Tradepoint Atlantic hits a turning point, seeks government financing

As Aaron Tomarchio drives across the site of Tradepoint Atlantic in southeastern Baltimore County, the SUV lurches over what only vaguely resemble roads.

A map of the future industrial campus — distribution warehouses, manufacturing plants, shipping facilities — slides to the floor.

“It’s starting to take shape,” Tomarchio said. “But it’s still very rough.”

The investors and executives of Tradepoint Atlantic are looking for the government’s help in smoothing over the rough edges of the vast property to attract tenants and return jobs to Sparrows Point where tens of thousands of steelworkers once worked for Bethlehem Steel. They’re asking for help in financing up to $150 million worth of water lines, sewer pipes and, yes, new roads.

As soon as next month, the Baltimore County Council will consider a deal that would involve issuing government bonds to pay for the work, with a portion of Tradepoint’s future property tax payments set aside to pay back the debt — a complex and often controversial arrangement known as tax-increment financing.

If Tradepoint Atlantic is going to reach its full potential as an industrial campus replacing a shuttered steel mill, it needs the help, said Tomarchio, Tradepoint’s senior vice president who often serves as its public face.

Without assistance in paying for infrastructure, the remainder of the 5-square-mile site will likely fill up with what Tradepoint already has built: distribution warehouses for big companies with modest-paying jobs and importing cargo that employs few people.

The $150 million would pay for 4.5 miles of roads, 6.5 miles of sewer lines and 8 miles of water lines. Large portions of the property don’t have access to the county’s public water and sewer system.

“If we don’t build the system today, it will eliminate the probability of getting a manufacturer,” said Eric Gilbert, Tradepoint Atlantic’s chief development officer.

The request comes as Tradepoint and its tenants already have received or lined up more than $60 million in grants, tax breaks and other assistance from the county, state and federal governments. Tradepoint also has received flexible zoning requirements, been granted more than two dozen variances from environmental regulations and lobbied successfully for a new public bus route to the site.

County and state economic development officials say that Tradepoint Atlantic is worth the investment because it offers one of the best opportunities for attracting jobs to the state.

“You don’t have a lot of projects that you can look at and say: Can we get billions of dollars of return, year over year, and put tens of thousands of people back to work?” said Will Anderson, Baltimore County’s director of economic development.

“It’s a really hot project,” said Michael Gill, the state’s secretary of commerce. “It’s easy to get excited. It’s got all the pieces for something great.”

Just a few years ago, the Sparrows Point property looked more like a post-industrial wasteland than a prime development opportunity. RG Steel, the mill’s last owner, went bankrupt and shut down in 2012, leaving massive abandoned buildings and furnaces.

The complex was liquidated. Whatever could move was sold and eventually the property was acquired in 2014 by Tradepoint Atlantic, a joint venture of Chicago-based redevelopment and liquidation firm Hilco and locally-based Redwood Capital Investments. Redwood is the private investment firm of billionaire Jim Davis, who co-founded the Allegis Group staffing company with his cousin, Baltimore Ravens owner Steve Bisciotti.

They laid out a new vision for the old mill, turning it into a modern industrial complex that takes advantage of the property’s port facilities along the Patapsco River, access to highways and miles of rail lines that connect to the CSX and Norfolk Southern railways.

In the four years since Tradepoint Atlantic took over, the property has undergone a startling transformation.

Crews leveled most of the old mill buildings, including the dramatic 2015 implosion of the mill’s last blast furnace. Meanwhile, environmental remediation has been ongoing, attempting to clean up the polluted legacy of more than a century of steelmaking.

Tradepoint already has attracted new users, big and small. FedEx, Under Armour and Amazon are occupying large warehouses while Pasha Automotive imports vehicles.

Other tenants include Gotham Greens, which is erecting a greenhouse farm; Harley-Davidson, which is building a rider training center; Perdue Agribusiness, which stores imported grains; and lumber distributor Atlantic Forest Products, which moved its headquarters there.

More than 1,500 employees work at the site today, a number that will grow to 3,500 once Amazon and Under Armour are fully staffed.

Tradepoint also ships commodities through its port, including salt, coal and zinc. And it offers storage and service for railroad cars on its property. The cement company Lafarge was a tenant before Tradepoint took over and continues to operate on the site.

And work continues: Tradepoint built a 1 million-square-foot warehouse next to the FedEx warehouse for which it’s seeking a tenant. Site work is underway for a commercial strip that will include a Royal Farms gas station.

Tradepoint’s Gilbert estimates the site is about 25 percent developed. It’s spent more than $30 million of the $50 million it agreed with regulators it would spend on environmental cleanup.

To get to this point, Tradepoint and its tenants have received help from all levels of government.

Under Armour and Amazon each received more than $19 million in financial assistance from the county and state governments — a mix of tax credits, a sales tax exemption and conditional loans likely to be converted into grants. Gotham Greens received $200,000 in similar conditional loans.

And the federal government is giving Tradepoint a $20 million grant to modernize the port infrastructure.

Tradepoint Atlantic is about to ask for more help, in the form of a financing package to pay for the roads, water lines and sewer pipes needed to build out the rest of the site.

The $150 million of infrastructure would open up the possibility of 7 million square feet of development, said Marc Salotti, Tradepoint’s chief financial officer.

And though Tradepoint’s investors have put $1 billion into the property — and ultimately could invest up to $3 billion — the company argues it needs assistance with that infrastructure.

If the company pays for the roads, water and sewer lines on its own, “we price ourselves out of the market,” Salotti said. Tradepoint would have to charge so much for rent to make back the money spent on infrastructure, it would no longer be competitive.

The details of the proposed tax deal haven’t been made public, but the company and county have offered broad strokes of what it would look like.

If approved by the Baltimore County Council, up to $150 million worth of bonds would be issued by the Maryland Economic Development Corp. The proceeds would pay for the roads, water and sewer work.

Then the bonds would be paid back by a portion of Tradepoint’s property taxes paid to the county going forward. As the property is developed, its value should increase along with the property taxes the company pays.

Tradepoint’s Tomarchio, who has been making the rounds with community groups to garner support, stresses that the bonds would be paid back with money that comes out of Tradepoint’s pocket.

“The tax dollars people send to Towson are not going to pay for this,” Tomarchio said.

But the county government would not get the full amount of property taxes it might from Tradepoint. That’s tax money that otherwise would go to schools, police and fire service, community parks and other government services.

The county essentially would give up a portion of future tax revenue growth to help Tradepoint develop its property and create jobs.

Baltimore County Executive Don Mohler hired a consulting company to review the proposal to see whether it makes financial sense for the county. Mohler, a Democrat, said he’s hopeful the consultant’s report supports the tax-increment financing — or TIF — deal.

One key question is whether Tradepoint will pay enough property taxes to repay the bonds.

“I am bullish on the TIF,” Mohler said. “At the same time, I have a responsibility to the taxpayers of Baltimore County to have a third party study it in detail.”

Tradepoint Atlantic started laying the groundwork for a TIF nearly two years ago, when it commissioned a report from Sage Policy Group that advocated for such a deal, saying it would help Tradepoint realize its potential “more quickly and more broadly.”

Rarely used in Baltimore County, TIF deals are often controversial.

Baltimore County issued $33 million worth of bonds under a TIF agreement to jump-start the Metro Centre project in Owings Mills. The county built a garage, library and community college there, while a developer is building retail shops, apartments, a hotel and office buildings.

TIF deals have been more common in Baltimore City.

Baltimore officials authorized up to $660 million in bonds to pay for infrastructure at Port Covington, where Under Armour founder Kevin Plank’s Sagamore Development plans to build a mini city that would include Under Armour facilities, shops, homes and more. (The Baltimore Sun is a tenant at Port Covington.) No bonds have been issued yet.

The city’s second-largest TIF was $301 million used for the city-owned Baltimore Hilton hotel downtown. The city also authorized more than $100 million in bonds for the 27-acre waterfront Harbor Point project under construction by Beatty Development.

Tradepoint officials note that on a per-acre basis, their request is much smaller than those in the city. And if the company’s property taxes are insufficient to repay the bonds, then the county will levy a special tax on Tradepoint to get the money.

It will be up to the Baltimore County Council to decide whether this is the right move. As soon as next month, council members will be asked to approve legislation needed for the deal to happen.

Councilman Todd Crandell represents Sparrows Point and has voted against other deals that sent money to developers, notably a $43 million package approved in 2017 to jump start the stalled Towson Row mixed-use project. Council members often defer to the member whose district a project is in when casting their votes on zoning and related matters.

Crandell, a Republican, said assisting Tradepoint with financing may be an opportunity to spur the creation of thousands of jobs in an area that sorely needs it after the closure of the steel mill and a nearby General Motors factory. But he needs more information to determine whether the deal will be a net positive for the county.

“This is a transformational opportunity,” he said. “Public support has been important to Tradepoint so far and further public support may be necessary moving forward.”

Council Chairman Julian Jones, a Woodstock Democrat, said he’s reserving judgment until he sees the proposal’s details. With other projects like Towson Row, developers needed county help or their project wouldn’t happen — but that’s not the case here, Jones said.

“It’s not a question in my mind, Tradepoint Atlantic is here to stay,” Jones said. “The issue as I understand it today is, when does it happen in terms of Tradepoint Atlantic and what happens. I’m very eager to see all the details in terms of whether or not it’s a good deal.”

Tradepoint officials are also working to win over the community. At the North Point Peninsula Council on Thursday, Tomarchio made his pitch to a skeptical crowd gathered in a fire hall. Some of the questions were practical — how would the bonds work? — while others were philosophical — why should a large company get help that’s not available to small businesses?

Council President Fran Taylor said the group will weigh the proposal carefully before deciding. “You have to look at the long-term benefits to the community as a whole,” he said.

Tradepoint officials are hopeful their proposal will be approved. They say they’ve gone about as far as they can developing the property in its current condition.

Gilbert, the Tradepoint development officer, said companies are waiting in the wings to see whether the infrastructure will get improved. It’s a tough sell, Gilbert said, when the property is a mess of substandard roads with no water and sewer service.

If the TIF goes through, Gilbert said, it won’t be long before Tradepoint will be able to announce deals involving millions of square feet of development and thousands of jobs.

“We have tons of interest,” he said, “but we can’t get them over the finish line.”

pwood@baltsun.com

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