Not one to mince words, Carmen Lehman calls the inspiration that led to the creation of Village on the Creeks, an innovative $30 million development in Rogers, “divine stupidity.” The stupidity on her part, she said, was not knowing what she was getting into while the divine part came from God taking care of her through the process. That process saw the development of a minnow farm into an upscale office complex and shopping center that catered to the burgeoning Wal-Mart vendor community.

Through negotiations in a bankruptcy that was later dismissed, Lehman lost control of the property last year during the economic downturn that has gripped the nation.

On Dec. 10, Lehman reached a settlement that transferred the property’s ownership to Arvest Bank.

It was a transaction that separated her from the project that is credited with changing

the perception of Ben- ton County.

The offices and other developments that now surround the complex would have happened at one time or another, said Tom Rife, a real estate appraiser and owner of Rife & Co. appraisers in Bentonville.

“It would have happened without Village on the Creeks but it would have been a whole lot slower,” Rife said. The fast growth in Northwest Arkansas during the past two decades fit well with Lehman, because slow has never been her style.

“My ‘sitter’s’ broken,” the real estate agent and former registered nurse said about why she keeps a tightly packed schedule.

The woman born in — and almost named for, she said — a community called Carmi, in southern Illinois, is known for her boundless energy and tireless efforts for supporting charities and her friends, but also is linked to 64 acres in southern Rogers.

IN THE BEGINNING

Lehman is adamant about avoiding publicity or anything close to what she calls “the spotlight.”

“That’s just not me. I don’t like it,” she said.

Lehman, 66, said she was raised with a strong faith that has supported her throughout her life.

“When I was growing up, if the church doors were open, we were there,” she said.

“My faith is the strongest part of me. I have no doubt that the best is yet to come,” she said. “Although I can’t do everything, I can do anything.”

Carmen married Arnold “Tuffy” Lehman in 1970 — a second marriage for both of them — and the couple built on his experience and prior successes to create residential projects in Rogers and Bentonville. Together they raised a son John and a daughter Summer Raser, who are both in their 30s.

In 1966, Tuffy and a brother Don formed Lehman Construction and began to develop residential projects. Early projects included Rural Oak Estates, Cedar Brooke and Centre Court, all in Rogers.

By 1977, Carmen Lehman and Tuffy Lehman formed Arnold Lehman Builders Inc. Carmen Lehman did the bookkeeping for the business while she raised the children.

In 1985, they moved the business office to Halsted Circle office complex on West Walnut Street in Rogers. Arnold Lehman Builders built seven of the buildings in that commercial development.

Another development company owned by the Lehmans, Hanover Inc., built the Hanover subdivision in Bentonville in 1987, the first project they created in that city. The first two phases included 88 lots, a third added 52 more. Prices ranged from $300,000 to $650,000 for houses on lots that ranged from one-third of an acre up to 2 acres.

MEETING A DEMAND

Having been successful in building residential properties, the Lehmans had what seemed to be a dependable, stable clientele.

The people who bought Lehman-built houses in Hanover and later the Stonehenge subdivisions in Bentonville — primarily employees and executives for companies supplying Wal-Mart Stores Inc. headquarters — began asking for quality office space, Tuffy Lehman said.

“I don’t think I realized what was happening. We were just meeting our customers’ needs,” Carmen Lehman said.

Trying to accommodate those demands led to the large-scale commercial development, said Tuffy Lehman, whose divorce from Carmen was final in 2000.

With its park-like walking trail around the lake nestled in the Village on the Creeks, the 64 acres at the heart of the Pinnacle area doesn’t look at all like the former minnow farm it used to be. The development features 21 buildings with 270,000 square feet of space. The buildings vary from 5,000 square feet up to 50,000 square feet, according to David Erstine of Sage Partners, the leasing company hired by Arvest Bank to help manage the property.

Erstine said the development is about 25 percent retail with the rest being professional or medical office space, although those amounts can change with every new tenant.

“A lot of the space is very flexible, it can go from retail to office and from office to retail,” Erstine said.

Although the current tenant population of about 50 is office-heavy, Erstine said there has been a lot of interest in retail space in the past few months.

However, the office section at the back of the development filled quickly from the beginning.

“We already had leases to several companies before we started,” Tuffy Lehman said.

To help their development company grow, the Lehmans split the work needed to complete a successful development between them. Tuffy Lehman was construction and development, Carmen was marketing, bookkeeping and networking.

“I’m not sure if it was more Tuffy or more Carmen, or if it was just the combination of the two of them at the time,” Rife said.

As early plans for the Village began to take shape, another question jumped to the front of their minds. People moving into Northwest Arkansas to work for Wal-Mart or Wal-Mart vendors were much more accustomed to having nearby shopping and other amenities in the cities they’d moved from. That type of convenience had not been developed in Benton County.

That led to the creation of the front half of the development with 10 commercial lots for retail and restaurant use.

“Our residents changed, we had to change with them,” Carmen Lehman said.

That change was clear from the numbers. Benton County’s growth outpaced most of the country — and most state estimates — for more than a decade.

The county’s population bloomed from 97,499 in 1990 to nearly 187,000 in 2005 and averaged 17 new residents a day between 2000 and 2005.

With that population boom, the amount of disposable income jumped too, jumping from $26,021 per median household in 1989 to more than $40,000 a decade later. Overall, the state projected a 4.7 percent increase in disposable income for the area in 1998 and a 3.7 percent increase from $2.7 billion to $2.8 billion in retail sales for the next year. Both percentages stood above state projections.

Even years after Village on the Creeks opened in 1998, demand for more retail space flourished in Benton County. Figures from the Chicago-based National Research Bureau, a retail market data firm, show that the Fayetteville-Springdale-Rogers metropolitan statistical area in 2005 had 11.99 square feet of retail space per person, 34 percent below the national average of 18.19 square feet per person.

CONSTRUCTION BEGINS

Tuffy Lehman said trying to turn a bunch of minnow ponds into a shopping destination kept him awake many nights. The property met all the conditions in the adage of choice real estate: “location, location, location.”

“It was near the center of population. It had good access to the new interstate. And it would be able to take advantage of an existing interchange at New Hope Road,” Tuffy Lehman said.

While it was the right spot, it was the wrong type of land for development. Tuffy said doing the dirt work on the soggy 64-acre site took two years before construction could begin.

“I like to do the layout and all that, then I take it to an engineer,” Tuffy Lehman said.

The site originally held 21 shallow minnow ponds that supplied the trout ponds surrounding Tale of the Trout, a popular Rogers restaurant that closed in 2000.

To turn the ponds into a retail haven, Tuffy excavated a 12-acre lake and used that dirt to fill the ponds beginning in 1993. Then the creek and flood way were changed to follow the lake’s contour.

Construction on the buildings began in 1995 for the master-planned development, the first such in Northwest Arkansas.

Master-planned developments include a mix of uses, such as residential, commercial, office or professional sections.

It was also the first Northwest Arkansas development for which the infrastructure improvements were funded in part by a bond issue as Rogers Municipal Special Improvement District No. 1.

Other real estate dealers and experts were surprised to see such a big construction project in Benton County.

Fayetteville had always been the retail shopping area for the region and many thought the new interstate was just a faster way to get shoppers from Benton to Washington County.

“I remember driving out there and it seemed it was in the middle of nowhere,” said George Faucette, one of the owners of Coldwell Banker Harris McHaney Faucette Real Estate. “I thought ‘Those buildings will wither on the vine, no one will come out here.’ They obviously had a vision that I did not have.”

Once the buildings were complete, filling them with retail stores was more difficult than she expected, Carmen Lehman said.

Major retailers demanded remodeling or build-out allowances and funding for the store’s inventory for the first year up front, she said.

“So we fell into a pattern of getting local businesses,” she said. SoHo Clothiers was the first store to contract for space in Village on the Creeks.

“Once we were on the radar, everybody came into Benton County. Developers, banks, all of them,” Lehman said.

LEADING THE MOVEMENT

Village on the Creeks started a rush for property on the west side of Interstate 540 in Rogers.

“They were the first,” Faucette said. “They were the catalysts for everything that followed.”

But while everyone was watching Village on the Creeks to see if it failed, they also noticed there was money to be made in developing Benton County, Carmen Lehman said. Competition to Village on the Creeks began to pepper the area.

Kathy Deck, economist and director of the Sam M. Walton College of Business’ Center for Business and Economic Research at the University of Arkansas at Fayetteville, said there always has to be a first development in an area, a pioneer who stakes out a plot of land to cultivate it into what he hopes will be a dynamic and busy commercial enterprise.

The first people to move into any market, whether it is developing land, selling a product or providing a service, tend to do well for a time, Deck said. It even has a term in economics — “first mover advantage.”

“The first in anything tends to do well for a while but it seldom lasts long unless there are barriers to others entering that same market,” Deck said. “As hard as it is to understand right now, there was a time when Benton County was underretailed.”

Mixed-use developments such as The Shoppes at Pinnacle Hills, which began in 2005, and the retail center Pinnacle Hills Promenade, which opened in October 2006, challenged Village on the Creeks for customers and leases. The newer developments offered the latest luxury updates with the promise of more space and more vendors to help draw more traffic to shops or offices willing to relocate.

Benton County had momentum on its side in population growth and income distribution, so everything needed for a successful development was available right there at that time.

“I think it is reasonable to say that the area had reached critical mass,” Deck said.

Speaking in March 2006, John George, executive vice president of a development company that formed the core of the group that built a large part of Pinnacle Hills region, called the overall development of the area along I-540 around New Hope Road the largest retail and commercial construction project at that time in the state.

George said the 700 acres — 1 square mile — that comprises the Pinnacle Hills area had more than $100 million invested in land alone and estimated the combined construction budgets of 18 construction sites at a little more than $1 billion at that time.

Pinnacle Hills Promenade retail center opened in October 2006 with a Dillard’s, a J.C. Penney’s and a 12-screen Malco Cinema movie theater, along with 80,000 square feet of office space.

Other developments in the past five years include:

The Shoppes at Pinnacle Hills, which includes 800,000 square feet of office, boutique retail and condominium space

The Church at Pinnacle Hills with its 3,500-seat worship center that opened in 2006

Hotelier John Hammons’ 125,000-square-foot convention center is attached to the Embassy Suites and includes a six-story, 150-suite addition to the hotel with a full-service luxury spa

The Mercy Medical Center that opened in 2008.

The Pinnacle area still draws businesses.

“This area has seen a tremendous amount of leasing activity lately,” Erstine said. “I think some of that is due to the completed construction of the roads that serve Pinnacle. And a boost in the economy may have a little bit to do with it.”

In a booming economy, every commercial property’s profitable life span is shortened, Deck said, although it is hard to predict what that life span could be.

“It very much becomes that business needs to make hay while the sun shines,” Deck said.

“Unfortunately, people will always want to move on to the next new thing.”

FALLING APART

Carmen and Tuffy Lehman’s divorce in 2000 split the properties and businesses in a Benton County civil court proceeding that remains partially sealed.

Carmen Lehman came out of the legal proceeding with possession of Village on the Creeks along with other assets.

Rife said the divorce didn’t have much to do with her loss of Village on the Creeks — the blame lies squarely on the economic recession.

“This economic downturn we’ve had is more than anything we’ve seen before,” he said.

Carmen Lehman said the failure of the bubble economy was the beginning of the end of her ownership of Village on the Creeks. Without the recession, she would still own the property, she said. About this project

Over the past two decades, fortunes were made and lost in Northwest Arkansas’ real estate and development market. The region, dubbed the “economic engine of Arkansas,” grew as developers and builders reshaped the rural landscape.

Former partners in business and real estate speculation now are rivals embroiled in lawsuits and foreclosures. The economic engine sputtered, as the national recession did not spare Northwest Arkansas.

“Going for Broke” is an occasional series profiling individuals who gambled heavily on the future and rode the local real estate bubble only to leave behind multimilliondollar debts, personal financial ruin and unfinished monoliths across the area. This series, running through the rest of the year, will examine the collapse of the real estate market and its impact on the region.

She added that banks should take some responsibility for helping to create the property value bubble and how it burst.

New banks moving into Northwest Arkansas looked to construction and development loans as the key to attracting more deposits and making more money. The availability of cheap loans and demand for land inflated property values until the economy fell, she said.

“I can see how it happened,” Tuffy Lehman said.

In the midst of the bubble, everyone was making money, he said. Some people got into development who should never have been in it; they were only looking for a fast turn around to high profits, he said.

“It was just an unbelievable time,” Tuffy Lehman said. “And it hasn’t even started to recover yet.”

Economies move in cycles, Rife said. The rise and loss of Village on the Creeks should be counted as a cyclical happening, he said.

“I don’t think they [Tuffy Lehman and Carmen Lehman] would take full credit or full blame for the rise or the fall. I think they need to be lauded for that,” he said.

AVOIDING THE WORST

Carmen Lehman filed a voluntary bankruptcy petition on Feb. 16, 2009, in U.S. Bankruptcy Court in Fayetteville on behalf of C.R. Lehman Properties Limited Partnership, the company she formed after the divorce to operate Village on the Creeks.

Chapter 11 bankruptcy allows a business to continue operations while reorganizing its debts with creditors.

C.R. Lehman Properties claimed assets valued at less than $50,000 and liabilities of between $10 million and $50 million on the preliminary petition. It listed a single creditor with an unsecured claim: Arvest Bank in Rogers for a loan of $27.3 million.

Tuffy Lehman said he was shocked to learn of the bankruptcy filing.

“I had no idea she was having any problems,” he said.

Fayetteville attorney Stanley Bond, who took over representing C.R. Lehman Properties from the original filing attorney Jill Jacoway, said the property was not bringing in enough money to cover its debts.

The details of the settlement that turned the property over to Arvest Bank of Rogers and allowed Carmen Lehman to withdraw her bankruptcy petition are confidential and the file is sealed, Carmen Lehman said. She said she could not comment further on anything pertaining to the bankruptcy filing, her feelings about the financial hardship that drove her to file or the ultimate settlement.

“Anyone who goes through the bankruptcy process can tell you that it’s a long, stressful and arduous process, and those that have to experience it have my sincere sympathies,” she said.

Jason Kincy, a spokesman for Arvest Bank Group, said the bank would not comment.

Bond said that part of the settlement was that Arvest Bank of Rogers would dismiss all claims against Carmen Lehman in state court after the property was transferred to the bank.

The only property values for Village on the Creeks through publicly available information are the warranty deeds that transferred ownership to VOC Properties LLC, a limited liability company registered to Arvest Bank of Rogers on May 27, 2009, and the real estate tax records kept by Benton County.

A records search of the 21 lots that make up the property transferred to VOC Properties show a total value of $25.14 million. The amount claimed against the property in Carmen Lehman’s bankruptcy petition was $27.3 million.

When a property value and the loan against it are close in value, there are usually other issues that drive the bank’s decision to renew loans or file foreclosure on defaulted loans, said associate professor Tim Yeager, the Arkansas Banking Association Chair at UA’s Walton College.

“What those are I have no idea because we have no way of knowing any of the details. And we are not supposed to know,” Yeager said.

BUILDING ON EXPERIENCE

Her propensity to look to the brighter side of any situation helped Carmen Lehman face the first day of not owning the Village on the Creeks.

“It was raining that day, and when I woke up, honestly, my first thought was ‘I don’t have to worry about leaks anymore,’” Carmen Lehman said.

Arvest Bank Group hired Sage Partners and Management Realty, both based in Fayetteville, to handle the leasing, marketing and management of Village on the Creeks.

Erstine said Village on the Creeks was about 60 percent leased when his company signed on to handle leasing on Aug. 1, 2009.

“Leasing has been above our expectations. Now we’re above 70 percent, with the potential to be over 80 percent leased by the end of the year,” he said.

He also confirmed that the property is on the market for a new owner, but refused to say for how much.

“There has been some activity in people looking at it. That activity has been increasing lately,” he said, adding that the interest is mainly from local or regional investors.

His firm has been focused on increasing the tenant leasing and stabilizing the property’s financial picture.

“This is a very viable development with a long-term investment life expectancy,” Erstine said. “I think the location has a lot to do with that.”

Carmen Lehman still maintains a presence at the development she helped create.

The offices for Century 21 Exclamation Realty occupy suite No. 10 in Village on the Creeks. Carmen Lehman said that Marcella Hagan, the owner-executive broker with Century 21 Exclamation Realty, recruited her to join the office.

“Add to that the fact that the office is so conveniently located and only five minutes travel time for me from home, the decision was an easy one for me,” Carmen Lehman said.

And she is on the board for the Carmen Lehman Charitable Foundation, the organization that owns The Chapel on the Creeks, a small church in the Village on the Creeks paid for by Lehman that opened in 2001.

“Have you ever known a village without a church?” she said.

The chapel receives fees for weddings and special service rentals that are used to fund scholarships for higher education. The chapel, open daily for prayer and meditation, has a nondenominational worship service every Sunday morning, which also provides a rental income to the foundation.

Lehman said a statement she made to herself when she woke up on her 40th birthday has helped her maintain a positive outlook on life and some of the obstacles it can throw in the way.

“I said to myself, ‘Let’s see what I can stir up today,’ and I’ve been doing that ever since.” IMPORTANT DATES

1966

n Arnold “Tuffy” Lehman and his brother Don build and sell their first house under the newly established Lehman Construction. The brothers later develop a subdivision called Rural Oaks.

Oct. 9, 1970

n Carmen Munsey marries Tuffy Lehman.

Mid-1970s

n Tuffy Lehman buys his brother’s share of the business, then goes on to develop Cedar Brooke, Centre Court and some smaller projects before advancing to Bentonville.

1977

n Tuffy and Carmen Lehman start their construction business, Arnold Lehman Builders Inc. or ALB Inc.

1987

n Tuffy Lehman starts building in Bentonville with a handful of high-dollar houses. What follows is Hanover I, which he and Jim von Gremp develop. Tuffy Lehman follows with phases II and III, with four phases of the Stonehenge subdivision and then the Heathrow development.

June 1993

n Lehman Properties buys 64 acres on Horsebarn Road in south Rogers. Originally a minnow farm with 21 ponds, it is the future home of the upscale retail project Village on the Creeks. Work starts to fill in the ponds and build a lake.

1995

n Construction begins on the buildings for the 64-acre Village on the Creeks.

April 1996

n The Village’s first office building is completed.

1997

n The Village’s first tenant, SoHo Clothiers, opens. The clothing store takes up residence in an 18,400-square-foot retail building near the complex’s entrance. Village on the Creeks Athletic Club opens.

1998

n The Village is fully leased in its first phase of retail space, its leasing and marketing person, Judy Burns says in June. More shops are slated to open in August, about the same time construction on the Village’s next retail phase, a 25,000-squarefoot adjacent building is to begin. n Doctors and Wal-Mart vendors occupy most of the 10 office buildings toward the back of the complex, and more than 250 people work in the office park.

March 1999

n The Lehmans separate.

Nov. 16, 1999

n Carmen Lehman files for divorce against Tuffy Lehman in Benton County Chancery Court. In her divorce complaint, Carmen Lehman lists her grounds for divorce as including alienation and estrangement.

Feb.1, 2000

n A judge appoints Glenn Kelley, a Rogers lawyer, to serve as agent for the Lehman businesses during the divorce proceedings. !!!“The parties are now in substantial disagreement as to the proper way to manage and control such companies and frequently make conflicting day-to-day decisions regarding the operation and management,” according to the court order.

Aug. 8, 2000

n The Lehman divorce is granted, but the judge gives the two more time to split their property. The court also grants an order to allow briefs to be filed out of public view.

Jan. 1, 2001

n A dedication ceremony is held for the opening of The Chapel on the Creeks, a nondenominational church that Carmen Lehman had built in the Village.

July 12, 2001

n BB&B Construction Co. files suit against a company Carmen Lehman retained in the divorce — identified in court documents as Lehman Properties, Limited Partnership — in Garland County Circuit Court. !!!BB&B seeks $380,000 in actual damages and an equal sum in punitive damages for work done in the Heathrow development.

Aug. 30, 2001

n A court brief later unsealed reveals some of the couple’s property divisions. !!!Carmen Lehman retains ownership of commercial properties Halsted Nos. 1 and 5 that were formerly owned by ALB Inc. !!!Tuffy Lehman keeps ALB, minus the Halsted properties, but including ALB’s Edward D. Jones account estimated at $168,833, its checking account estimated at $9,269 and other assets. !!!The parties also had agreed to liquidate their corporation, Hanover Inc., and divide equally the remaining proceeds.

Nov. 19, 2008

n Alexandra’s Accents, a high-end floral design and interior decorating shop at the Village on the Creeks, begins liquidating its inventory. It opened in August 1991 in downtown Rogers as Victoria’s Elegant Furnishings and Gifts before moving to the Village. Business remained strong until the recession started in 2007 and housing starts dwindled. n A Colorado liquidation specialist hired for the closing sends postcard invitations to a target audience, and is surprised to find 7,500 homes within a 3.8-mile radius of the store have household incomes between $75,000 and $1 million.

Feb. 13, 2009

n Carmen Lehman’s company, C.R. Lehman Properties Limited Partnership files for Chapter 11 bankruptcy. !!!In the preliminary petition, the company claims assets valued at less than $50,000 and liabilities between $10 million and $50 million. The filing lists a single creditor with an unsecured claim: Arvest Bank in Rogers for a loan of $27.3 million.

July 24, 2009

n A settlement transfers Village on the Creeks from C.R. Lehman Properties Limited Partnership to Arvest Bank of Rogers’ VOC Properties LLC. According to the order, all “non-insider creditors” are paid in full on the respective claims, leaving no general unsecured creditors.

Nov. 25, 2009

n U.S. Bankruptcy Judge Ben T. Barry signs an order granting motion to withdraw the bankruptcy petition. !!!Village on the Creeks was the “only tangible asset of the debtor,” according to the order.

Dec. 10, 2009

n The case file is closed without bankruptcy.

SOURCES: U.S. Bankruptcy Court filings, Benton County Circuit Court filings, news reports PHOTO: JASON IVESTER/Arkansas Democrat-Gazette Arkansas Democrat-Gazette