The Little Rock Technology Park Authority made a soft pitch to a local Centennial Bank-led banking consortium to support the second phase of the city’s multi-stage tech village once a decision is made on how to fully finance the $26 million development project.
In a presentation that lasted about 30 minutes, Tech Park Executive Director Brent Birch shared key details of the planned project with a half-dozen executives aligned with the same banking syndicate that financed a two-part, $15.4 million loan for the construction of Phase I of the downtown startup incubator, which was completed in April 2017.
Near the end of his presentation, Birch offered the local bankers a brief history of the Tech Park that began with enabling legislation passed by the Arkansas General Assembly in 2007. Then he laid out the authority’s blueprint to move forward with the second step of the five-stage project to draw tech jobs to central Arkansas.
“So why Phase II, given that we are rocking and rolling along here, and things have settled in with a lot of stability in our tenant base?” Birch asked rhetorically, highlighting the Tech Park’s near 100% occupancy. “We are running into instances where we are turning people away. And we can’t not only turn away people that fit with the offices we have, but we’ve had to turn people away that want more than we can offer.”
In 2011, the Tech Park’s first phase was accelerated after Little Rock taxpayers approved a $22.5 million sales tax referendum to finance the project. Four years later, the local banking group financed the successful completion 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 ranging in size from sole proprietors to mid-sized startups with growing payroll needs.
Under Phase II plans first unveiled by Little Rock-based WER Architects in late 2018, Tech Park board members said they hope the planned 83,000 square foot STEM-focused downtown project will serve as the “front door” of the downtown tech village. The original bid proposal calls for commercial space on the first floor for a restaurant or cafeteria, and a large meeting/conference room that could serve up to 150 people.
Another key component in the design includes state-of-the-art wet/dry labs for computing and research and additional tenant space to office larger firms and emerging companies. The Tech Park board has also discussed a potential mixed-use development that would attract private investors or a possible equity investment from a venture capitalist.
Architectural renderings for the five-story “shell” building show the Phase II development will be connected to the current Tech Park headquarters on the vacant lot between the KATV Channel 7 building at Fourth and Main Streets. Four additional stages of development are planned over several years to foster a Silicon Valley-like entrepreneurial culture in Little Rock’s central city.
At Wednesday’s meeting, Birch explained to the local bankers that besides the need for more office space for early stage startups, the legislative intent behind the creation of the authority was to spur innovation in central Arkansas. By providing an innovation center to encourage new forms of enterprise, knowledge-sharing and commercialization of ideas, Arkansas’ entrepreneurial, private, government and academic sectors can boost the region’s tech economy, he said.
“I have a good feeling there are long-established companies in the Little Rock area who would like to be around this environment not just for recruitment, but being able to bring potential employees into an environment like this and say, ‘This is the kind of place where you are going to work,’” said Birch.
In his final pitch to the banking group, which included Centennial Bank executive vice president Jeff Hildebrand, Birch told the group that the authority plans to soon move forward with a local roadshow to find key investors or seek other ideas to fund Phase II. He said the seven-person nonprofit board is also looking to attract a local or out-of-state tech company that needs room to expand or serve as a potential “anchor tenant.”
“Let them own a floor or two floors, whatever it is,” said the Tech Park’s lone employee. “We also talked about naming rights to the building and other private investment out there that … we can get our hands on. We will definitely keep pursuing draft rosters of (investors) we may call on, and that is pretty short on our agenda to get out there and seek that.”
Birch then thanked the Centennial Bank-led consortium for their support of Phase I, but closed by telling the half-dozen or so bankers attending the meeting that the authority will look to the them for financial backing as plans for the Phase II are nearer and clearer.
“The banks stepping in was a big piece in us being able to do all this. So, our hope is the relationship continues to be as strong as it is and then when you are ready for what we may need from you for this Phase II,” said Birch. “I think it means a lot to the community, … that your banks stepped up and played a role in us getting this off the ground.”
After that pitch, several of the local bankers quizzed Birch and Tech Park board directors on the future of the downtown development. Hildebrand said the consortium was strongly interested in continuing a financial relationship with the authority, yet could not fully commit on backing Phase II until more is known.
“When we originated this, we were leading it and we are certainly thrilled with what you’ve done so far and we want to continue to participate,” said Hildebrand. “Who knows how many banks we are going to have involved, but we are interested and want to see what you will come up with, and we will look at it at that point in time.”
In the consortium’s original financing deal with the Tech Park in 2015 the $15.4 million loan was split into a $5.1 million taxable loan with an interest rate of 4.19% and a larger $9.6 million tax-exempt portion due February 2022 at an interest rate of 2.95%, which the authority began making payments on in March.
The $25.99 million cost estimate for Phase II includes about $15.4 million of construction costs along with an additional $10 million in direct and indirect costs, insurance and contingencies. Those costs also were “inflation-adjusted” based on at least a two-year timetable necessary to complete such a project once financing is in hand or an angel investor is found.
Following the presentation to the local bankers, the Tech Park directors tabled a measure to pay an additional $300,000 on the remaining premium of the tax-exempt loan from the consortium until Birch had an opportunity to brief the board on the Tech Park’s cash flow, which ended the first half of 2019 with $851,000 in the bank.
Tech Park directors also unanimously approved a 23-page deal with CDI Contractors to lead construction of the second phase of the city’s unfinanced $26 million startup village. The Dillard’s Inc.-owned firm was first hired as construction manager of the multi-million dollar project in August 2018, but won’t get paid until financing is in hand, said Birch.