Crain's Detroit Business Profile of RACER Trust

'I'M NOT INTIMIDATED. I'M EXCITED':
TRUST'S POINT MAN HAS 89 OLD GM PROPERTIES TO SELL

Crain's Detroit Business

Aug. 8, 2011

By Daniel Duggan

With 89 buildings across the country, funded with $770 million for environmental remediation and upkeep, the RACER Trust and its 44 million square feet of industrial space would be the third-largest real estate investment trust in the country if it were on the New York Stock Exchange.

Instead, it's one of the largest real estate sales and marketing endeavors undertaken in recent history.

Atop the pile of former General Motors Co. factories being marketed for sale is Bruce Rasher, the former broker and former state official now in charge of selling it all.

"I'm not intimidated," he said in the office space RACER uses as a headquarters, crowded with 30,000 boxes of documents and hidden in the 5 million-square-foot Willow Run plant in Ypsilanti. "I'm excited, it's an important process."

The trust, officially called the Revitalizing Auto Communities Environmental Response Trust, goes back to the General Motors bankruptcy, when the automaker was allowed to put its unwanted properties into a trust.

The trust isn't just charged with selling each property. Rather, it's charged with finding a use that's in line with what individual communities would like to see, strategically, for some major parcels of land across the country.

The Michigan properties include three GM plants in Pontiac, plus other sites in Ypsilanti, Milford, Livonia and Detroit.

Sales aren't just about money

The RACER Trust is headed by Elliott Laws, the Washington, D.C., trustee appointed by the U.S. Bankruptcy Court. Under him is Rasher and a team of nine employees. Together, they must oversee the environmental cleanup of each property and put together a marketing program for every site.

Rasher brings with him a long background of real estate and political work.

He served two terms as mayor of Marshall from 1995 to 1998 before working in the Southfield office of CB Richard Ellis, managing the North American manufacturing and brownfield specialty practice. He was an executive with Consumers Energy Co. from 1977 to 2008, managing real estate projects and economic development.

He serves as treasurer of the Barrington, Ill.-based National Brownfield Association, is a commissioner on the Great Lakes Commission and is chairman of the board of Oaklawn Hospital in Marshall.

Rasher was asked by former Gov. Jennifer Granholm in 2009 to merge the Michigan Department of Environmental Quality and Michigan Department of Natural Resources. The two agencies were later separated again by Gov. Rick Synder.

In finding a new use for the GM buildings, Rasher said it's not just a sale price he's looking for. He follows six criteria laid out in the documents creating the trust. Monetary value, wishes of the local community, degree to which jobs are created, tax revenue, whether a use interferes with environmental cleanup and the reputation of the buyer are all considered.

"The first step is reaching out to every community, both local officials and economic development divisions," he said. "We need to get a clear idea of the guidance and wishes of a community so we can determine how to proceed."

Battle over a battleground

And even that isn't a clear-cut process.

In Fredericksburg, Va., for example, Rasher and his team are trying to develop a plan that works when stakeholders have conflicting opinions.

On one hand, local leaders want to see a manufacturing use to replace jobs lost by GM's plant closure.

On the other hand, the plant is built on the site of the Battle of Fredericksburg in the Civil War. Given the land's significance, the Washington, D.C.-based Civil War Trust has gotten involved, asking to purchase the land and preserve it along with other famous battlefield sites it has purchased and preserved around the country.

On the other extreme, Rasher said, there was a two-hour meeting in Ewing, N.J., and afterward he walked away with a clear plan for another RACER site, 80 acres of vacant land.

"They want the site demolished and they want a transit-oriented, master-planned development there," he said.

Layers of Government

Locally, there are some significant parcels of property in the trust soon to hit the market.

There are 32 RACER properties in Southeast Michigan, of the 57 total properties in Michigan, according to the group's listing.

Sites in Pontiac, Ypsilanti, Milford, Livonia and Detroit are all in the mix. The Flint area has 14, there are five in Saginaw, four in Lansing, one in Bay City and one recently sold in Wyoming. Rasher said his team has been in contact with nearly every level of state, regional and local government along with economic development groups, investors and real estate brokers.

And in many cases, it will take every group working together to come up with the right plan for a site.

The Willow Run Plant, for example, straddles Washtenaw and Wayne counties, involving county officials plus Van Buren and Ypsilanti townships. The Michigan Economic Development Corp. has an interest in the future of the site, as does the Wayne County EDGE and Ann Arbor Spark.

Not to mention the Wayne County Airport Authority, which is nearby, Atlanta-based Delta Air Lines Inc. because of its hub at the airport and the Norfolk, Va.-based Norfolk Southern Corp. which has tracks running adjacent to the site.

"This is a 5 million-square-foot facility on a rail line, near an airport, along major interstates, near the border of Canada, outfitted with major gas lines, electrical systems and water," Rasher said. "It's a significant asset, and we want to optimize its use. Here, a worst-case scenario is to see it torn down for scrap."

Users are hard to find

Finding buyers other than scrappers will be a challenge when old auto plants are put up for sale, said Eugene Agnone III, a broker in the Southfield office of CB Richard Ellis.

Agnone was on the team that sold the former Ford Motor Co./Visteon Corp. Utica Plant in Shelby Township in 2010. After a long marketing process, the only realistic deal was a company interested in having the plant dismantled to sell the parts for scrap.

"There's always pressure to reuse these sites in a way to create more jobs," he said. "But they're just too big, and it winds up that it's not all that feasible."

Nationally, he said, there are a few companies looking for large manufacturing facilities and will take a former plant, such as Silicon Valley-based Tesla Motors Inc. and Irvine, Calif.-based Fisker Automotive Inc.

A major problem is the sheer size, he said.

"There aren't many users looking for a 2 million-square-feet facility," he said. "There are plenty looking for 300,000 square feet."

So why not just knock down some and save a corner?

Not so easy, Agnone, said.

In the 1.8 million-square-foot plant in Shelby, he said, there was a newer portion with 300,000 square feet that had the modern amenities, ceiling heights and space between structural columns that industrial users might be looking for.

"We tried to work through ways to split it up and demolish the older portions," he said. "But the utilities all come into one spot and run throughout the plant. There's one water line, one sanitary sewer line. It's expensive to split all that up and reroute it."

The plant is being dismantled now and is slated for demolition during the coming months.

Millions of square feet for sale

Selling the RACER properties is going to have both direct and indirect effects on the local real estate market, said Sue Harvey, senior vice president with New York-based Ashley Capital, which owns 12 million square feet of office and industrial real estate in the region.

If investors buy the sites and create speculative industrial space, it would compete with local investors, she said.

But the largest impact is the sheer amount of space being put on the real estate market.

"Any time you put that much space on the market, it affects all of us," Harvey said.

And, in part, Detroit's perception to the rest of the country of being full of cheap real estate is fostered.

"It sends a message to the people, the out-of-state people, who think that Detroit is one big vacant rusting building where rent is going to be offered at 50 percent of what we think it's worth, that we should be happy to get that."

Staying on top of the process

With a daunting task ahead, the prospect of selling these properties from coast to coast means a chance to repair real and symbolic holes in many communities, said Grant Trigger, cleanup manager for Michigan, also based in the Willow Run offices.

Trigger, who will oversee the environmental remediation process at all of the Michigan properties, said cleanup by itself isn't really the end goal.

"The goal is to help the local communities, not just do a cleanup," he said. "We want to redevelop the properties, and we won't be successful in every case, but that's a goal."

With 7,000 acres of land that includes golf courses, apartments, power plants and wastewater plants -- not to mention 30,000 boxes of documents to accompany the portfolio -- the details are immense, as is the long-term task.

Rasher said the key is to see the bigger picture.

"It might seem overwhelming," he said. "But it's a process. And we're on top of that process."

Daniel Duggan: (313) 446-0414, dduggan@crain.com. Twitter: @d_duggan

Used with permission of Crain's Detroit Business Copyright © 2011. All rights reserved.

Trust makes string of deals in Pontiac

Crain's Detroit Business

Aug. 8, 2011

Bruce Rasher and his team are off to a strong start in Pontiac, with one manufacturing site sold and three others under contract to be sold to a group of investors with a streak of deals there.

A. Alfred Taubman, founder of Bloomfield Hills-based Taubman Centers Inc.; John Rakolta, CEO of Detroit-based Walbridge Aldinger Co.; and Linden Nelson, CEO of Raleigh Michigan Studios, have three former General Motors Co. factories in Pontiac under contract, said Rasher, redevelopment manager for the RACER Trust.

The facilities are adjacent to the studio on Pontiac's Centerpoint campus.

Closings are expected to occur before the end of the year with the group buying the Pontiac Assembly Plant, Centerpoint Central and Centerpoint West, all near Opdyke Road and I-75.

As the trust works through its inventory of 32 former GM factories in metro Detroit, it's making for millions of square feet of real estate deals, such as the Pontiac one.

Rasher would not comment on the sale price or the intentions of the Pontiac buyers. Phone messages and emails from Crain's to all three investors were not returned last week.

A real estate source familiar with the group's plans said they expect to find a manufacturing user to buy the facilities.

Other deals by RACER in Michigan:

• A subsidiary of Lapeer-based dismantling company North American Dismantling Corp. recently purchased the 730,000-square-foot plant at 220 E. Columbia Ave. in Pontiac.
  The company will sell the raw materials on the site for scrap metal and then plans to market the land for redevelopment, said North American Dismantling principal Rick Marcicki in a press release.
  Work at the 47 acre site will begin later this summer, with the site ready for future development next year.
• Also involved with a former GM plant is West Bloomfield Township-based Lormax Stern Development Co., which purchased a 2 million-square-foot plant in Wyoming, near Grand Rapids, through a joint venture with the Wyoming Economic Development Authority, an entity similar to a land bank.
  Lormax Stern has a five-year exclusive development agreement to find a user for the site, build the facility and then either lease or sell the land.
  Sale prices on the deals have not been disclosed, but real estate brokers estimate the plants are selling between $1 and $3 per square foot.

-- Daniel Duggan

Used with permission of Crain's Detroit Business Copyright © 2011. All rights reserved.