Former Bethlehem Steel plant property at Sparrows Point, Md., evolving into something new.
Broken concrete and piles of twisted scrap metal are scattered about the former Bethlehem Steel property at Sparrows Point, Md.
But developers see a silver lining in this industrial wasteland—a vast and vibrant new logistics park in the Baltimore area.
“There’s nothing like it out there virtually anywhere in the country,” said Mark Levy, managing director and head of port, airport and global infrastructure services for Jones Lang LaSalle (JLL), a large commercial real estate developer. “This property has access to a third of the nation’s population.”
JLL is working with property manager Sparrows Point Terminal, a joint venture between Northbrook, Ill.-based Hilco Real Estate and Redwood Capital Investments of Baltimore, to promote the site to prospective industries.
Sparrows Point, about nine miles by truck from the Port of Baltimore, is massive—3,100 acres or five square miles. Spread across the property is 160 miles of railroad track, including a staging yard which once transported raw materials and finished steel products throughout the sprawling steel plant. These tracks directly connect to the Class I railroad networks of CSX and Norfolk Southern.
On the south side of the rectangular-shaped property is a marine terminal, which includes a deep-water channel and four vessel berths, as well as a turning basin. There is also a finger pier extending into the Patapsco River that once used large machines to unload iron ore and other steel-making materials from bulk ships.
Not included in the Sparrows Point Terminal property is the former Bethlehem Steel shipyard which built tankers and drybulk ships from 1916 to 2003. A business venture, which used the site for scrapping former U.S. Maritime Administration ships, operated there in 2006, but quickly succumbed to bankruptcy. The yard is currently idle, but poses no obstacle to accessing the Sparrows Point Terminal property nor its development.
Realizing Potential. Touring the site in early August—even with the giant blast furnaces, buildings and sheds and colossal ore piles swept away—one still recognizes that Sparrows Point was once a large and industrious place. The site not only housed one of the country’s biggest steel producers, but an entire community that included neighborhoods, churches and a school. In the plant’s post-World War II heydays it employed more than 30,000 people.
It was only last year that the Sparrows Point property still had the appearance of a giant steel plant just waiting to be rekindled. Once the largest integrated steel plant on the East Coast, the operation had fallen on hard times during the past decade. Outdated equipment and a flood of cheaper imports took a heavy toll on the company’s efficiency and finances.
Between Bethlehem Steel’s 2001 bankruptcy and 2012, the plant has had four owners. OAO Severstal bought the plant for $810 million in 2008, and then sold it to RG Steel in 2011, which would be the last steel-producing owner. RG Steel held the company until late May 2012 when it too filed for Chapter 11 bankruptcy protection.
The Sparrows Point steel plant, meanwhile, had potential to remain a steel-producing operation. Under RG Steel, it demonstrated an annual output of 3.6 million tons of crude steel, 2.9 million tons of hot rolled steel, 1.3 million tons of cold rolled steel, 480,000 tons of coated steel, and 470,000 tons of tin. The plant maintained the second largest blast furnace in North America and the cold rolled mill, which was commissioned in 2000, was considered the most modern in North America. As many as 2,500 employees worked at the plant by 2012.
However, this wasn’t enough for RG Steel to rescue the Sparrows Point plant from ruin and the property was put up for public auction on Aug. 7, 2012.
One of the companies to bid on Sparrows Point was property buyer Hilco Real Estate and joint venture partner, St. Louis-based Environmental Liability Transfer. On Aug. 15, the U.S. Bankruptcy Court in Wilmington, Del. approved the sale to Hilco and ELT. According to the bankruptcy court, the partners paid a combined $72 million for the Sparrows Point property.
Roberto Perez, executive vice president for Hilco, who was in charge of the company’s bid for the Sparrows Point property, said he realized its huge potential after driving over the Scott Key Bridge and seeing its massive size. Recognizing that there was enough assets for redevelopment, he took the information back to headquarters and made his presentation. The company said “let’s bid on it,” Perez said.
At the conclusion of the auction, Hilco and ELT believed there was still a possibility to sell the plant to another operator that would continue steel manufacturing at Sparrows Point. “Based on our early assessment, we believe the state-of-the-art cold-rolled mill complex with intermodal transportation capabilities, including rare access to a deep-water port, has great potential for the right operator,” the companies said in a joint statement at the time.
Through the joint venture, ELT acquired the 3,100-acre Sparrow Point site, along with certain reusable buildings, and assumed the environmental liabilities related to the land, while Hilco purchased the above-grade improvements and machinery and equipment.
Shortly after the auction, it became apparent that resuming steel production was no longer an option at Sparrows Point and the property would be repurposed, said Gary Epstein, Hilco’s chief marketing officer.
In September 2014, Hilco and Redwood Capital Investments bought out ELT for a reported $110 million and formed a new joint venture called Sparrows Point Terminal to manage the property’s re-development.
However, before demolition of the steel plant could proceed, an environmental plan had to be approved by both the U.S. Environmental Protection Agency and Maryland’s Department of the Environment. On Sept. 18, 2014, it was agreed that Sparrows Point Terminal would forward-fund $48 million to clean up the site, along with providing another $3 million to the EPA to conduct an offshore investigation and, if necessary, perform remediation.
Michigan-based MCM Management Corp. was contracted by Sparrows Point Terminal to demolish the plant structures and ensure all materials were either recycled or disposed of properly.
Since August, MCM has recycled 2.75 million tons of steel, copper and aggregate; 245,000 gallons of oils; 157,000 pounds of batteries; 78,300 pounds of light tubes and ballasts; 273,000 pounds of electronic waste; and 23,000 pounds of paper. Disposal of hazardous materials included 5,316 tons of asbestos and 157,000 gallons of PCB oil.
Remembering History. The plant teardown has been closely watched by the local community. As Aaron Tomarchio, vice president of corporate affairs at Sparrows Point Terminal, put it to American Shipper, many people who live in Baltimore and the surrounding county have a deep personal connection to the plant, with generations of family members having worked there.
When highly visible structures are taken down, such as the “L” blast furnace which was imploded on Jan. 28, crowds of people stood along the property’s parameter to watch and take photographs, Tomarchio said.
The “L” furnace’s demolition was quite a spectacle, since it required 94 charges of dynamite to drop the 320-foot-tall structure to the ground. When the furnace was erected in 1978 it was the largest of its type in the western hemisphere.
“We are extremely mindful of this place’s history to the community,” Tomarchio said, adding that Sparrows Point has preserved a number of artifacts from the plant, including models, tools, factory bicycles, photographs, and workers’ gear for future display.
Bethlehem Steel at Sparrows Point was the birthplace of the industry standard I-beam, and supplied steel for the Golden Gate and Chesapeake Bay bridges, as well as hundreds of ships during World War II.
During the takedown of the “L” furnace, the company saw to it that the large, lighted “Star of Bethlehem” on top of the structure was carefully removed for preservation. In November 2014, the star was rewired and placed on a new six-ton steel base to hold it upright. The star is currently kept in a lot next to the Sparrows Point Terminal offices until it will be located to a more permanent and visible site on the property.
Active Site. While the demolition and cleanup work continues across the sprawling property, there’s already signs of commercial activity taking place.
Bulk and breakbulk ships regularly call the 1,500-foot marine terminal. Recent deliveries to the site include thick steel plates from Brazil and a large load of lead ingots. Tomarchio said, for now, there’s plenty of space available for these companies to store their shipments and retrieve them as needed.
The terminal operator at Sparrows Point, Kinder Morgan, services the ships at dock, and operates a piece of equipment nearby that picks up railcars, tips them to pour out their drybulk contents, and places them back on the tracks. These railed materials are then scooped and dumped into waiting trucks for delivery to area job sites.
However, Sparrows Point Terminal’s managers are carefully studying the property for how to best develop and parcel it out to future tenants. In June, it hired JLL to be its real estate services provider for the project and Parsons Brinckerhoff to oversee master planning of the site.
In August, Sparrows Point Terminal named Michael Moore, former Maersk executive and later CEO and president of Global Container Terminals, as president. Moore will oversee implementation of Sparrow Point Terminal’s master plan and the site’s ultimate transformation into a global transportation, manufacturing and logistics hub.
So far, the property is broken down into four sections of development: the northern part contains the rail yard fed by both CSX and Norfolk Southern (an onsite rail operator provides inter-property movements of rail equipment), a central parcel is aimed at distribution and logistics services providers, just below that is a large space set aside for prospective manufacturing and processing operations, and the southern edge is dedicated to marine terminal operations.
When asked about Sparrows Point’s relationship to the container and roll-on/roll-off terminal operations at the Port of Baltimore, Moore said he envisions Sparrows Point Terminal serving in a supporting role to the port.
“We certainly have the space for a container operation, but not the market to build a container terminal at this time [at Sparrows Point],” he said. “We actually see ourselves driving more cargo to the Port of Baltimore.”
To support this vision, the Baltimore Regional Transportation Board recently formed a Freight Movement Task Force, which in turn set up a Port-to-Point Working Group to study the transportation connectivity between the Port of Baltimore and Sparrows Point.
The goal of the working group, which is scheduled to hold its first meeting this fall, will explore the most efficient ways to move cargo between Sparrows Point and the Port of Baltimore, as well as understand how Sparrows Point could serve as a spillover point for the port when cargo levels are running high. “That’s why a good connection between the port and Sparrows Point is important, and we are glad that Baltimore regional planning officials recognize that,” Tomarchio said.
Meanwhile, a steady stream of interested companies have come to Sparrows Point throughout the summer to investigate whether the site is a right fit for setting up operations. JLL’s Levy said his firm gets about “five to seven inquiries a week” regarding the property, adding that the real estate firm doesn’t plan to officially launch its marketing push for Sparrows Point until early January.
“With the high barriers these days to industrial development, this property serves as a unique offering in the market place,” Levy said.
This article was published in the October 2015 issue of American Shipper.
