Challenge
The client, Timken, had recently acquired a steel company that owned over 850,000 sq. ft. of obsolete industrial product on 31 acres. The steel plant was over 100 years old and had been expanded several times over the last century. The site was a heavily contaminated brownfield with a rambling and ad hoc industrial complex consisting of several buildings. The client spent an estimated $3.5 million annually on operational and environmental obligations related to this vacant asset. Allegro led the client through a multifaceted disposition of the property.
Solution
The complex transaction took over two and a half years and involved assessing and assigning value to significant environmental risk, structuring a complex purchase agreement which included provisions for the absorption of the majority of environmental risks by the purchasers, establishing short-term utility access rights from one buyer to the other, and numerous financial and legal hurdles.
The disposition resulted in removing the unproductive asset from the portfolio and significantly reducing the client’s exposure for environmental liability. The site was sold in two parts to a private sector developer and the State, and resulted in an industrial and office redevelopment, a new county courthouse, and an administrative building.
A transaction of this scale would typically result in a significant brokerage commission. Due to transaction complexity, Allegro developed a creative compensation structure that enabled the delivery of project management and transaction services which did not influence the deal terms. Allegro’s real estate advisory role in the project went above and beyond normal transaction services and extended past the project closing. Allegro is still providing advisory services related to post-acquisition and development matters.
