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General Motors site buyer has handled other GM properties

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Neil Johnson
Sunday, November 12, 2017

In Frankenmuth, Mich., the G. Heileman brewery -- once one of city's main economic engines -- has been gone for years.

In the old brewery's place, years after its closure in the early 1990s, is a 35-store boutique mall nestled along the Cass River in the downtown of the city of 5,000 located 100 miles north of Detroit. It's a tourism-centered area known as Michigan's Little Bavaria.

Commercial Development Company, the St. Louis firm considering buying the defunct General Motors assembly plant in Janesville, shows on its website and materials a transformation of the sprawling brewery site in Frankenmuth into a “themed retail centre.”

Commercial Development casts the turnaround of the former brewery property as a win, one of many examples it advertises of redevelopment and reinvention at some of the post-industrial properties the company and its two principals, Tom and Mike Roberts, have had a hand in.

This week, Janesville city officials said, Commercial Development will reach the end of a 75-day due diligence period during which it has reviewed the feasibility of buying the GM property in Janesville. That means the company in short order could make a formal offer to buy the GM plant, which would spark a 30-day review by GM.

If that occurs, it's possible GM could sell the Janesville property by mid-December.

The Gazette reviewed a handful of former industrial plants that Commercial Development has bought, cleaned up, and sold—including a few former GM plants—to learn details of how the company's projects have rolled out.

The projects shared common threads: They've taken years to turn around, and some have required millions in private investment by later owners. Some, while thriving, are still works in progress.

In many cases, Commercial Development has leveled the properties, and re-development, when it comes, has started from the ground up.

JANESVILLE UPDATE

Commercial Development announced in August it wants to buy the 4.8 million-square-foot, defunct auto plant from GM, clean up the 300-acre site and either sell the property, buildings and all, or demolish the buildings and sell off the land for redevelopment.

Commercial Development has kept a low profile in recent weeks. It hasn't responded to Gazette requests for details on its push to buy the mammoth GM plant. In an interview, Janesville City Manager Mark Freitag said that he'd sent a letter last week to General Motors officials and Commercial Development asking about the status of the pending sale.

As of late last week, neither company, Freitag said, had responded to the city's inquiry.

In an email to The Gazette late last week, General Motors spokeswoman Nicole Yellen wrote: “We are not going to speculate on the timing of a close. However, both GM and (Commercial Development) are working together to complete the transfer of the property to the buyer later this year.”

In a pitch to Janesville officials and other local stakeholders in August, Commercial Development and its sister company, Environmental Liability Transfer, said that if the sale goes through, it would “work to reposition the property for its highest and best use and prepare the property for new and vibrant development activity,” including a “global search for end users interested in investing into Janesville and creating a new community asset.”

Those statements come from a brownfield redevelopment company that says it has assumed $1.5 billion in environmental liabilities—otherwise known as cleanup projects—275 of them in all, in a portfolio the company says “exceeds 50 million square feet under roof.”

The GM site could perhaps be considered yet another “liability” taken on by Commercial Development, except that the property would qualify as among the largest-scale former industrial sites the company has ever tried to buy and clean up—larger by three or four times any of several other General Motors plants Commercial Development has bought in the past.

Freitag said he considers the GM plant a “megaproject” for Commercial Development or any other entity who'd buy or redevelop it.

When asked by The Gazette to characterize its past dealings with Commercial Development, GM's Yellen wrote that “GM has confidence in this company through previous experiences with its leadership.”

THE OLD BREWERY

Over the long haul, the former Frankenmuth brewery's redevelopment to a tourism-centered specialty retail mall has been a boon to the city. Its owners say the 35-store complex they built on the grounds of a century-old brewery in Frankenmuth has weathered the Great Recession and before that a hit to the tourism industry in the wake of the 9/11 terrorist attacks.

But it's a boon that took city leaders a decade to see.

And it took $20 million dollars, an investment that was laid out by a Frankenmuth family—not Commercial Development's owners—to launch the full demolition and clearing of the old brewery site.

Bill Zehnder, who said his family bankrolled, developed and owns Frankenmuth River Place Shops, the mall complex that replaced the old brewery in 2001, thinks it'd be a “misnomer” to say Commercial Development's owners spearheaded redevelopment in Frankenmuth. Commercial Development's owners sold the property years before redevelopment launched.

“The Roberts brothers had nothing to do with all that. They came in, they bought the (brewery) building, scalped everything out of it, and sold the property, basically, to us,” Zehnder said. “For me, our family, we own a restaurant and inn across the way (from the brewery). We purchased 18 acres from them, mostly as a defensive move. We didn't want somebody else to get that parcel of land.”

Commercial Development in a testimonial on its website shows a “before and after” photo of the Frankenmuth property and a short description explaining how it bought the defunct, 1 million barrel brewery out of bankruptcy, then worked with city officials on a redevelopment plan in an effort that the company says included it demolishing “75 percent of the obsolete buildings,” removing asbestos and selling off plant equipment.

Zehnder said the Roberts brothers at the time—the mid-1990s—were just getting into commercial property redevelopment. He said the brothers bought the mothballed brewery and promptly removed fixtures at the plant such as the large, glass-lined tanks used in beer brewing. They sold the equipment, Zehnder said, and within a matter of months prepared to sell off the property, leaving the main brew house and its warehouse standing.

Zehnder said when his family bought the property, the remaining buildings hadn't had much in the way of environmental remediation. His family moved ahead with redevelopment with the aid of a state grant.

“Our experience was they bought it (the brewery). They stripped it. They sold it. We haven't seen them since then,” Zehnder said. “We're not planning on stripping everything out and moving along. But you need people like the Roberts brothers (Commercial Development) to move forward on these things, otherwise those old plants would just sit and deteriorate.”

EUCLID'S STORY

Another building Commercial Development bought, a 1 million-square-foot, former General Motors Fischer Body plant in Euclid, Ohio, remains standing and is being reused.

Commercial Development's purchase came after GM closed the plant in 1993 in the industrial, Cleveland suburb of 50,000 people.

Two owners and more than 20 years later, the property made a turnaround, Jonathan Holody, the city of Euclid's planning and development director, said.

Commercial Development said in a testimonial that it performed environmental remediation at the Euclid site and renovated the plant into a “multi-tenant” facility before the property was sold to a warehouse operator.

Holody said the property became distressed during the Great Recession but not under ownership by Commercial Development. He said a developer who bought the property from Commercial Development fell behind on property taxes and went in foreclosure.

The property, meanwhile, was being leased by HGR Industrial Surplus, an industrial equipment resale and distribution company whose presence in the plant property has grown from 150,000 square feet in 1998 to about 500,000 square feet now.

Holody said HGR bought the property out of foreclosure through a county land bank, and it agreed to commit $10 million in renovations to the plant. HGR completed about one-quarter of the work by about 2015, Holody said. He said unoccupied sections of the plant had fallen into disrepair under the owner who'd initially bought it from Commercial Development.

JANESVILLE'S PLANT

Commercial Development has said if it didn't find a buyer for the GM property in Janesville a short time after cleaning up the plant and removing asbestos, it would level some or all of the plant buildings.

Freitag said the city of Janesville doesn't have a preference whether a buyer of the GM property would try to rehab or retrofit for reuse the existing plant buildings or simply clear the property.

But he said since GM put the site on the market in 2015, the city has fielded no inquiries from companies eyeing parts of the old plant for potential occupancy.

“It's been two years, and we haven't seen anybody coming out of the woodwork saying, 'I want this building, I want that building (on the GM site),” Freitag said.

Freitag said he's “skeptical” that the sale of the GM site would unleash an immediate flood of interest by companies who'd want to reuse or buy the existing plant building.

CLEARED, SOLD, REDEVELOPED

Municipal property records show Commercial Development went a few steps farther than in Frankenmuth or Euclid on another of its projects: its purchase and complete clearing of the land of a former General Motors Fischer Body plant in West Mifflin, Penn.

West Mifflin is a borough of 20,000 people in the industrial steel belt and coal hills just outside Pittsburgh.

The former auto plant property is now home to an auto salvage yard owned by a national salvage chain, according to local officials. It took eight years getting there.

Commercial Development razed the former GM plant in West Mifflin at some point after it bought the plant property in 2011 for $1.2 million, according to a 2013 story by the Pittsburgh Tribune.

GM had sold off the plant after it shut down in 2009. Its sale came during a time when GM was restructuring out of bankruptcy following the Great Recession. At 72 acres, with a 900,000-square foot plant once on the site, the West Mifflin property is about one-quarter the size of the Janesville GM plant.

Walter Anthony, West Mifflin's community development director, confirmed that Pull-A-Part, a Georgia-based auto salvage company, bought the site under the name Mifflin Development. He said the company is now developing it as a walk-in auto salvage yard. The redevelopment comes years after Pull-A-Part bought the property.

Anthony said Pull-A-Part's redevelopment plan earned borough approval as a “conditional use” of the property.

He said he believes the project took several years to fully launch because the market for scrap metal was bogged down for several years coming out of the Great Recession.

Anthony said Commercial Development handled its work on the site without seeking municipal incentives.

“We had very little contact with those people (Commercial Development) at all. Just basically what they did was get the site ready for marketing,” Anthony said. “We have had more contact with the end user.”

Allegheny County Redevelopment Authority, the government group that also handles economic development in West Mifflin, said it has no record of Commercial Development seeking incentives for work on the former GM site.

At the time it was being sold, the West Mifflin property had about $3.3 million in federal money laid aside in 2010 for environmental cleanup of defunct “Old GM” plants, according to the Pittsburgh Tribune report. It's not clear if those incentives transferred under the sale to Commercial Development.

In Janesville, the city council in 2016 approved an overlay district for the GM property, a legal designation that sets limits on how the site could be redeveloped or used in the future. Uses that would not be allowed include scrap or salvage yards.

Freitag said he's told Commercial Development the city plans to stick with limitations it set on future uses of the GM site, and because of the structure of the overlay district, any projects on the GM site would automatically face review by the city's plan commission and the city council.

“You've got houses, residential areas to the south, the east, the north and the northwest,” Freitag said. “We want to make sure whatever the use is that it meshes well with the residential feel of the surrounding area.”



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