to Steve, so I doubt he would want to speak to you,” Cynthia Clary said.

 

Establishing a Reputation

In the early 1990s, Clary was making a name for his fledgling Clary Development Corp. with retail projects such as the 150,000-SF River Park Plaza in Malvern and the 272,000-SF Valley Park Centre in Russellville.

The high-risk, high-reward outcome with the 600,000-SF Spring Creek Centre became a legacy deal for Clary, a signature play that helped establish his reputation as a successful developer.

At the time, Clary was cash-strapped and needed about $350,000 to keep his option to buy the 67-acre site for $3 million.

An added hindrance to the development was a Wal-Mart real estate official who was slow-playing Clary. The nation’s largest retailer was interested in developing a supercenter on part of the land.

But the Wal-Mart representative was looking to wring out some savings by squeezing Clary out of the deal, according to Hathaway and others familiar with Spring Creek Centre.

The stance of the Wal-Mart real estate exec is remembered as: “I know you can’t afford the property. I’m going to wait until your option expires, and we’re going to buy it on our own.”

Clary was so committed to making Spring Creek Centre happen that he pushed the limits of leverage and cash flow. How far did Clary carry the risk?

At one point, sources told Arkansas Business, Clary battled shut-off notices for electric service to his house in west Little Rock’s Longlea neighborhood.

“It was a big risk because he could’ve gone down, but Steve was able to operate and stay in the deal,” Hathaway said.

Despite Wal-Mart’s shaky commitment, Clary kept Spring Creek Centre moving, and he executed his purchase option with Duane Nelson, who owned Nelson’s Funeral Home in Fayetteville at the time.

Cash was generated and equity created by Clary reselling parcels to Ryan’s Family Steakhouse of Greer, S.C., 2.6 acres for $400,000, and National Home Centers Inc. of Springdale, 16.2 acres for $2 million.

“All my dealings with him were good,” said Dwain Newman, founder of National Home Centers. “I’m sorry things turned out the way they have for him.”

The Spring Creek Centre transaction represented the second time Newman had done business with Clary. In Russellville, Clary redeveloped a former Wal-Mart store into a National Home Center and expanded the 88,000-SF building for Newman.

In Fayetteville, a 150,000-SF store was built for National Home Centers. The project, completed in May 1994, represented the company’s largest location at the time. Four years later, the Spring Creek Centre store was sold to Home Depot Inc. of Atlanta for $6.5 million.

“Wal-Mart was going to open a year ahead of us and ended up opening a year after us,” Newman said.

Wal-Mart let its tenuous land deal with Clary lapse. But the real estate executive’s power play ultimately cost the company more money. The retailer bought its 25-acre supercenter site at Spring Creek Centre for $2.6 million.

“They came back and ended up paying more for the land, maybe twice as much,” one Clary investor said.

In 1997, Clary sold two pieces of the Spring Creek Centre totaling 140,000 SF to Developers Diversified Realty Corp. of Cleveland for $12.4 million. Clary Development also sold a final 78,000-SF piece in February 1999 to the real estate investment trust in a $6.8 million deal.

The Spring Creek Centre sales followed an earlier transaction with Developers Diversified Realty. Clary Development sold the River Valley Centre in Russellville for $14 million in 1994.

The company was off and running, and real estate development continued to be the successful foundation for Clary. Every single one of Clary Development’s ventures made money, according to past partners.

Even Shackleford Crossings in west Little Rock was performing despite Wal-Mart delaying the arrival of its 203,000-SF supercenter, real estate insiders report. That 22.9-acre site produced a $9.7 million sale, more than two years after the Wal-Mart store was originally expected to open.

Clary relinquished his ownership in Shackleford Crossings, built around a 278,000-SF lifestyle center. That high-profile property is now under the care of a receiver after Clary defaulted on the project’s $74 million funding agreement with M&I Marshall & Ilsley Bank of Milwaukee.

Among the actions that triggered the M&I default was Clary pledging his ownership in Shackleford Crossings as collateral on other debt.

“Real estate development is not what took Steve Clary down,” said a past business partner.

 

Foreshadowing Encounters

Steve Clary started his career as an accountant in 1974, working in Memphis at Ernst & Whinney and in Little Rock with Arthur Young & Co. His accounting work included providing audit, tax, regulatory compliance and management advisory services to investment banking firms and real estate syndication firms.

Before striking out on his own in real estate developing during the mid-1980s, Clary worked with two prominent executives, Jon Brittenum and Melvyn Bell. Aspects of their careers foreshadowed things to come in Clary’s.

With Brittenum, Clary would have a good seat to see what happens when financial stress prompts a businessman to step over the line.

With Bell, Clary was exposed to the consummate deal junkie, an entrepreneur who discovered that even his substantial Environmental Systems Co. wealth had limits.

Brittenum, a Razorbacks football hero, operated Little Rock investment banking firm Brittenum & Associates. Clary helped Brittenum syndicate real estate investments during the early 1980s.

When Brittenum’s company began suffering financial losses, he scrambled to borrow money and more to keep it solvent. Along the way, Brittenum ended up in federal court accused of converting customers’ securities for use by him or his firm without their consent.

Brittenum & Associates failed in January 1986, and both the firm and Brittenum filed bankruptcy that year.

Claimed losses totaled more than $3.5 million, and Brittenum offered a plea of no contest to felony theft-by-deception for mishandling his client’s cash and securities.

Brittenum faced a potential 20-year stint in jail but was given a five-year suspended sentence with 100 hours of public service. Lawsuits were flying over various Brittenum deals at the time, and Clary was splashed by some of the litigation because of his association with some of the investments.

But Clary emerged unscathed.

Loehmann’s Plaza in west Little Rock, known today as Market Street Plaza, brought Clary and Bell together. The $14.7 million development was in turmoil thanks in part to financial skullduggery by John McClellan, who developed the 137,000-SF retail center with Clary.

Bell entered the ownership picture in 1987, and Clary remained aboard in a vain attempt to keep the project working. The property ended up in the hands of the Texas lender, Richardson Savings & Loan Association, and ultimately its regulatory receivers.

When the stock market crashed in 1987, Bell’s leveraged Ensco stock fortune was pummeled, and he could no longer juggle his varied business interests and chaos ensued.

It was a situation that Clary can appreciate.

As the financial markets melted down in 2008, Clary’s hopes of striking deals and raising money to keep his own varied holdings afloat were snuffed out. 

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Steve Clary Established High-Risk Success With Spring Creek

 

 

Steve Clary just knew he was sitting on a can’t-miss opportunity, but he didn’t have the cash to push the deal forward. Clary turned to individuals in the Little Rock business community to raise the needed funds, armed with promises of lucrative returns.

The situation sounds eerily similar to Clary’s efforts to borrow money in the months before debt swamped the Little Rock developer this year and sent him and his wife, Cynthia, to bankruptcy court.

Their Chapter 7 filing lists assets of $1.4 million and liabilities of $168.6 million, which includes unsecured debt of $135 million. Efforts to keep his disintegrating financials intact allegedly drove Clary to commit loan fraud in 2008, setting him up to face federal criminal charges this year.

However, the aforementioned can’t-miss investment isn’t part of Clary’s business problems or legal woes. The deal happened nearly 20 years ago, and Clary made good on his pledges.

Investors received double their money from Clary within 18 months, and also received a minority stake in what would become his biggest deal to date: Spring Creek Centre in Fayetteville.

“He did his part 100 percent,” said Jim Hathaway, a veteran Little Rock commercial developer and Spring Creek investor. “He did everything he said he would do.

“I’m real sorry about what’s happened to Steve.”

The 58-year-old businessman didn’t respond to a request for an interview for this story.

“Your paper hasn’t been kind to Steve, so I doubt he would want to speak to you,” Cynthia Clary said.

 

Establishing a Reputation

In the early 1990s, Clary was making a name for his fledgling Clary Development Corp. with retail projects such as the 150,000-SF River Park Plaza in Malvern and the 272,000-SF Valley Park Centre in Russellville.

The high-risk, high-reward outcome with the 600,000-SF Spring Creek Centre became a legacy deal for Clary, a signature play that helped establish his reputation as a successful developer.

At the time, Clary was cash-strapped and needed about $350,000 to keep his option to buy the 67-acre site for $3 million.

An added hindrance to the development was a Wal-Mart real estate official who was slow-playing Clary. The nation’s largest retailer was interested in developing a supercenter on part of the land.

But the Wal-Mart representative was looking to wring out some savings by squeezing Clary out of the deal, according to Hathaway and others familiar with Spring Creek Centre.

The stance of the Wal-Mart real estate exec is remembered as: “I know you can’t afford the property. I’m going to wait until your option expires, and we’re going to buy it on our own.”

Clary was so committed to making Spring Creek Centre happen that he pushed the limits of leverage and cash flow. How far did Clary carry the risk?

At one point, sources told Arkansas Business, Clary battled shut-off notices for electric service to his house in west Little Rock’s Longlea neighborhood.

“It was a big risk because he could’ve gone down, but Steve was able to operate and stay in the deal,” Hathaway said.

Despite Wal-Mart’s shaky commitment, Clary kept Spring Creek Centre moving, and he executed his purchase option with Duane Nelson, who owned Nelson’s Funeral Home in Fayetteville at the time.

Cash was generated and equity created by Clary reselling parcels to Ryan’s Family Steakhouse of Greer, S.C., 2.6 acres for $400,000, and National Home Centers Inc. of Springdale, 16.2 acres for $2 million.

“All my dealings with him were good,” said Dwain Newman, founder of National Home Centers. “I’m sorry things turned out the way they have for him.”

The Spring Creek Centre transaction represented the second time Newman had done business with Clary. In Russellville, Clary redeveloped a former Wal-Mart store into a National Home Center and expanded the 88,000-SF building for Newman.

In Fayetteville, a 150,000-SF store was built for National Home Centers. The project, completed in May 1994, represented the company’s largest location at the time. Four years later, the Spring Creek Centre store was sold to Home Depot Inc. of Atlanta for $6.5 million.

“Wal-Mart was going to open a year ahead of us and ended up opening a year after us,” Newman said.

Wal-Mart let its tenuous land deal with Clary lapse. But the real estate executive’s power play ultimately cost the company more money. The retailer bought its 25-acre supercenter site at Spring Creek Centre for $2.6 million.

“They came back and ended up paying more for the land, maybe twice as much,” one Clary investor said.

In 1997, Clary sold two pieces of the Spring Creek Centre totaling 140,000 SF to Developers Diversified Realty Corp. of Cleveland for $12.4 million. Clary Development also sold a final 78,000-SF piece in February 1999 to the real estate investment trust in a $6.8 million deal.

The Spring Creek Centre sales followed an earlier transaction with Developers Diversified Realty. Clary Development sold the River Valley Centre in Russellville for $14 million in 1994.

The company was off and running, and real estate development continued to be the successful foundation for Clary. Every single one of Clary Development’s ventures made money, according to past partners.

Even Shackleford Crossings in west Little Rock was performing despite Wal-Mart delaying the arrival of its 203,000-SF supercenter, real estate insiders report. That 22.9-acre site produced a $9.7 million sale, more than two years after the Wal-Mart store was originally expected to open.

Clary relinquished his ownership in Shackleford Crossings, built around a 278,000-SF lifestyle center. That high-profile property is now under the care of a receiver after Clary defaulted on the project’s $74 million funding agreement with M&I Marshall & Ilsley Bank of Milwaukee.

Among the actions that triggered the M&I default was Clary pledging his ownership in Shackleford Crossings as collateral on other debt.

“Real estate development is not what took Steve Clary down,” said a past business partner.

 

Foreshadowing Encounters

Steve Clary started his career as an accountant in 1974, working in Memphis at Ernst & Whinney and in Little Rock with Arthur Young & Co. His accounting work included providing audit, tax, regulatory compliance and management advisory services to investment banking firms and real estate syndication firms.

Before striking out on his own in real estate developing during the mid-1980s, Clary worked with two prominent executives, Jon Brittenum and Melvyn Bell. Aspects of their careers foreshadowed things to come in Clary’s.

With Brittenum, Clary would have a good seat to see what happens when financial stress prompts a businessman to step over the line.

With Bell, Clary was exposed to the consummate deal junkie, an entrepreneur who discovered that even his substantial Environmental Systems Co. wealth had limits.

Brittenum, a Razorbacks football hero, operated Little Rock investment banking firm Brittenum & Associates. Clary helped Brittenum syndicate real estate investments during the early 1980s.

When Brittenum’s company began suffering financial losses, he scrambled to borrow money and more to keep it solvent. Along the way, Brittenum ended up in federal court accused of converting customers’ securities for use by him or his firm without their consent.

Brittenum & Associates failed in January 1986, and both the firm and Brittenum filed bankruptcy that year.

Claimed losses totaled more than $3.5 million, and Brittenum offered a plea of no contest to felony theft-by-deception for mishandling his client’s cash and securities.

Brittenum faced a potential 20-year stint in jail but was given a five-year suspended sentence with 100 hours of public service. Lawsuits were flying over various Brittenum deals at the time, and Clary was splashed by some of the litigation because of his association with some of the investments.

But Clary emerged unscathed.

Loehmann’s Plaza in west Little Rock, known today as Market Street Plaza, brought Clary and Bell together. The $14.7 million development was in turmoil thanks in part to financial skullduggery by John McClellan, who developed the 137,000-SF retail center with Clary.

Bell entered the ownership picture in 1987, and Clary remained aboard in a vain attempt to keep the project working. The property ended up in the hands of the Texas lender, Richardson Savings & Loan Association, and ultimately its regulatory receivers.

When the stock market crashed in 1987, Bell’s leveraged Ensco stock fortune was pummeled, and he could no longer juggle his varied business interests and chaos ensued.

It was a situation that Clary can appreciate.

As the financial markets melted down in 2008, Clary’s hopes of striking deals and raising money to keep his own varied holdings afloat were snuffed out.