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‘Their timeline is aggressive’: Hilco plans to clean up polluted South Philly refinery site, city says

Hilco Redevelopment aims to move quickly to clean up the 1,300-acre South Philadelphia refinery complex and redevelop it into a mixed-use industrial facility.

The Philadelphia Energy Solutions refinery along the Schuylkill in South Philadelphia.
The Philadelphia Energy Solutions refinery along the Schuylkill in South Philadelphia.Read moreMICHAEL BRYANT / Staff Photographer

Hilco Redevelopment Partners, whose $240 million bid won an auction to acquire the bankrupt Philadelphia Energy Solutions refinery site, aims to move quickly to clean up the 1,300-acre South Philadelphia property and redevelop it into a mixed-use industrial facility, according to city officials.

“I think their timeline is aggressive, I’ll put it that way,” Brian Abernathy, the city’s managing director, said in an interview Wednesday. “They want to be in the ground quickly.”

Abernathy, who headed a four-member city government delegation that attended Friday’s six-hour-long auction, said Hilco had done its homework and came well-prepared for negotiations. The Chicago-based company, which specializes in repurposing industrial properties, did not submit a formal plan for the site, but painted its plans in “broad brushes,” he said.

“They’ll probably still keep the tank farm and some of the energy logistics that are on-site, but they don’t intend to operate the refinery,” said Abernathy. He said Hilco is likely to develop the site for multiple users, which he said was “exciting” because the property will be less dependent upon a single industry that is susceptible to boom-and-bust cycles.

“The way that the site is going to relate to the community — both the nearby community and the city as a whole — is going to be much different than it is today,” he said.

PES’s plans require the approval of U.S. Bankruptcy Court Judge Kevin Gross, who has scheduled a confirmation hearing for Feb. 6. The deadline for creditors to vote on the plan, and for filing any objections to the plan, is Feb. 3.

A Hilco spokesman declined to comment on Wednesday while the matter is pending in court.

Hilco was one of two finalists bidding on the refinery, which shut down following a June 21 fire and explosion and declared bankruptcy. The 335,000-barrels-a-day refinery was the largest oil-processing facility on the East Coast and had been in operation for 150 years.

Neither of the two finalists was a refinery operator, sources said, suggesting that the site’s value as a fuel processing facility had diminished. Philadelphia Energy Industries, a company formed by former PES chief executive Philip Rinaldi to bid on the site, was not a finalist.

The runner-up, Industrial Realty Group, a California real estate company that rehabilitates former industrial sites, sent representatives who toured the site in September and told PES workers that they were open to working with a refining company if one could be found.

“What they told me was that they swim with the tide,” said Ryan O’Callaghan, a spokesman for United Steelworkers Local 10-1, which represented 640 of the refinery’s 1,100 employees before the plant shut down. “If they purchased it and they found somebody who wanted to run it as a refinery, they would accommodate them.”

A spokeswoman for Industrial Realty Group, Lauren Crumrine, declined to comment.

Hilco Redevelopment Partners is one of about 20 operating units under Hilco Global, which was founded in 1987 by its chairman and chief executive, Jeffrey Hecktman. Hilco Redevelopment acquires and redevelops “complex real estate assets.” Abernathy, the city’s managing director, said his research suggested the firm “has a great track record.”

The company has acquired old power plant sites in Boston, Chicago, and New Jersey, and has $2.5 billion in assets under management.

Hilco and another company in 2012 bought the bankrupt Sparrows Point steel mill in Baltimore, a 3,100-acre property more than twice the size of PES. In 2014, Hilco formed a joint venture with a Baltimore development company, Redwood Capital, to rebrand the joint venture as Tradepoint Atlantic, which cleared the land and erected warehouses and distribution centers for Amazon, Home Depot, Volkswagen, and Under Armour, and recently agreed to host a staging site for Ørsted, the Danish offshore wind farm developer.

Under the PES plan, Hilco will assume environmental liabilities and cleanup costs, according to a purchase agreement posted early Wednesday with the U.S. Bankruptcy Court in Wilmington. It’s unclear how Hilco will coordinate its plans with Sunoco Inc., a previous owner of the refinery complex that in 2012 agreed to clean up legacy contamination on the land.

Abernathy said that Hilco indicated it had discussions with Sunoco and with officials from the U.S. Environmental Protection Agency and the Pennsylvania Department of Environmental Protection before the auction.

“Their intent around remediation showed a lot of forethought that they were thinking through how to tackle the various problems that the site faces, which gave me some comfort,” said Abernathy. He said Hilco likely would go through a “phased development,” where some sections of the property are cleared and redeveloped before others.

Richard Gorodesky, an industrial properties broker with commercial real estate firm Colliers International, said he expects the developer to embrace a mix of uses, much like the Philadelphia Navy Yard. Hilco will probably set aside some space for energy operations to continue, to capitalize on its existing infrastructure, and will likely develop warehouses and other similar industrial uses in other parts. The land near Philadelphia International Airport could be developed for air-freight purposes.

The site is also large enough — and sections relatively uncontaminated — that the developer might consider building offices, retail, and even housing and parkland, he said.

“It’s going to evolve,” said Gorodesky, who analyzed the site in his work with Colliers. “You’ve got a great developer, and they’re going to listen to all the situations. They’re going to develop it to — as we say in real estate — the highest and best use, and I think that’s going to be a mix of uses.”

Some former refinery employees expressed resignation that the petroleum-processing complex, which had been operating for 150 years, was finished.

“The nail’s probably in the coffin for the refinery,” said O’Callaghan, of the Steelworkers union.

Community and environmental advocates, who had vowed to oppose a continuation of refining on the property, on Wednesday said they were encouraged by the auction’s outcome.

“With Hilco’s proposal likely to be approved by the bankruptcy court, we are cautiously optimistic about the opportunity for the site to be much less polluting than its previous use as a refinery,” Joseph Otis Minott, executive director of the Clean Air Council, said in a statement.

“The public must now do everything it can to hold Hilco accountable for developing the cleanest and safest uses possible at the site,” Minott said. "Clean Air Council urges Hilco to reach out to stakeholders, including environmentalists and nearby neighbors, to work with them on the future use of the site.”

Abernathy, the city managing director, said Hilco’s aims seemed to be aligned with the values expressed in the recent report of Mayor Jim Kenney’s Refinery Advisory Group, which hoped for a new owner to have a more positive impact on the environment and the surrounding community.

“I think they can be really strong partners,” he said. “Not that everything’s going to be hunky-dory all the time, because nothing’s ever easy with development projects of this size. But you know, I think Hilco’s approach and their ability to communicate with the city is leaps and bounds above where we were.”

Staff writer Jacob Adelman contributed to this article.

This story was modified Jan. 24 to add information that Hilco formed a joint venture with Redwood Capital to develop the Baltimore project.