$18.5m 'green' redevelopment to set a record: former HQ of Dillard's seeks LEED approval.(Green Business)

THE TRANSFORMATION OF the former Dillard's headquarters in downtown Little Rock to state office space is establishing a record for a green redevelopment project in Arkansas.

"There is nothing that is even close to this," said Anne Laidlaw, director of the Arkansas Building Authority.

Backed with an $11 million construction loan, the 1.4-acre project at 900 W. Capitol Ave. is billed as an $18.5 million to $22 million redevelopment.

The range reflects a sliding scale for a potential price tag based on when the state exercises an option to buy the property. The earliest option date (June 30, 2010) is linked with $18.5 million.

"All of that has to be supported by an appraisal, and we pay the lesser of the two," Laidlaw said.

Dallas developers Ed Massman and Chuck Edwards are expanding and converting the 120,600-SF building into a LEED-certified, energy-efficient project. The green factor was a big selling point to the state and will be in any new office projects pitched to the state. LEED, standing for Leadership in Energy and Environmental Design, is a certification program of the U.S. Green Building Council.

"This is our first green building," Edwards said. "We don't think there's any question that having a green building will make this property more competitive. More and more buildings will attempt to meet LEED certification.

"To not do it would have been a hard decision for us to make. From a modern development standpoint, for a building to be competitive long term, it absolutely needs to be LEED certified."

Upgrades include a new roof deck, energy-efficient light fixtures, a new window system with performance glazing windows and enhanced natural lighting.

Windows bricked over in deference to the Dillard's computer operations are being reopened, joined by windows where none originally existed. On the west side of the building, some brick work will be replaced with a window wall to create a new portal for light.

"The openness of the interior layout with the environment of having outside natural light--that creates a great environment for people to work in," said Jeff McNeil, project manager with Dave Grundfest Co.

A water-source heat pump HVAC system is an important component in controlling energy costs, said McNeil, vice president with the Little Rock general contracting firm.

He described the system, a series of incredibly efficient heat pumps that allow local temperature control throughout the building, as one of the main LEED-certified items on the project.

Recycling building material removed from the building and using steel, carpet, metal stud framing, wallboard and more made with recycled materials is another aspect of the green development.

"We're not only recycling the building itself, we're also recycling the parts of the building that are coming out and using new recycled material going in," McNeil said.

Another recycling feature will capture rainwater from the roof and funnel it down to a large storage tank in the parking lot. The system is envisioned to provide most of the irrigation needs for the property's greenery.

[ILLUSTRATION OMITTED]

"It sounds mundane, but we're putting in a significant amount of insulation," Edwards said. "Insulation is so critical."

From mundane to high-tech, the lineup of energy-saving items in the project qualified for a federal grant through the U.S. Department of Energy. The application could yield up to $1.2 million, under the sustainable energy projects heading of the federal economic development stimulus package.

State Space

The state signed a lease-purchase agreement for the long-vacant Dillard's HQ, which will become quarters for the state library, Arkansas Development Finance Authority, Arkansas Science & Technology Authority and Arkansas Economic Development Commission.

The AEDC will occupy the fourth floor, and the state library will be on the first and second floors and basement. Both will be moving from the Big Mac Building on the Capitol grounds.

"We're hoping to have the library space done close to the end of the year, so they can be moved in by the end of January," Edwards said. "The rest of the building should be completed during the first quarter."

The ADFA and ASTA will share the third floor. The two agencies will relocate from leased space at 423 Main St., owned by Little Rock businessman Warren Stephens.

The last piece of the tenant roster to fall in place is 6,000 SF on the third floor that will be occupied by the Administrative Office of the Courts. The space represents overflow for the agency, which also has quarters in the Justice Building and the 1515 Building on the State Capitol grounds.

Workers are adding 13,000 SF to fill out the top floor and gutting the interior to update and reconfigure the existing space.

"We're replacing everything, except the shell," Edwards said. "We were able to save the core of the building. It's a very well-built building. It provides everyone with benefits when you don't have to start from scratch."

'Big-Boned Building'

The oldest part of the building dates back to 1941 when it housed a switching station for Southwestern Bell Telephone. When it became home to Dillard's, the building was expanded and used for office space and computer operations.

Union Rescue Mission purchased the property for $1.2 million in May 2003 with the idea of developing a homeless shelter. Opposition from downtown property owners killed that notion and kept the property in limbo until Edwards and Massman came along.

Stuart Mackey of The Hathaway Group, who listed the property for Union Rescue Mission, said the building attracted a healthy dose of prospective developers and owners.

"It's a big-boned building with strong floor plates," said Mackey, vice president of the Little Rock commercial realty firm. "As far as green credits go, you get a whole lot more by keeping the building rather than tearing it down."

Some looked to buy the building and use as much as half the space with an eye toward future expansion for the balance. But the numbers never worked out.

Even after Edwards and Massman struck a deal to buy the property, there was considerable study given to the best redevelopment format. Retail, office condominium, residential condominium and apartments were all possibilities.

"It was a rather lengthy due diligence process," Mackey said. "They looked at a variety of combinations before they locked in on what they're doing with the state now."

Edwards and Massman made a purchase offer that was rejected early on when the Union Rescue Mission put the property up for sale. Months later, they were contacted to see if they were still interested. That led to the $800,000 acquisition, which closed a year ago.

"We looked at the property a year or two before we bought it," Edwards said. "We liked the location."

By George Waldon

george@abpg.com

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