Brownfield redevelopment is not for the faint of heart.
Attendees got to see why at I.CON: The Industrial Conference this week. Jeff Milanaik, principal at Bridge Development Partners LLC, and Michael Murphy, chief development officer for CenterPoint Properties, shared the nitty-gritty details from the companies’ recent redevelopment projects, addressing the challenges and opportunities presented by each.
Milanaik started with an overview of the company’s BRIDGePort Logistics Center in Perth Amboy, New Jersey. The brownfield site was the former home of a smelting and refining company, which employed thousands of residents, but over time contaminated the area and eventually went bankrupt (see image above, courtesy Bridge Development Partners LLC). The site found second life as shipping container storage before Bridge Development Partners stepped in.
“The great thing about redeveloping these sites are the surprises you get when you lift the [building] pads,” Milanaik joked.
The company saw tremendous value in the site’s location. New Jersey ranks as the third-largest industrial market in the U.S. due to the vast logistical infrastructure network of interstate highways, deep water cargo ports, air freight and rail capabilities servicing the entire region. And Perth Amboy provides direct access to the largest and most concentrated consumer base in the country.
When all was said and done, the 15-month BRIDGePort Logistics Center project cost a total of $156 million. The company had to get creative with their capital stack, since, as Milanaik said, “Banks don’t want to get near deals like this.”
“Is the risk worth it?” He continued. “Yes, it is. If you want to be in last mile, this is the type of thing you have to deal with.”
Next, Michael Murphy, chief development officer for CenterPoint, shared a look at his company’s redevelopment projects. CenterPoint’s flagship project is the redevelopment of the U.S. Army’s former Joliet Arsenal into CenterPoint Intermodal Center, a 2,500-acre state-of-the-art inland port. The total investment was more than $1 billion and required the cooperation of more than a dozen public and private organizations.
The site was originally used to make TNT during World War II, so areas of the property were contaminated with explosives, metals, hazardous and non-hazardous wastes, sulfur and toluene. Remediation was a serious undertaking, and included the demolition of 1,200 separate structures and extensive cleanup.
Today, the 6,400-acre CenterPoint Intermodal Center-Joliet/Elwood is the nation’s largest inland port, handling more than 1.5 million container lifts per year at the intermodal facility. In addition, more than 8,000 new jobs have been created, and property tax revenues are projected to increase by as much as $30 million per year – quite the turnaround for a site that sat vacant for 20 years.
Both Milanaik and Murphy emphasized the importance of engaging the local community to ensure a project’s success. “These are truly community projects,” Milanaik said. He shared an anecdote from a meeting he had with a city mayor and representatives from potential major tenant Target. When Target committed to bringing a minimum of 1,500 new jobs to the community, with a goal of 65 percent of the work force coming from the local area, the mayor broke down in tears. “Some of these communities are starved for economic growth and investment,” Murphy added.
And the future is bright for redevelopment. “These last mile buildings – They’re leasing out faster than the buildings are going up,” Milanaik said.
Photo courtesy Bridge Development Partners LLC.