Bloomberg Businessweek Europe - 19.08.2019

◼ ECONOMICS Bloomberg Businessweek August 19, 2019

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that today it forms most of the existing landmass

at the site. A 2009 review by state authorities had

revealed highly toxic levels of benzene, chromium,

and zinc in the groundwater. The site “was per-

ceived by everyone to be environmentally unsolv-

able or certainly too scary to get involved with,” says

Eric Kaup, Hilco’s general counsel.

Perez persisted, knowing there would be ready

buyers for the leftover raw materials and equip-

ment. Hilco teamed up with a St. Louis, Mo.,

company that assumed all of the environmental lia-

bilities. Together they paid less than one-tenth of the

$810 million S parrows Point had previously sold for.

When Hilco sold a state-of-the-art cold mill to

Nucor Corp. for parts at the end of 2012, it was clear

that Sparrows Point’s steelmaking days were done.

Much of the rest was demolished and sold as scrap.

“To watch that old girl that I worked on, and gen-

erations before me, just torn down—it broke my

heart,” Ernest recalls.

As Perez and other Hilco executives clocked more

hours at the demolition site, they began to hatch a

plan. “About 18 months in, we realized that the land

was actually the most valuable part of the deal,”

says Kaup. In 2014, Hilco and Redwood Capital

Investments LLC, a firm backed by Baltimore bil-

lionaire Jim Davis, formed a joint venture and

bought out Hilco’s original partner in the auction.

The companies reached an agreement with the

Environmental Protection Agency that allowed

them to start remaking Sparrows Point into a logis-

tics hub while environmental remediation work

continued. As a condition, the companies were

required to place $48 million in a trust to cover the

cost of the cleanup in the event the venture failed.

Sites like Sparrows Point where redevelopment

is complicated by the presence of pollutants are

called brownfields by the EPA. Todd Davies, CEO

of Hemisphere Brownfield Group, whose company

specializes in rehabilitating these type of proper-

ties, reckons that Sparrows Point may be the larg-

est of the 450,000 or so in the U.S.

The National Brownfield Association estimates

that almost $1 trillion of real estate value could be

unlocked from these sites, many of which have fea-

tures that are appealing to developers, including

waterfront locations, transport links, and proxim-

ity to large urban populations. But many investors

won’t touch brownfields because of the expense and

regulatory burden. Says Davies: “You have to be emi-

nently patient to move through the process, and you

have to have an appropriate risk tolerance.”

Hilco and Redwood created Tradepoint to over-

see Sparrows Point’s transformation. Eric Gilbert,

the venture’s chief development officer, recalls that

area residents were initially skeptical when officials

outlined their plans in town-hall-style meetings.

“When we said, ‘We’re going to rebuild the roads

and water and sewer, we’re going to bring thou-

sands of jobs and big-name companies,’ well, we

got a lot of rolling eyes.”

One of the first things Tradepoint did at

Sparrows Point was to build a 1 million-square-foot

warehouse—about the size of 17 football fields—the

same way a developer might put up a spec home

to show to prospective tenants. The first company

to sign on was FedEx Corp., which opened a dis-

tribution center in late 2017, bringing with it about

300 positions. The number of tenants is now 15 and

counting. More than 3,000,000 square feet is under

construction for Home Depot and Floor & Decor,

while a Gotham Greens hydroponic greenhouse is

set to open later this year.

The warehouses, enormous as they are, only

take up a fraction of the land at the site. Half a

mile away, giant yellow dump trucks crisscross a

construction site. Tradepoint’s plans call for adding

15 million sq uare feet of space—mostly industrial

but also some retail.

On an afternoon in May, the parking lot of the

new Amazon fulfillment center is bustling with

activity. Workers line up at a food truck for $13 crab-

cakes. A woman gathers her belongings before walk-

ing into orientation on her first day at work. Two

DATA: MD IMAP, GEOFABRIK, OPENSTREEMAP, TRADEPOINT ATLANTIC

Businesses Flocking to Sparrows Point

Location of distribution centers and major transport infrastructure

Patapsco

River

Old Road

Bay

Rail

interchange

yard

Bulk-handling

facility

Amazon

Under Armour

FedEx

Deep-water turning

basin for ships

Shipyard

▲

Baltimore,

10 miles I-695

“About

18 months in,

we realized

that the land

was actually

the most

valuable part

of the deal”