Last week more than 200 people from around the country attended an event at Willow Run, a signature automotive brownfield site in Ypsilanti, Mich., and one of 89 former General Motors properties in 14 states under the aegis of the Revitalizing Auto Communities Environmental Response (RACER) Trust. It's the factory where the inspiration for Rosie the Riveter worked, and a site that has been called "the world's largest room" for its massive assembly floor space.
When the RACER Trust was formed in March 2011 by the U.S. Bankruptcy Court, it instantly became the third-largest industrial landowner in the nation and the largest environmental trust in U.S. history. And its portfolio was instantly positioned as some of the most strategically located industrial land in the country, by virtue of site selection decisions made long ago by GM: Large swaths of land near primary transportation and power infrastructure, albeit with environmental legacies embedded in that hard-working ground.
RACER properties comprise some 44 million sq. ft. (4 million sq. m.) of industrial space, spread across 7,000 acres (2,833 hectares) in 14 states: Delaware, Illinois, Indiana, Kansas, Louisiana, Massachusetts, Michigan, Missouri, New Jersey, New York, Ohio, Pennsylvania, Virginia and Wisconsin. In addition, the settlement agreement that formed RACER also includes the St. Regis Mohawk Tribe, which owns land adjoining one of the properties in Upstate New York.
Bruce Rasher is RACER's redevelopment manager. He previously served as a VP at CB Richard Ellis, where he managed CBRE's North American manufacturing and brownfields specialty practice groups. He is the former mayor of Marshall, Mich., and in February was named chairman of the board for the National Brownfields Association.
The open house was designed around two panel discussions and a speech by Jay Williams, the former mayor of Youngstown, Ohio, who now serves as executive director of the U.S. Dept. of Labor's Office of Recovery for Auto Communities and Workers. But Rasher says the informal networking periods were where the real heavy lifting occurred.
"I had conversations with probably a dozen prospective buyers in which they asked questions about doing business with Racer in general and certain specific sites they're interested in," says Rasher, admitting that such an event was a convenient way to compress his typically heavy travel and meeting schedule among those 14 states into one afternoon. Since RACER's inception, Rasher has criss-crossed the country from as far east as Massachusetts, as far west as Kansas City (where a transaction is pending on Trust land adjacent to a GM site) and as far south as Shreveport, visiting the parcels and, more importantly, visiting with local, regional and state officials.
"I'm on track for diamond status on Delta Airlines, and I get to sleep in my own bed two to three nights a week," says Rasher.
Points of Origin
While local, state and national government agencies were prominent and very interested parties to the open house, also among the curious were representatives of such organizations as North American Dismantling Corp., Ultimate Soccer Arenas, Elio Motors, Nexteer Automotive, BenneRa Solar Power, Yankee Air Museum and Herman Miller. There is also distinct interest from a very hot sector: data centers.
"The trust is dealing with two separate parties in that sector at this time," says Rasher. "Clearly that sector recognizes the opportunity. They are power demanding, and of the many infrastructure amenities we have at most of the former GM sites, access to power is one of them — in many cases access to redundant power."
One reason is GM's acquisition and subsequent spinoff of captive IT provider EDS, which grew to have an extensive data room presence at many GM manufacturing sites. "In many cases the former GM actually installed UPS and emergency generators to support their operation," explains Rasher. "While the Trust is liquidating surplus personal property at many of these locations, we're taking care to maintain that kind of access and power generation backup at our sites."
Broadband infrastructure is in place at all of RACER's major sites, including places where the buildings have been demolished. "GM's operations are information-intensive and require high-speed data performance," Rasher says. "The heads are still in place, even if the buildings are gone."
Asked to characterize prospect interest thus far (including a pending deal on the Buick City property in Flint, Mich.), Rasher says over 95 percent of interested companies are from the U.S., with a few from Canada, Europe and Asia. Most of the foreign interest, he says, is in the alternative energy field.
The alternative energy interest comes as states race to comply with self-imposed renewable energy portfolio standards.
"Utilities and others in those states are scrambling to meet deadlines this year or in the next couple of years," Rasher explains, "so in order to fill that void, a number of biofuels and biomass-to-energy companies are seeking out sites, and many have contacted us. The reason they like us is that principally we're close to the grid, so for the purposes of selling output into the grid, the infrastructure is there. In many cases that's one of the largest costs outside of plant construction. Second, they want to utilize rail, and we have rail at probably a third of our sites."
Within the energy sector, the interest breakdown is roughly 80 percent for power generation/renewable project development and 20 percent for supply chain/support of manufacturing, including solar panels.
Other industry sectors on the lookout include automotive, aerospace, defense, agriculture, chemicals and agriculture, including aquaculture and hydroponics. "Quite a few manufacturing companies have looked," he says, led by automotive companies. Though there have been a few inquiries related to residential, the Trust will likely record land use restrictions limiting the reuse to non-residential. "We're trying to make it clear to the market that these are industrial properties," he says.
One of RACER's open house panelists was Mayor Dayne Walling of Flint, Mich. Flint is home to a number of RACER sites, and has been known for its depressed industrial economy at least since one of its most well-known residents, filmmaker Michael Moore, made the iconic "Roger & Me" 23 years ago.
"Over the last few years, Michael Moore has been a strong supporter of arts and education in the city," says Walling, "and he's done a number of benefit engagements. The last event he did benefited the Flint Public Library, and he's also shown an interest in the restoration of Flint's historic Capitol Theater."
But Flint's momentum is built on a lot more than imagery. And yes, that includes openness to new automotive firms ... even those from away.
"Flint is in a great position to support manufacturing, transportation and export-intensive industries because of the skilled work force, airport, infrastructure and geographic location halfway between Toronto and Chicago with the Blue Water Bridge international crossing," says the mayor. "It is a top priority for our community to bring in new jobs so there is an openness to foreign companies now that may not have been there in the past."
That said, he notes the interest in city locations from non-automotive companies, including a wood and materials recycling companies and a data center operator now known to be considering the part of the Buick City property that formerly hosted Buick's world headquarters.
The federal Auto Recovery Office came under criticism in a recent GAO report, in which the GAO said, "Unless the Secretary of Labor can demonstrate how the Auto Recovery Office has uniquely assisted auto communities, Congress may wish to consider prohibiting the Department of Labor from spending any of its appropriations on the Auto Recovery Office and instead require that the department direct the funds to other federal programs that provide funding directly to affected communities." Asked for comment, Walling says, "The GAO criticism is unfair and misses the point that the purpose of the office was to assist with coordination among federal agencies and to provide information and access to federal programs. As a mid-size city, it was vital that we had an advocate for our priorities inside the beltway. By this measure, the office was effective in Flint. Additional assistance from HUD, EPA and other agencies was utilized based on Flint's relationships initiated through the office."
Asked how the state's imposition of an emergency manager has influenced the economic development climate in Flint, Walling says, "The fact is that we have a strong community consensus among the state, the regional chamber of commerce and city officials about where Flint is going and what it's going to take to get there. The emergency manager has delegated the lead on economic development activities to me, so I can continue to drive the agenda that I have for the last few years, in partnership with the Michigan Economic Development Corporation and the Genesee Regional Chamber of Commerce. There is now a new formal decision-making process that takes place inside of City Hall with the state's approval, but from an external perspective, there's virtually no change in how the city and region is conducting its economic development activities. Theoretically you could have a very different situation, but in this case we're all in alignment."
Burn Rates, Reduced Rates, Union Rates
The RACER Trust was capitalized with funding for environmental remediation activities and for administration. Site investigations and remedial actions are at various stages at all 89 sites, with the goal of a "No Further Action" letter. RACER staff includes five full-time cleanup managers. Administrative funds are sufficient to hold the assets while marketing takes place. "We're paying property taxes, heating buildings in the winter, providing site security, doing outdoor and indoor maintenance," says Rasher. "Our burn rate is about $4 million a month. And the largest single cost site is $3.5 million per year at Willow Run."
While most sites don't require RACER to run all systems, the maintaining of readiness, says Rasher, provides some valuable utility rate and other information for a buyer's pro forma for operating costs. For some sites where GM had negotiated special rate packages, there was a minimum employment requirement. While the Trust is not eligible to enjoy those reduced rates, says Rasher, "In most of those cases, we got back to the service provider to get a commitment from them to extend the rate to eligible users."
Such data and more is available on the RACER website, as the Trust endeavors to make things as fully transparent as possible. Forms for letters of intent, confidentiality, purchase and environmental agreements are all posted. "And any record we were given by Motors Liquidation Company is posted to a database link," says Rasher. "So any prospective purchaser will find more information about our properties available online than for typical corporate sellers that would probably make you sign a confidentiality agreement or require a purchase agreement to get the data. This increases efficiency and reduces the impediment to prospective buyers doing due diligence on our properties."
Rasher says RACER's competitive advantage in the marketplace is based first on its sites' amenities and infrastructure proximity, and on the fact that the Trust provides funding for remediation. But transparency is their ace in the hole.
"I just came from a meeting with a prospect, and they indicated one reason they were interested in doing a transaction with the trust, aside from the fact they have a user, is our transparency."
Asked if there are site challenges that parallel what military communities have faced during the base realignment and closure process, he says dealing with extra-large buildings is one, and environmental issues are another. But unlike the maze of requirements and agency sign-offs with government properties, RACER can enter into a transaction and close on it while continuing to address those environmental issues. Moreover, as federal and state brownfield funds shrink, the fact that the Trust is taking care of the remediation costs such funds would normally cover is an added bonus.
Does the Trust have any union labor obligations as it executes its work? Rasher is diplomatic to a fault.
"The Trust has a philosophy for trying to source outside services local to the communities that were adversely affected by the shutdown of GM facilities," he says. "At the end of the day, we seek proposals and evaluate them based on the best value in terms of cost, safety, compliance with applicable regulations and the track record of the bidder. We're impartial as to whether the bidder may or may not be using union labor. We don't have a preference for or against, and we welcome any qualified bidder, whether union or non-union."
On the Move
On a separate track, RACER has been disposing of equipment and personal property at the sites via auctions coordinated by Hilco Industrial, with net proceeds at Willow Run, for example, "far exceeding our expectations," says Rasher, even just a quarter of the way through the inventory. The property includes presses, robots and conveyors, as well as wrenches and screwdrivers.
Rasher says RACER successes so far include the sale of Pontiac Assembly East and the Grand Rapids Stamping Plant in Michigan. He says Grand Rapids is a market to keep an eye on. (For the background on that site prior to RACER's inception, read Site Selection's February 2011 piece "Diamond In the Rough" here.) He says there's a forthcoming announcement in Detroit in the life sciences sector as well. "A lot of things are cooking right now that I think are going to come to fruition this year," he says.
Asked to name the top three things local, regional and state economic developers should do to best set the stage for successful brownfield redevelopment, Rasher says, "unity of vision and purpose; cooperative working relationships between the various public- and private-sector stakeholders; and projecting a sense of stability and effectiveness in the local business climate.
"In markets that function well, you see sharing of resources and information," he says, highlighting the way government leaders in Shreveport and Louisiana collaborate. "There's clearly trust among the stakeholders, and you almost never see disagreements aired publicly. One of the messages I try to convey diplomatically and politely to the communities we're working with is that businesses are evaluating them for potential investments, and that those evaluations are taking place constantly, not just when there's a site visit. You want people to know your community is a great place to do business."
Back in Flint, renewed hope is stoked by a new master planning process, strong involvement of the higher education community and the fact that downtown Flint has grown by 1,000 new residents in the past few years. "It's actually the fastest growing neighborhood in Genesee County," says Walling, noting its blend of student housing, apartments, lofts and condominiums and its diverse demographic in terms of age and income. "I've cut a ribbon in downtown Flint every few months since I was elected in August 2009."
More residents mean more restaurants and other service-sector and retail development. And new companies have located too, including Rowe Engineering and Wade-Trim, as well as the Michigan State College of Human Medicine's branch focusing on public health.
Walling says the most exciting business attraction and expansion effort in Flint is the Great Lakes Medical Technology Centre, which is a former GM complex that has been converted into office space for Diplomat Specialty Pharmacy and other medical and healthcare related companies such as McLaren and Hurley.
"Diplomat purchased much of the complex in 2010 and brought more than 200 jobs into Flint," he says. "Since that time, Diplomat has more than doubled their jobs on that site. This shows that Flint is building on its automotive tradition in unique and diverse ways."
Could the goals of the city's master plan harmonically converge with the goals of RACER Trust to the extent that "No Further Action" letters coalesced with letters of intent to spur new industrial development action?
"Flint is now working on its first comprehensive master plan since 1960," says Walling. "The community is excited about the opportunity to re-envision our future, and re-purposing brownfield properties and former auto sites is a major component. The financial and technical resources available through the RACER Trust for the sites in Flint are a welcome addition to our efforts. People will be able to see progress on the sites as the planning process moves forward, so the RACER Trust will be helping to lead the charge."