Bureau's downtown Little Rock building purchase analyzed

A 5-year payoff, then it’s in black

It would take at least six years for the Little Rock Convention and Visitors Bureau to see the financial benefit of owning the Cromwell Building, according to an analysis of the proposed purchase.

Currently, the Visitors Bureau rents space in the Cromwell Building, and the agency has an opportunity to buy the building after the Bank of England offered $3.35 million for the property in July.

Owning the building would generate $4.88 million over 20 years, according to the analysis. Owning the building would generate between $280,738 and $370,505 annually from 2022 until 2036.

During the first five years -- the length of time the purchase would be financed -- the purchase would cost the organization $2.75 million, an average of $551,011.60 per year. The loss includes the cost of financing the building at a 2 percent interest rate through the city's short-term financing program.

Projections are based on the building operating at a 10 percent vacancy rate. It is currently 100 percent occupied.

Commissioners will consider today whether the short-term costs are acceptable considering the long-term financial benefits. They are also being asked to consider whether the commission, which operates with tax money collected by restaurants and hotels, should be operating as a landlord for commercial property.

"I think based on the financial analysis that has been run, I think we have justified that it is a good long-term investment and there are more pros than cons," bureau Chief Executive Officer Gretchen Hall said. "That is the staff's opinion."

Currently the bureau leases the fourth floor of the Cromwell Building, and Hall told commissioners last month that the organization would spend about $4.3 million in rent over the next 20 years at its current annual lease rate of $155,000.

Purchasing the building would allow the bureau to move its staff under one roof.

Bank of England executive Brad Canada, in a letter sent to commissioners last month, said a planned expansion for his company would lead to as many as 150 new jobs in Little Rock the next five years.

When reached Monday, Canada said the bank remains interested in the property as part of its expansion plans. Those plans include development of existing space the bank owns across the street. Currently Bank of England has 95 offices in 40 states and occupies a 25,000-square-foot building across the street from the Cromwell building.

Purchasing the property would allow for more rapid expansion, he said.

"We are even more interested than we were. We have big plans for hiring people downtown," Canada said. "I would hope that is something the decision-makers would think about."

Commissioners Warren Simpson, Rajesh Mehta and Pamela Smith declined to comment on the analysis prior to today's meeting. Chairman Capi Peck, Philip Tappan and Mayor Mark Stodola could not be reached for comment.

Gene Fortson, chairman of the finance committee, said he wanted more time to study the analysis. He noted that it did not include potential revenue generated by the organization gaining access to additional parking spaces near the Robinson Center, currently under renovation.

"I think the most critical need the Convention and Visitors Bureau has is parking," Fortson said. "With Robinson reopening in November, we will have a need to have as much parking as possible."

Business on 08/23/2016

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