Can worms and compost pay off for westside developer?

June 15, 2016 In northwest Charlotte along the Catawba River, on the once heavily polluted home of a former textile dye manufacturer, a variety of alternative energy and recycling businesses are sprouting at an innovative commercial real-estate development. There’s an aquaculture project producing duckweed, which can be used as feed for animals or fisheries. Nearby, a habitat restoration project aimed at promoting pollination has taken root, along with a greenhouse that uses compost and worms to produce high-quality soil. A $40 million project is expected to be announced this summer.

Since opening in 2014, ReVenture Park has become a leader in the blossoming era of eco-industrial parks. Such parks cater to businesses that work with one another and the local community to cut waste and pollution and efficiently share resources. One company’s byproduct, for example, may become another firm’s feedstock. ReVenture Park was developed by Charlotte-based Forsite Development, though founder Tom McKittrick didn’t start with the goal of creating green-collar jobs. He kicked off Forsite in 2004 to buy corporate surplus industrial real estate and attract new companies that were expanding or relocating to the Southeast. He’d gotten the idea when working for Carmel, Ind.-based Lauth Property Group as he drove around the Carolinas and noticed the abundance of warehouses and industrial buildings left in the wake of manufacturing’s exodus overseas. He opened Lauth’s first Southeast office.

He originally sought out buildings with high ceilings and located on major interstates that could be easily rehabbed and filled with new tenants. Then the Great Recession arrived and debt dried up. Pondering his next move, McKittrick thought about the shuttered plant sites he’d passed over that had critical infrastructure such as on-site power generation, central steam plants, wastewater treatment and rail access. He started thinking about how this infrastructure could be repurposed to attract more sustainable business, including renewable energy. That thinking led Foresite to develop a 667-acre former Superfund site in northwest Charlotte, the former Sandoz Chemical Corp. plant (later known as the Martin-Marietta/Sodyeco or Clariant Corp.) renamed ReVenture Park. McKittrick’s ReVenture Park Investment I LLC paid $2.34 million for about 304 acres, according to a Charlotte Business Journal report in 2011.

McKittrick’s initial projections of $900 million in new investment and 1,100 jobs haven’t panned out yet: one key reason was Mecklenburg County’s 2011 decision to cancel a planned $200 million project to use garbage and yard waste for a power plant after Sierra Club objections. But the developer has soldiered on, and the U.S. Environmental Protection Agency gave ReVenture its “Excellence in Site Reuse Award” in 2014. McKittrick’s optimistic that momentum is building as sustainability and alternative energy become more entrenched business themes.

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Finding new uses for old industrial plants

June 15, 2016 Charlotte-based Forsite Development got its start buying and rehabbing shuttered industrial buildings in small towns throughout the Carolinas. Now, the firm is becoming a leader in a more sophisticated line of business: acquiring contaminated industrial sites and assuming the responsibility to clean them up.

Last week DevelopCLT profiled Forsite’s pioneering eco-industrial park, ReVenture Park. Now, we’re talking to president and company founder Tom McKittrick about his push into a relatively new and obscure part of the commercial real estate market: Environmental Liability Risk Transfer. In this business, Forsite takes title to a contaminated property — sometimes being paid to do so — and assumes the responsibility to remediate it. Forsite is one of a handful of companies in the U.S. pursuing these transactions. Forsite has acquired a variety of sites via risk transfer including chemical plants and textile-dye facilities and recently closed on its third coal-fired plant in North Carolina. McKittrick talked with DevelopCLT about this business model and how more developers are needed.

Develop CLT: How does environmental liability risk transfer work?

Tom McKittrick: Risk transfer transactions involve a site that has legacy environmental contamination from its previous use and an owner who wishes to remove this contingent liability from their balance sheet. We underwrite the cost to clean up the site, and if we can agree on the scope and price we acquire title and assume full responsibility to remediate.

For most sites we pursue, the liability exceeds the value of the real estate. In this instance we are paid to take title. Our goal is to achieve a regulatory closure for that amount or less and then go to work on redeveloping the property. That’s obviously not a traditional real estate deal. It’s basically a risk arbitrage play wrapped in an industrial redevelopment project. Our goal is to put these sites back to a productive use in an environmentally responsible manner that is supported by the sellers, regulators and the communities. Risk transfer is becoming more and more of our core business. Too often these sites are viewed strictly as liabilities, however many can become assets for attracting new industry and jobs.

Develop CLT: What types of properties are you pursuing?

TM: We’re spending most of our time chasing shuttered coal-fired power plants, mostly in the Midwest. We’re shortlisted on four projects there and hope to be announcing a major project shortly. We’ve just closed on our third coal-fired facility in North Carolina. These are smaller plants (typically 35 megawatts) that were supplying electric and steam to large industrial plants. One is being repurposed as a large biomass project, while we have another facility that we may repower as a biomass project ourselves, or sell it to a biomass developer. Every coal plant has extensive infrastructure and usually a large land mass. Much of this infrastructure and excess land can be repositioned to attract new industry.

Develop CLT: Where are the projects you are interested in?

TM: Historically 90% of our business has been in the Carolinas, however our Risk Transfer platform is taking us more into the Midwest. There’s no shortage of shuttered, contaminated industrial facilities and coal plants. That’s unfortunate on one hand, but also a tremendous opportunity for our business model.

Develop CLT: Is there much competition?

TM: There’s very little competition – this is not glamorous real estate. We’re not building condos on South Boulevard, or glitzy mixed-use projects. This is ugly, industrial space often with complex environmental issues. Not a lot of developers are attracted to these big heavy, shuttered sites and even fewer are willing to assume the environmental challenges, which for us is fantastic. I believe most every problem is disguising an opportunity.

There’s so many of these sites, however, I wish there were a few more firms were interested in repurposing these facilities. There are over 300 shuttered coal fired plants in the U.S. and more are coming. Most utilities are only focused on demolishing the structures and closing out the ash basins. There’s typically little thought in how these sites can be redeveloped. I’m actually quite surprised more communities aren’t demanding these sites be used to attract new industry where possible.

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Tom McKittrick of Forsite Development on recycling real estate

June 15, 2016 DevelopCLT: What’s in the park now?

Tom McKittrick: We’re on our third wave of tenants. We have an abundance of cheap, dry industrial space and we quickly became a hub for startups, pilot projects and entrepreneurial expansions. Some have made it, some haven’t. We’re starting to get much more quality creditworthy type tenants. We have an industrial tote washing facility, plastics recycling, and we have an aquaculture project on a 35-acre lake. We’re harvesting that material and using it in a composting operation to create a high-quality soil amendment. We’ve also got a synthetic textile manufacturer.

We sold the city of Charlotte 180 acres of land to build a new regional wastewater treatment facility, which will be close to a $200 million project. And we’re about to announce a $40 million-plus project that has a signed agreement. We hope to share details this summer.

DevelopCLT: You use the term “eco-assets” when talking about the site. What does that mean?

TM: Many of these facilities have extensive buffer acreage that often is not developable in a traditional sense. Opportunities exist, however, to create value via conservation easement tax credits and mitigation banking projects. Sometimes these eco-assets have real monetary benefit, other times it is “natural capital” where no money is made but it’s the right thing to do.

We saw eco-asset potential at ReVenture on our buffer and unbuildable areas. This included creating a 183-acre conservation easement along all of our Catawba River and Long Creek frontage, a wide variety of habitat enhancement projects including; pollinator habitat, bat boxes, wildlife plantings, energy crop demonstration stands and managed timber. Beyond being environmentally responsible, our site-wide maintenance costs were reduced by over $100,000 annually as our areas that required mowing are about half. We’re pleased to have been awarded the Wildlife and Industry Together (WAIT) certification from the NC Wildlife Federation. We have areas where it doesn’t make sense to build but certainly makes sense to put these acres back to productive use.

DevelopCLT: What’s the secret to rehabbing formerly polluted sites for a profit?

TM: Most importantly, you need to understand what you’re getting into and how to operate within the regulatory framework. Creating a development plan that is mindful of the sites condition is of critical importance. I’m also a big proponent of not changing the use from industrial. The main plant area of ReVenture is an industrial site and will always remain industrial forever (deed restricted). Sites with legacy contamination get significantly more complex when you start developing condos and retail.

DevelopCLT: Share examples of the thinking involved with this type of development.

TM: Sites with heavy infrastructure and active permits can have significant appeal to new industry and/or the permits may be able to be monetized. For example, in certain watersheds, the phosphorous and nitrogen allocation associated with the wastewater treatment plant may have substantial value. Other examples include: conservation easement tax credits, endangered species, stream and wetland mitigation projects among others. Too often companies who own these sites demolish everything in an effort to lower their property taxes, which is unfortunate. There’s typically no thought in how to repurpose the infrastructure in a manner than can attract new industry.

I love the challenge of trying to figure out how to make a site or a project economically viable, by looking at it in a nontraditional manner. You need to look at real estate, but are there other parts and pieces that can be monetized to extract value and make a project viable. We’ve certainly figured out a lot of angles to extract value where others just can’t see it.

DevelopCLT: What do you enjoy about this type of work?

TM: Certainly everybody wants clean air to breathe and clean water. No one wants to harm the environment. This eco industrial redevelopment model has the added benefit of being economically viable, environmentally responsible and the right thing to do. That said, we’re not here to hug trees, we’re doing this to make money.

I believe repurposing a shuttered industrial complex into an eco industrial park is a rare instance where private investment, public policy and the environment can merge and all can benefit. I like to say big problems are often disguising big opportunities, you just have to look at them through a different lens. I feel like we’ve become very efficient at that. I feel like we’re recycling real estate.

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EPA Case Study of ReVenture Park

September 23, 2015 Reclaim, Restore, Reinvent: Creating Jobs and Cleaner Energy at ReVenture Park. The case study of a shuttered textile manufacturing plant returning to productive use, creating jobs and creating cleaner energy. Click the link to see full story.

EPA Case Study ReVenture Park

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ReVenture Park Recognized with Air Compliance Excellence Award

August 26, 2015

Mecklenburg County Air Quality (MCAQ) has recognized ReVenture Park with the Air Compliance Excellence Award at the annual ACE Awards. The award is designed to highlight local industry’s efforts in achieving compliance with their air quality permits, thereby helping to reduce pollution and improve local air quality. Click here to view the award letter in its entirety.

ACE

 

 

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