Bloomberg Businessweek - USA (2019-08-19)

◼ ECONOMICS Bloomberg Businessweek August 19, 2019

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thattodayit formsmostoftheexistinglandmass

atthesite.A 2009reviewbystateauthoritieshad

revealedhighlytoxiclevelsofbenzene,chromium,

andzincinthegroundwater.Thesite“wasper-

ceivedbyeveryonetobeenvironmentallyunsolv-

ableorcertainlytooscarytogetinvolvedwith,”says

EricKaup,Hilco’sgeneralcounsel.

Perezpersisted,knowingtherewouldbeready

buyersfortheleftoverrawmaterialsandequip-

ment.Hilcoteamed upwitha St. Louis,Mo.,

companythatassumedalloftheenvironmentallia-

bilities.Togethertheypaidlessthanone-tenthofthe

$810millionSparrowsPointhadpreviouslysoldfor.

WhenHilcosolda state-of-the-artcoldmillto

NucorCorp.forpartsattheendof2012,it wasclear

thatSparrowsPoint’ssteelmakingdaysweredone.

Muchoftherestwasdemolishedandsoldasscrap.

“TowatchthatoldgirlthatI workedon,andgen-

erationsbeforeme,justtorndown—itbrokemy

heart,”Ernestrecalls.

AsPerezandotherHilcoexecutivesclockedmore

hoursatthedemolitionsite,theybegantohatcha

plan.“About 18 monthsin,werealizedthattheland

wasactuallythemostvaluablepartofthedeal,”

saysKaup.In2014,HilcoandRedwoodCapital

InvestmentsLLC,a firmbackedbyBaltimorebil-

lionaireJimDavis,formeda jointventureand

boughtoutHilco’soriginalpartnerintheauction.

Thecompaniesreachedanagreementwiththe

EnvironmentalProtectionAgencythatallowed

themtostartremakingSparrowsPointintoa logis-

ticshubwhileenvironmentalremediationwork

continued.Asa condition,thecompanieswere

requiredtoplace$48millionina trusttocoverthe

costofthecleanupintheeventtheventurefailed.

SiteslikeSparrowsPointwhereredevelopment

is complicatedbythepresenceofpollutantsare

calledbrownfieldsbytheEPA.ToddDavies,CEO

ofHemisphereBrownfieldGroup,whosecompany

specializesinrehabilitatingthesetypeofproper-

ties,reckonsthatSparrowsPointmaybethelarg-

estofthe450,000orsointheU.S.

TheNationalBrownfieldAssociationestimates

thatalmost$1trillion 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

gota lotofrollingeyes.”

One of the first things Tradepointdid at

SparrowsPointwastobuilda 1million-square-foot

warehouse—aboutthesizeof 17 football fields—the

same way a developer might put up a spec home

to show to prospective tenants. The first company

tosignonwasFedExCorp.,whichopeneda dis-

tributioncenterinlate2017,bringingwithit 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.

Thewarehouses,enormousastheyare,only

takeupa fractionofthelandatthesite.Halfa

mileaway,giantyellowdumptruckscrisscrossa

constructionsite.Tradepoint’splanscallforadding

15 millionsquarefeetofspace—mostlyindustrial

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

UnderArmour

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”