The Little Rock Technology Park Authority is considering the possibility of pursuing a public-private partnership to fund the second phase of the city’s downtown startup village for entrepreneurs and early-stage companies.
At the authority’s monthly board meeting Wednesday (Jan. 9) at the downtown Tech Park’s Main Street-facing conference room, Little Rock real estate developer Jimmy Moses prompted an informal board discussion on a possible public-private partnership marriage as he offered potential financing vehicles for the Phase II of the downtown development just one month after design plans were unveiled.
In particular, Moses offered as an example his “public-private” experience in developing the downtown Arcade Building, a three-story, mixed use 60,000 square foot office complex in Little Rock’s River Market district that includes retail and office space and the 325-seat CALS Ron Robinson Theater. That $17 million joint venture between the Central Arkansas Library System (CALS) and Moses Tucker Real Estate was completed in 2013.
In explaining the history and ups-and-downs of getting that project off the ground with the city’s public library system, Moses told Tech Park boards members he could envision the authority taking on a similar project as an extension of its mission of advancing the city’s entrepreneurial community.
Moses then applauded the Tech Park board for the successful completion of Phase I of the six-floor, 38,000 sq. ft. project that includes a heavily-trafficked coffee bar, a spacious conference room, and tenant space to house companies of all sizes. He said he was wowed by the initial Phase II design plans in December, including possible commercial space on the first floor for a restaurant or cafeteria, and a large meeting/conference room that could serve up to 150 people.
“I think it is fantastic for a host of reasons,” Moses said. “It adds a commercial component we need downtown on Main Street. It makes perfect sense.”
Tech Park board members have said Phase II of the downtown project would serve as the “front door” or official centerpiece for the tech village. The second step of the city’s original bid proposal calls for a STEM-focused office building that would include state-of-the-art wet/dry labs for computing and research, and additional tenant space to office local startups and tech firms.
The planned 83,000 square foot STEM-focused building is located between the KATV Channel 7 building at Fourth and Main Streets and the current Tech Park headquarters at 417 Main St, which Moses called the “perfect space.”
The downtown real estate developer advised the Tech Park board to consider exploring public-private options that fit within the authority’s nonprofit mission and legislature-approved charter. He said one possibility could be a joint venture arrangement, which could expand funding opportunities by attracting private capital and investors looking to invest in mixed use space.
“Perhaps there is a way …, you might engage the private sector to help you,” said Moses, adding that his firm might be a candidate along with other local real estate developers and fast-growing companies looking for office space to expand in the downtown area.
TECH PARK CHARTER CHALLENGES
One challenge the Tech Park board could face to a public-private partnership is whether the publicly-financed nonprofit’s charter limits the authority’s options. Under enabling legislation passed by the Arkansas General Assembly as Act 1045 of 2007, the authority is sponsored by the University of Arkansas at Little Rock (UALR), University of Arkansas for Medical Sciences (UAMS), and the City of Little Rock through a mutual pact.
The authority later was formed in 2011 to acquire, develop and manage a research-technology facility in the city, governed by a seven-person board appointed by the three sponsors. In the 30-page act signed into law by then-Gov. Mike Beebe, the legislative intent called for the authority to “maximize the creation and retention of business that develops through Arkansas’ colleges and universities,” and to “encourage, house and support … developing entrepreneurs and businesses.”
Before the Tech Park board made the decision to locate to the downtown area, there was robust debate on the intent of the enabling legislation. As the authority was considering a controversial eminent domain option to acquire land to locate in the city’s Oak Forest neighborhood, UALR’s former Chancellor Joel Anderson argued that the authority had moved away from the “key ingredient” of university-generated research in Act 1045.
“Unfortunately, somewhere along the way public discussion changed from ‘research park’ to ‘technology park.’ That change has had the effect of taking everyone’s eye off the ball. The point of departure for it all was research … university research … commercializing university research … and jobs, in our case, jobs for the people of Little Rock,” Anderson said in prepared remarks to the Tech Park board in October 2013.
In the Tech Park board’s discussion on Wednesday, Moses challenged board directors to look at the charter to see if they had the ability to underwrite the future financing of the downtown multi-site project through a public-private partnership that did not overstep the authority’s legal boundaries.
“It makes perfect sense,” said Moses. “I look at what you’ve done here as nothing but ‘A-plus’ for this city. Anything that we can do to drive quality job growth that is technology-based is essential to our future.”
Moses added: “What could the community, what could a company in your wheelhouse and others do with you to help facilitate sooner and larger (development)?”
Longtime Tech Park director C.J. Duvall said there could possibly be some legal issues the board will face if it should look at outside partners to help fund Phase II development. However, he urged the board to consider that route as a mission-oriented option.
“(A) joint venture or public-private option could very easily have some complications as it relates to our mission – at least the way it has been chartered,” said Duvall, a former executive for the now defunct Alltel Corp. “But if we really are thinking about what’s great for Little Rock and the possibility of more jobs, and in the same regard not having to ask the citizens for something bigger when we know we already have to ask, I would love to see us think about ways to search for joint ventures.”
Little Rock real estate developer Dickson Flake, who has served on the Tech Park’s board of directors since its beginning, said he would research the Tech Park’s charter to see if there was any leeway to consider a public-private financing arrangement. At the Tech Park’s February meeting, the seven-person board is expected to get a price tag for the next stage of the project.
The Tech Park’s first phase was accelerated in 2011 after Little Rock taxpayers approved a $22.5 million sales tax referendum to finance the project. Then in 2015, a local bank consortium led by Conway-based Centennial Bank financed a $17.1 million loan for the construction of the projects, which was completed in April 2017.
Four additional stages of development are planned over several years to foster a Silicon Valley-like entrepreneurial culture in Little Rock’s central city.
In other Tech Park business, authority Executive Director Brent Birch gave the board a recap of financial and operational highlights for 2018. He told the board that the downtown tech village saw a yearly increase of nearly $178,500 to push the authority’s annual rental revenue to more than $1.1 million. On a monthly basis, rental income is up 77% in 2018, or $41,603 compared to $23,532.
That rental spike is primarily due to the 54 companies that now occupy the Tech Park at the end of the year, up from 32 in 2017. With a total of 114 people working for those tenant firms, Birch said the city’s startup incubator is at full occupancy.
Financially, Birch said the downtown nonprofit has a nearly $1.5 million bank balance, mainly due to annual proceeds from the city’s 2011 sales tax referendum. A second payout would be remitted in April after all Little Rock sales tax proceeds from 2018 are accounted for, he said.
Last year, the Tech Park received a total of $1.7 million from the sales tax initiative. Birch said the Tech Park will use those funds to pay off a taxable portion of a $15.4 million financing package given to the authority in April 2016 by a local bank consortium. Birch said the authority will soon pay off the remaining $2.06 million balance on the taxable loan at an interest rate of 4.19% due before February.
That loan was split into the Centennial Bank-based loan package that included a larger $9.6 million tax-exempt portion due in February 2022 at an interest rate of 2.95%, which the authority will begin making payments on this year, he said.