Northwest, Central Arkansas business leaders launch private investment fund

Former Arkansas Development Finance Authority (ADFA) executive Brad Henry is leading the formation of Natural Capital, a Little Rock-based private investment company focused on investing in regional private investment funds, real estate and operating companies.

For the past five years, Henry served as vice president of ADFA, Arkansas’ venture capital and loan portfolio, with over $120 million in assets.

Henry is co-founding Natural Capital and is responsible for the firm’s day-to-day operations. A trio of Northwest Arkansas business leaders are also co-founders — Brock Gearhart, Marshall Saviers and Todd Simmons. Gearhart is the president and owner of Fayetteville investment advisory firm Greenwood Gearhart Inc., one of the largest independent investment advisory firms in the state. Saviers is president of commercial real estate investment firm Cushman & Wakefield/Sage Partners in Rogers. Simmons is the CEO and vice chairman of Siloam Springs-based Simmons Foods Inc. & Affiliates, a third-generation, family-owned company that has called Arkansas home since 1949.

“The concept for the firm developed over several conversations between the four of us over the past four years,” Henry said. “Just casually talking about [investment] opportunities we see in Arkansas and the heartland. The more we talked, the more it was clear that our investment strategies matched up.”

All of the co-founders are Arkansas natives — Henry and Saviers from Little Rock, Gearhart from Fayetteville and Simmons from Siloam Springs. Henry said Natural Capital is a response to the growing interest in Arkansas investments by other U.S. funds, specifically from the east and west coasts.

“We keep seeing the [investment] deal sizes get larger in Arkansas,” Henry said. “There’s more money coming in. We feel like folks here should have the opportunity to participate in the exciting stuff that’s going. But you’ve got to have the capital base to take advantage of the opportunities. Especially some of the larger ones.”

Simmons agreed, saying the prospect of Arkansas investors backing Arkansas assets is appealing.

“I love my state,” he said. “And I love the fact that the folks in Arkansas are hard-working, smart people. I think people who have built businesses here and grown their careers here deserve an opportunity to reinvest back in the state in a way that is impactful.”

Gearhart said the timing is right for Natural Capital.

“From an investment standpoint, which is my background, we believe there are a lot of opportunities that are non-coastal in nature,” he said. “We want to be positioned to take advantage of that. Not just for ourselves, but for our limited partners. The timing is right for that as Arkansas continues to grow. We want to make sure these opportunities are given to Arkansas investors. We think this is the right mechanism to do it.”

Natural Capital has raised $15.77 million for its private equity fund — Natural Capital Fund I LP — according to a Form D filing it made Oct. 3 with the U.S. Securities & Exchange Commission. The date of the first sale was Sept. 18, and the total offering amount is $100 million, according to the filing. The number of investors was not disclosed.

Henry left his job with ADFA in June and Natural Capital started formal operations Aug. 1.

“It’s been a whirlwind the first couple of months,” Henry said. “We’re excited about all the momentum and we want to continue that.”

FIRST INVESTMENT

Natural Capital completed its first investment in early October. The firm, according to county real estate records, paid $16.5 million for the 220,000-square-foot Doctors Building, a medical office and clinic building at 500 S. University Ave., just off Interstate 630 in midtown Little Rock.

An affiliate of Provident Realty LP of Dallas was the previous owner. Situated in the city’s medical corridor, Saviers said the purchase and subsequent renovations of the building will complement the ongoing development in the midtown area.

The new owners say they plan to “invest significantly” in property renovations. The building is about 70% occupied with as many as 50 different types of medical providers.

Originally built as a hospital, the tenant use has morphed into a medical office building and hasn’t been locally owned since the 1970s.

“Because it hasn’t been aesthetically improved in a long time, people either don’t notice it or don’t have a positive impression of it,” Saviers said. “That’s the thesis of what Natural Capital is all about. We want the building to be something we’re proud of and the state’s proud of. We felt like we’re the right folks to do it.”

Saviers said Cushman & Wakefield Sage Partners will manage the Doctors Building. He said with the property getting the improvements it needs, the former Sears building nearby being razed to make way for new redevelopment, the area near the University/630 intersection will look significantly different in the next couple of years.

“It’s already highly desirable, but will be even more so a few years from now,” he said.

Dr. Chad Rodgers is a partner at one of the building’s longtime tenants, Little Rock Pediatric Clinic. He said the building’s location — within a five-mile radius of six major hospitals — is essential to the medical community.

“We are pleased that the new ownership represents local investors who are committed to new improvements and want to ensure this space serves future generations of Arkansans,” Rodgers said.

Saviers said the existing tenants will all remain. The vacant space will be marketed to medical/healthcare users that will add value to the property.

Henry said he expects Natural Capital to “move quickly” to grow its portfolio across the state. He said there are opportunities throughout the state.

“Even though we’ll be investing in multiple verticals, we envision holding these investments for a long period of time,” he said. “Ten or 15 years; we may hold forever. I’m not saying we won’t sell, but that’s not the idea. If we make an investment, we want to be comfortable that we are holding it for the long-term.

“On the flip side, we want investments that are cash flow positive and have the ability to make distributions without the need to sell the asset. That’s the balance. You can’t hold something forever if you aren’t able to have some form of capital coming back as part of the investment.”

You can watch a full interview with Brad Henry in the video below.