|Environmental response trust|
|Industry||Environmental remediation, commercial and industrial real estate sales|
|Predecessor||Motors Liquidation Company|
|Founded||March 31, 2011|
The Revitalizing Auto Communities Environmental Response Trust ("RACER Trust" or "RACER") Trust was created in March 2011 by a Settlement Agreement in the United States Bankruptcy Court for the Southern District of New York. RACER's mission is to clean up and position for redevelopment properties and other facilities owned by the former General Motors Corporation (“GMC”, “Old GM”) before its Chapter 11 reorganization. Its predecessor, Motors Liquidation Company ("MLC") was created to manage and hold the assets of Old GM before the bankruptcy was complete. MLC was carved into four separate trusts; the first to settle the claims of unsecured creditors (OTC Pink: MTLQU), the second (RACER) to handle environmental response for MLC's remaining assets, a third to handle present and future asbestos-related claims, and a fourth for litigation claims.
At its inception, RACER's portfolio included properties at 89 locations in 14 states, comprising 358 individual parcels and more than 7,000 acres of primarily industrial land, making RACER one of the largest holders of industrial property in the United States. When it was formed, RACER was the largest environmental response and remediation trust in U.S. history.
RACER is headquartered in Detroit, Michigan. Its administrative trustee is Elliott P. Laws, a former assistant administrator for the U.S. Environmental Protection Agency and a partner in the law firm Crowell & Moring. The Bankruptcy Court appointed Mr. Laws to a five-year term as administrative trustee when RACER was established in 2011. He was reappointed to a second five-year term in 2016.
The Settlement Agreement assigns RACER three basic roles regarding former GM properties. First, for those properties with environmental issues, RACER manages and funds the environmental cleanup. Second, RACER manages the properties while they are owned by RACER. Third, RACER has authority to “try to sell or transfer [its] Properties ... with the objective they be put to productive or beneficial use.”
RACER is not a government entity but rather an independent trust.
On June 1, 2009, General Motors Corporation and three wholly owned direct or indirect subsidiaries filed voluntary petitions for relief under Chapter 11, Title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York. On October 9, 2009, Remediation and Liability Management Company, Inc. (“REALM”) and Environmental Corporate Remediation Company, Inc. (“ENCORE”) each filed voluntary petitions for relief under Chapter 11 in the Bankruptcy Court.
On July 5, 2009, the Bankruptcy Court approved the sale of assets, pursuant to 11 U.S.C. § 363, to NGMCO, Inc. (“Newco”), now known as General Motors Company (“New GM”). Following the sale of assets, General Motors Corporation was renamed Motors Liquidation Company (“MLC”). As part of the sale of assets, GMC excluded from the sale certain real property and personal property it owned. On March 31, 2011, these excluded properties were transferred to the newly formed RACER Trust.
Parties to the Environmental Response Trust Consent Decree and Settlement Agreement (Case No. 09-50026 [REG]) included MLC, REALM, and ENCORE (collectively the “debtors”); the United States of America; the states of Delaware, Illinois, Indiana, Kansas, Michigan, Missouri, New Jersey, New York, Ohio, Virginia and Wisconsin; the Louisiana Department of Environmental Quality, the Massachusetts Department of Environmental Protection; and the Department of Environmental Protection for the Commonwealth of Pennsylvania (collectively the “States”); the Saint Regis Mohawk Tribe; and EPLET, LLC, not individually but solely in its representative capacity as Administrative Trustee of RACER Trust.
RACER Trust Properties
When GMC was renamed as MLC, its portfolio included properties at 89 locations in 14 U.S. states. These properties totaled more than 7,100 acres of land and nearly 40 million square feet of structural area. At the time MLC's assets were transferred to RACER Trust, MLC had sold six properties outright and a portion of a seventh. While RACER Trust was conveyed the remaining properties, it was transferred the environmental cleanup and monitoring responsibilities of all properties that required environmental remediation and long-term monitoring, regardless of whether the property had changed ownership. Sixty of the properties carried environmental obligations, four of which were sold or partially sold by MLC prior to RACER Trust's creation.
RACER Trust Redevelopment Mission
RACER begins the redevelopment process for new job-creating uses by meeting with local elected officials, community leaders and economic development organizations, with a goal of understanding the local community's common vision for the optimal re-use of each location. Based on this common vision, RACER determines how best to market the property for sale to prospective buyers. Following these initial steps, RACER published detailed marketing brochures and documents describing the terms for purchase, formally opening the marketing process.
Offers for purchase are evaluated by RACER against six criteria set forth in the Settlement Agreement that resulted in RACER's creation. RACER also may consider additional factors, in its sole discretion, when assessing whether these criteria have been best satisfied by a particular offer. While purchase price will be evaluated, RACER also must consider each offer's ability to create jobs and generate new economic opportunity in the communities hurt by the GM bankruptcy.
RACER strongly prefers buyers who have a specific plan to create new jobs in those properties while reusing, improving and expanding existing buildings, rather than buyers who intend to dismantle buildings and sell components of the properties they have purchased.
Proceeds from property sales or leases are used to pay so-called holding costs at RACER sites, including the property taxes RACER pays on these properties, and maintenance, insurance and security expenses. Proceeds from the sale or lease of RACER properties are transferred to RACER's Administrative Funding Account, from which RACER pays its day-to-day expenses. RACER is self-sustaining, and the anticipated proceeds from the sale or lease of properties were factored into the ongoing operations of RACER at the time of its creation. Thus, donation of property as a redevelopment strategy is precluded.
RACER does not invest directly in redevelopment (for example, by providing funding to offset infrastructure improvement costs) or otherwise pay third-party expenses (for example, for consultants to evaluate redevelopment proposals). RACER invests in local communities by maintaining properties in a marketable condition, paying property taxes and acting as an economic development partner in pursuit of new investment and job creation.
RACER is obligated by terms of the Settlement Agreement to sell its properties at prices that approximate fair market value and that take into consideration the jobs and other economic benefits new projects can bring to auto communities hurt by the GM bankruptcy.
The Settlement Agreement described the criteria that RACER, at a minimum, must consider when selling properties. These criteria include: 1. Whether the purchase price is sufficient; 2. The potential for job creation in the affected community and the state; 3. Increases in tax revenue or other benefits, like the reduction of blight, to the community, state or Tribe; 4. Avoiding an unanticipated increase in costs for the environmental cleanup; 5. The views of the local communities, the Tribe or the state; and, 6. The reputation and credibility of the prospective purchaser.
The Settlement Agreement does not require any particular weighting of the factors. Although the effects of a proposed sale on the states and localities are to be considered — and are considered — by RACER, these entities are not beneficiaries of RACER. Its sole beneficiary is the United States Government.
RACER Trust Environmental Mission
RACER Trust is responsible for conducting safe, effective cleanups of legacy environmental contamination resulting from previous operations at 60 former GM locations. The cleanups are conducted with the approval and oversight of state and federal regulatory agencies and funded by the principal and investment income from nearly $500 million that RACER received from the U.S. Department of the Treasury at the time of RACER's establishment. RACER's goal is to obtain "No Further Action" letters or other such instruments of completion from responsible regulatory agencies for all locations where cleanups were required.
To the extent possible, RACER coordinates its cleanups to accommodate the interests of buyers or end users who seek to invest in new industrial or commercial development and job creation. In most cases, RACER properties can be sold for new uses even before environmental cleanups are started or completed, assuming RACER is guaranteed continuing access to the properties to conduct cleanup work.
Budgets for each cleanup were incorporated into the Settlement Agreement that established RACER Trust. In cases where the established budget is insufficient, RACER Trust has access to supplemental funding with the approval of the signatories to the Settlement Agreement.
RACER sold two of its properties, Moraine Industrial Land and Moraine Assembly Plant, to Industrial Realty Group (IRG) in June 2011. The adjacent sites totaled more than 3.3 million square feet of factory space on 379 acres of land in Moraine and Kettering, Ohio. In one of the largest international deals in Ohio's history, Fuyao Glass America purchased 1.5 million square feet of manufacturing space from IRG. The company, now the largest auto glass manufacturer in the world, supplies customers such as General Motors, Ford, and Honda. The plant also serves after-market glass suppliers, which includes companies such as Safelite AutoGlass.
Fuyao originally pledged $230 million in investment and the creation of 800 jobs. One year later this jumped to $360 million in investment and 1,550 jobs. One year after that, Fuyao announced its labor need had risen to a total of 2,400 workers at this facility. A total of 622 temporary construction jobs also were created. In July 2016, Fuyao announced it is leasing an additional 241,000 square feet of the plant in a 15-year agreement with IRG. Fuyao's chairman, Cho Tak Wong, said it expects to have more than 3,000 employees at this site sometime in the future. IRG leases portions of the sites to other auto- and non-auto related manufacturers.
Kansas City, Kansas
In September 2013, RACER sold its 74-acre Kansas City, Kansas holdings to NorthPoint Development. The buyer named the site Central Industrial Park and prepared it for new industrial development. In 2015, NorthPoint developed a 74,000 square-foot, $10 million build-to-suit facility that was purchased by Plastic Omnium Auto Inergy, which manufactures plastic fuel tank systems for the nearby General Motors Fairfax Assembly Plant. The manufacturer employs approximately 200 new workers. NorthPoint then constructed an 842,000 square-foot speculative building that General Motors Company occupies under a long-term lease. This $55 million project is expected to employ approximately 500 new workers. Additional areas of the site are planned for redevelopment.
In August 2014, RACER sold two of its Pontiac, Michigan properties, PCC Validation I and PCC Validation II, to M1 Concourse, LLC. The two adjacent sites comprised 86 acres of vacant land once owned by the Rapid Motor Vehicle Company until being acquired by Old GM in 1909. The buyer built an exclusive community of more than 250 secure private garages set along the 1.5-mile Champion Motor Speedway, also part of the M1 Concourse development. Private garages are individually owned flexible storage and entertainment spaces. A 6,000 square-foot entertainment venue, a restaurant and banquet/event center, and commercial/retail spaces were part of the nearly $70 million investment.
RACER sold its 103-acre Indianapolis Stamping Plant site in Indianapolis, Indiana to the Ambrose Property Group in March 2018. The property was once home to the 2.2-million square-foot General Motors Indianapolis Metals Center. RACER razed the vast majority of the structures on site prior to selling to Ambrose. Ambrose's site plan includes a mixed-use development along the White River that could require some 1,000 temporary construction jobs, 900 permanent jobs, and more than $500 million in project investments over 10 to 15 years.
RACER sold its Delco Chassis site in Livonia, Michigan to Ashley Capital in August 2015. The buyer built a 1-million square-foot facility that it leases to Amazon.com as a fulfillment center. Over 500 temporary construction jobs were created, and in the summer of 2017, Amazon estimated it would hire more than 1,000 employees to staff the facility. Ashley Capital sold a portion of the same site to National Republic Distributing Corporation. The wine and spirits distributor is building a 515,000 square-foot development that will serve as both a regional headquarters and a logistics facility. It is estimated that the company will invest over $67 million in the project and need to hire 525 employees.
Ypsilanti Township, Michigan
In November 2016, RACER sold 312 acres of its iconic Willow Run Powertrain Plant to a partnership that has redeveloped the property into the American Center for Mobility, a state-of-the-art, four-season testing facility for connected and automated vehicles in Ypsilanti Township, Michigan. The facility includes a 2.5-mile test track with ramps, a 700-degree tunnel, and other components necessary to developing and marketing driverless automobiles and related technologies.
Prior to this sale, RACER sold 144,000 square feet of former manufacturing space on almost 17 acres of this property for the newly relocated Yankee Air Museum, which suffered a devastating fire at its previous location in 2004.
Spotsylvania County, Virginia
Old GM owned a single property in Virginia, located near Fredericksburg in Spotsylvania County, which RACER took possession of as part of Old GM's bankruptcy. The 265,000 square-foot manufacturing facility and 76 acres of land were sold by RACER to idX Corporation in May 2017. idX stated in late 2017 that it will hire 175 employees and invest $9.8 million in its project.
RACER Trust self-publishes case studies describing the redevelopment, reuse and environmental status of its former properties from time to time.
In August 2012, RACER announced it had reached agreement with the Brownfield Communities Development Company, a joint venture between Hilco Trading LLC and The Adler Group, for the sale of the former GM Ontario Stamping Plant, a 2.5-million-square-foot manufacturing facility in Ontario, Ohio. The sale was completed in December 2012. "We are taking an obsolete single-tenant facility and turning it into a modern multi-tenant business generator,” said Michael M. Adler, CEO and Chairman of Adler Group. "We are excited to start the next phase of the project and we are looking forward to working with the community." The company promised to create 500 jobs within five years or pay a $1 million fine to the city.
Brownfield Communities Development Company represented to RACER and to the community in a Development Agreement dated August 16, 2012, that it intended to seek new tenants to occupy most of the intact building. In a letter dated April 12, 2013, Michael M. Adler, president of Ontario Business Park LLC, requested approval from the City of Ontario for demolition of the buildings on the property. The request was approved by the Ontario City Council and the buildings were demolished and sold for scrap.
Brownfield Communities Development Company claimed that its marketing of the property was thwarted by ongoing environmental activity at the property, despite never having raised the environmental conditions as a potential impediment when purchasing the property and despite ample examples of RACER properties that were purchased and redeveloped while environmental activities were ongoing. The Ohio Environmental Protection Agency, the regulatory agency that oversaw RACER's cleanup activities at the property, issued a Covenant Not to Sue to RACER in April 2016, certifying the completion of environmental cleanup at the property.
In August 2017, the Ontario City Council sent a notice of default of completion to the Adler Group, Inc. The property remains undeveloped.
Caddo Parish, Louisiana
In January 2013, RACER and Elio Motors announced that Elio Motors would purchase the former Shreveport Assembly Plant in Caddo Parish, LA, just outside Shreveport, and hire 1,500 people to manufacture the company's innovative three-wheel, gas-powered vehicles. The deal was restructured to enable purchase of the facility by the Caddo Parish Industrial Development Board (IDB) in December 2013, with a master lease provided to Industrial Realty Group (dba Shreveport Business Park) and a secondary lease provided to Elio Motors. Shreveport Business Park, in addition to making monthly lease payments to the IDB, is responsible for all of the property's marketing, maintenance and upkeep.
Local elected officials who initially were supportive of Elio Motors began to publicly criticize the deal as Elio Motors continued to miss start-of-production targets, citing lack of capital. In particular, Caddo Commissioner Matthew Linn and Louisiana State Rep. Cedric Glover, a prominent supporter of Elio Motors during his time as mayor of Shreveport, levied false allegations — Commissioner Linn that RACER threatened to demolish the plant if the Caddo Parish IDB did not purchase it, and Rep. Glover that the sale of the plant prevented other prospects from leasing or purchasing the plant. Rep. Glover sponsored a House resolution requesting “the House Committee on Commerce to study the state of the automotive manufacturing industry in the state of Louisiana since the onset of the most recent worldwide economic downturn.”
The House Committee on Commerce convened a hearing on the transaction on October 26, 2016, in Shreveport. The committee issued a two-page report that included no conclusions or finding of fact, except to note that, “Since the October 2016 meeting, officials with the North Louisiana Economic partnership announced that GLOVIS America, a subsidiary of Hyundai, will open a new distribution center in the former General Motors facility that will result in the production of 75,000 vehicles annually and the creation of 400 new positions in north Louisiana.”
In 2017, the Louisiana House authorized the creation of a subcommittee of the House Committee on Commerce “to further examine certain matters relative to the (RACER Trust’s) fulfillment of fiduciary duties concerning the former General Motors Shreveport plant.” A report of the subcommittee was due 30 days before the start of the 2018 Regular Session of the Legislature of Louisiana. No report was issued.