Hilco Redevelopment Partners (HRP) — the real estate development unit of Hilco Global that remediates and redevelops complex and obsolete industrial property — announced June 26, 2020, that it completed a transaction to purchase the 1300-acre former Philadelphia Energy Solutions (PES) refinery in Southwest Philadelphia. The deal is a giant step toward building an environmentally responsible and economically robust commercial hub in Southwest Philadelphia.
“I want to thank Hilco Redevelopment Partners for their commitment to Philadelphia by assuming ownership of one of the most important commercial sites in the city,” said Philadelphia Mayor Jim Kenney. “The action creates jobs, ensures the future commercial viability of the site, and decreases the former refinery’s environmental impact.”
For more than 150 years, the PES refinery stood as a symbol of the Industrial Revolution and helped to grow Philadelphia, with all the attendant environmental concerns that were byproducts of that era. Under new ownership led by HRP, a fresh vision for the industrial site will be realized, resulting in one of the largest and most strategically significant multi-modal logistics hubs in the country that leverages the site’s unparalleled infrastructure and location.
“Our plan is to transform the site into a commercial hub to be shared by dozens of world-class companies that will benefit from Philadelphia’s diverse workforce and strategic location with an environmentally responsible infrastructure that will be great for all Philadelphians,” said Roberto Perez, Chief Executive Officer – Hilco Redevelopment Partners. “We are looking forward to collaborating with city, state and neighborhood leaders and community groups, working side by side as your new partner and member of the community to create this extraordinary center for commerce and economic development.”
As an employment engine, the project’s 1300 acres–the total size of Philadelphia’s Central Business District–offers incredible job growth potential. During the remediation and redevelopment phase, the project will generate many job opportunities and rely heavily on local unions and local trades. Ultimately, the companies that will locate at this new development will create thousands of new permanent jobs, according to initial studies.
“This is an exciting project that will serve as an economic hub in the region with the potential to create thousands of new jobs,” said Councilman Kenyatta Johnson. “I expect that Hilco Redevelopment Partners will pursue an environmentally sustainable, economically vibrant vision for the property that protects the health and safety of nearby residents and people who will work on the site. Hilco officials have assured me they will have a serious commitment to diversity and inclusion for the facility plus will make sure that as many local residents as possible get these new jobs. I look forward to working with community stakeholders for a bright new future for the property.”
HRP is planning a long-term redevelopment of this important piece of Philadelphia history just as it has done in cities across America. In 2012, HRP was the original architect of a vision to redevelop the bankrupt 3300-acre former Bethlehem Steel Mill site in Baltimore, Maryland that had closed after 125 years of operation. Together, with our JV Partner Redwood Capital, we have developed and built Tradepoint Atlantic, a state-of-the-art tri-modal logistics complex that has generated more than 8,500 new jobs to date and is expected to account for as much as 1% of Maryland’s GDP by 2025. HRP is reimagining and redeveloping other significant real estate projects in Boston, Chicago, New Orleans, Northern New Jersey, and more.
Hilco Global Founder and Chief Executive Officer Jeffrey Hecktman said, “This is an extraordinary project for our firm. The site is located within a six-hour drive of one-third of the American population, and when completed it will serve as an important asset for the movement of commerce in the region and around the country. We’re excited to begin the redevelopment process and work as a partner and good neighbor to the citizens of Philadelphia.”
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Laila Kearney, writing for Reuters, reports that the Philadelphia Energy Solutions oil refinery site to real estate developer Hilco was sold for $27.5 million less than planned.
Hilco Redevelopment Partners won an auction in January to buy the 1,300-acre (526-hectare) south Philadelphia refinery with plans to transform it into a mixed-use industrial park. It agreed to pay $252 million for the site.
The Chicago-based developers, citing economic uncertainty caused by the coronavirus pandemic and higher-than-expected environmental costs tied to cleaning up PES land, asked to amend the agreement and delay the sale earlier this month, the filing said.
PES agreed to lower the price contingent partly on Hilco finalizing the deal by June 26.
The refiner shut its 335,000 barrel-per-day refinery, the largest and oldest on the East Coast, and filed for Chapter 11 bankruptcy last summer after a fire at one of its fuel processing units badly damaged the plant and leaked toxic chemicals into the air.
More than 1,000 workers were laid off, including 640 United Steelworkers members. Executives of the company, which had just emerged from a separate bankruptcy at the time of the June 21 blaze, have received millions of dollars in bonuses since the shutdown.
Union workers, who were let go without access to extended health benefits typically given to laid-off employees, will receive several thousand dollars apiece in transition pay after the sale is finalized, according to the original agreement.
About Philadelphia Energy Solutions
Headquartered in Philadelphia, Pennsylvania, PES Holdings LLC and its subsidiaries are owners and operators of oil refining complex and have been continuously operating in some form for over 150 years.
PES Energy Inc. is the indirect parent company of Philadelphia Energy Solutions Refining and Marketing LLC (PESRM). PESRM owns and operates the Point Breeze and Girard Point oil refineries located on an integrated, 1,300-acre refining complex in
PES Holdings, LLC, and seven subsidiaries, including PES Energy, sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 19-11626) on July 21, 2019.
PSE Holdings estimated $1 billion to $10 billion in assets and the same range of liabilities as of the bankruptcy filing.
The Debtors tapped Kirkland & Ellis LLP as general bankruptcy counsel; Pachulski Stang Ziehl & Jones LLP as local bankruptcy counsel; PJT Partners LP as financial advisor; and Alvarez & Marsal North America, LLC, as restructuring advisor. Omni Management Group, Inc., is the notice and claims agent.
The Company’s proposed DIP financing lenders are represented by Davis Polk & Wardwell LLP and Houlihan Lokey Capital, Inc.