Fenton Chrysler site redevelopment could follow Hazelwood Ford blueprint – STLtoday.com

Posted: Sunday, July 17, 2016

Amid what seems to be a booming market for new industrial buildings, even more space is underway.

The newest construction is planned at the former Chrysler auto assembly site in Fenton, some of which could be ready for occupancy as soon as next year, according to a proposal from KP Development. The Fenton Logistics Park would add around 2 million square feet of space for warehouses, offices and industrial tenants at a time when industrial space is being added to the regional market at a rapid clip.

KP Development appears to be following the same playbook for the former auto manufacturing site as Panattoni Development Co., which in recent years has turned the old Hazelwood Ford site into Aviator Business Park.

And, like similar logistics-focused business parks, it is asking for a hefty helping of incentives from taxpayers to help accelerate the project.

Logistics warehousing is a sector regional leaders have targeted as a priority for growth. They tout the St. Louis area’s location and transportation infrastructure, and many say incentives are important to attract facilities from companies scouting multiple regions for distribution centers.

In Aviator Business Park, real estate firm CBRE says the site’s 25-year tax abatement has helped the firm market the site to potential tenants. CBRE will also be marketing the Fenton site, and the same should hold true there, said CBRE vice president Brian Bush.

“In addition to their location and their access, I think incentives play a part,” he said.

In Fenton, KP is asking for $57 million in incentives to help finance the $222 million development of the former auto site.

Most are in the form of $52 million in tax increment financing, which will be raised through a TIF bond sale by St. Louis County or another entity.

To pay down the bonds, about $17 million would come from diverting new state income taxes as jobs are added to the empty site, while the remainder would come from new local property taxes and sales taxes generated by the project.

The St. Louis County TIF Commission is holding a public hearing to discuss the proposal at 6:30 p.m. Wednesday at Fenton City Hall.

Incentive packages tend to give cities a “competitive advantage,” said Karen Ellis, director of economic development at the St. Louis Regional Chamber. While companies mostly look at location, workforce and other factors first, “that’s usually the tiebreaker,” she said.

Other area business parks have at least some sort of public assistance to help market them, and there’s still a lot of work left at the Fenton site to remove the remnants of the Chrysler factories, which once churned out minivans and pickups.

For a logistics park, developers also may need to address access and other infrastructure issues that were problematic to the automaker while it still operated there, said Patrick McKeehan, a longtime economic development official in the region and former director of the St. Louis Regional Automotive Partnership.

“They’re going to have to make a significant investment to build upon those sites,” McKeehan said. “I’d rather see activity on the site then having it sit and not generating any economic activity.”

‘The future

was in logistics’

Both the Chrysler and Ford sites lend themselves to distribution centers because of their location along interstates and rail lines. Finding a new major manufacturer tenant to fill the Ford property after it closed a decade ago seemed unlikely, said T.R. Carr, who was mayor of Hazelwood from 2000 to 2009 and is now a research scholar for the Institute for Urban Research at Southern Illinois University Edwardsville.

“It was very clear that the future was in logistics, the area along I-255 on the Illinois side was taking off,” Carr said. “There’s not a large manufacturing base ready to move into these sites.”

In Fenton, the $222 million logistics park won’t reach the 6,000 jobs that the Chrysler assembly plants once supported. But the developers have said it could house 2,500 to 3,000 jobs as it develops.

Assuming KP Development’s numbers remain the same, the subsidy for the Fenton Logistics Park comes out to roughly $19,000 per job, said Kenneth Thomas, a professor of political economy at the University of Missouri-St. Louis who studies government incentives. That’s lower than average, he said, and at least the subsidy isn’t being used for a primarily retail development.

“The whole system is a bad system, but within the confines of the system we have, that’s not such a bad deal,” Thomas said.

The use of the incentives will reduce investment somewhere else, Thomas said, by distorting the market.

Other subsidized logistics parks have caused some reshuffling locally. When Fenton-based food distributor International Food Products Corp. moved to a new 227,000-square-foot warehouse in Aviator Business Park, for instance, it said it would consolidate operations there from two warehouses in St. Louis. Swedish lubrication system maker SKF recently announced it would leave its existing St. Louis factory for NorthPark, another growing logistics and office park near Lambert-St. Louis International Airport.

But McKeehan said often the new locations replace aging, inefficient facilities.

“While there may be a little bit of a shift of some existing space, it tends to be not just a move but expansion and growth coming with it,” he said.

There’s hope that the new space will attract tenants from outside the region as e-commerce continues to grow and companies look for locations to house new, state-of-the-art distribution centers. The region has seen some big successes recently, especially online retail giant Amazon’s announcement last month it would open two fulfillment centers with a total of 1,000 jobs in Edwardsville’s Gateway Commerce Center and the adjacent Lakeview Commerce Center.

McKeehan and others hope that sends a signal to other companies to scout out St. Louis for distribution sites. Aviator recently attracted a non-St. Louis firm, inking a lease with Trans-Lux Corp., an Iowa-based maker of LED displays often used in sports arenas. The city of Hazelwood chipped in a $650,000 forgivable loan for Trans-Lux, which said it should grow to 90 employees locally in four years.

That deal fully leased a building that already housed Weekends Only and Silgan Plastics, and development should start soon on a new speculative warehouse, CBRE’s Bush said. While more industrial space is under construction in the area than has been seen in over a decade, Bush thinks the market can absorb more space at Aviator and the Fenton Logistics Park.

“The supply is still relatively constrained versus historic averages,” Bush said. “We’re catching up. It sounds like a lot, but when you look over the past few years and see that nothing has been built, there’s probably still some runway.”

Carr, the former Hazelwood mayor, says logistics and warehousing seems to be the best use for the former Ford and Chrysler sites.

“If we could find other manufacturing, I would say go for it, but the nature of our economy has changed,” he said. “I firmly believe that St. Louis needs to look at and develop and strengthen our position in the logistics market.”


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