June 6, 2024

by Josh Snyder | Arkansas Democrat-Gazette

A subcommittee of the Arkansas Public Employees Retirement System’s board voted Thursday to delay making a recommendation on where the system should move its offices until a consulting firm’s report on the efficiency of the state agencies is published.

The Investment Finance Subcommittee, chaired by system trustee Daryl Bassett, also saw presentations on the second of two options in their building search: The One Cantrell Center office building at 2800 Cantrell Road in the Riverdale area in Little Rock. At its previous meeting, the subcommittee saw a presentation on the other option: a building that a company — owned by veteran lobbyists Ted and Julie Mullenix — has proposed to construct on its property at 1700 W. Third St., just north of the state Capitol in Little Rock.

Finally, the subcommittee voted to recommend seeking a one year extension on the system’s lease at the Union Plaza building in downtown Little Rock, where the system’s offices are now.

In February, the Arkansas Legislative Council signed off on the state Department of Transformation and Shared Service’s consulting contract for up to $5.5 million to help the state’s 15 executive branch agencies become more efficient and improve services to Washington, D.C.-based McKinsey & Co.

Bassett said it would be in the subcommittee’s interest to take into consideration the “exhaustive study” made by McKinsey and Arkansas Forward, Gov. Sarah Huckabee Sanders’ state government efficiency initiative, and to make decisions that align with its recommendations.

Sanders’ transformation effort indicates “our state leaders have been interested in us trying to find ways to do more with less, find ways to consolidate, work together,” Bassett said.

Subcommittee member Gary Wallace made the sole vote against the motion, expressing concern that it would prevent the subcommittee from hearing offers about other spaces the system could move into. Bassett rejected the notion, however, saying their vote was only intended to hold off on making recommendations to the full board.

“The sentiment is not to release any recommendation to the board until after the McKinsey group report is released,” Bassett said. “Once that’s released I think that’s going to open up a plethora of other ideas.”

Located near the base of Cantrell Hill, One Cantrell Center is sometimes referred to as the “Cadence Bank building.”

The 38-year-old building stands five stories tall, with a total of 67,682 maximum square feet as rentable area, according to a May 23 report from Anne Laidlaw, director of the Transformation and Shared Services Department’s Division of Building Authority, to retirement system Executive Director Amy Fecher. Each floor typically occupies about 15,049 rentable square feet, the report states.

Laidlaw’s report states the system has two purchase options with regard to the building. First, it could simply purchase the building outright at a cost of $15.5 million. That choice would include an $800,000 escrow for capital upgrades. Alternatively, the system could lease with the option to purchase. Under that route, it could lease up to 50,837 square feet at $22.50 per square foot, with the cost increasing by 3% a year, for up to 10 years. It could choose to purchase at any time within the first five years, according to the report.

Ryan Gibson, managing director for the Cushman & Wakefield/Sage Partners commercial real-estate firm, and Ken McRae, one of the building’s owners, gave the first presentation on the building. The pair said the system could move into blocks of space between the second and fifth floors, though the building currently has several occupants. Gibson said half of the second floor and the third floor are currently available, while the fourth floor has a lease that will be up in June 2025. The fifth floor would be available “no later than” December 2026.

Fecher told the subcommittee the system could occupy two to two-and-a-half floors of the building if they were to ultimately move into that location.

“We could deliver roughly 34,000 feet or something like that,” McRae said of the amount of space that would currently be available. “We’d have to wait another year to deliver space on the fourth floor. But if you were to wait a year, then we think it could all be delivered simultaneously.”

Bassett said the existence of the other occupants would require the system to consider how quickly it would want to move if they were to choose to move into the building.

Laidlaw presented second. She told the subcommittee that, while the building would offer less square footage than the space currently occupied by the system, the One Cantrell Center space would be “more efficient.”

“Whereas right now you may be occupying 41,000 square feet there, you could occupy much less than that,” she said.

Laidlaw said the system would need to consider making about $1.05 million in upgrades during the first year if they purchased the building, and more than $3.75 million within a decade. The upgrades include about $850,000 in mechanical and elevator work that would need to be made in short order.

The retirement system currently occupies a portion of the Union Plaza building in downtown Little Rock. Its lease on the 41,283 square-foot space is set to expire in June. Fecher has previously said the annual rent for that space is $766,625. According to system records, it also pays more than $40,000 a year in parking costs at the building.

At its previous meeting, the subcommittee saw a presentation on the other option: a building that a company — owned by veteran lobbyists Ted and Julie Mullenix — has proposed to construct on its property at 1700 W. Third St., just north of the state Capitol in Little Rock.

Julie Mullenix told the subcommittee the current plan for the proposed building at 1700 W. Third St. is for a two-floor, 40,000-square-foot building that would be an extension of the state Capitol complex.

The price tag for the system to purchase building would be $18.5 million, she said. If the system leased the building with a 3% “annual escalator,” it would cost the system $29.4 million over 15 years, she said.

The project timeline, including design and construction, is estimated to be 20 months.

Information for this article was contributed by Michael R. Wickline of the Arkansas Democrat-Gazette.

Read full article HERE.