SOS In The News

Investor group snaps up Steel site

Mayor calls the sale "a great day in Bethlehem's history."

Wednesday, September 15, 2004

BETHLEHEM -- After almost a decade of failed efforts to redevelop it, the Bethlehem Works site has a new owner.

Investment group BethWorks Now has completed its purchase of the 135-acre portion of Bethlehem Steel's plant long planned for an entertainment and retail complex.

The group -- led by Upper Saucon Township attorney Michael Perrucci and including New York investors -- will pay an undisclosed price to current owner International Steel Group.

Mayor John Callahan said the closing of the Bethlehem Works sale was a "great day in Bethlehem's history."

"We're finally getting this site in the hands of someone who has the wherewithal and resources to do something with it," Callahan said.

Perrucci, who did not return calls for comment on Tuesday, has said the development would resemble a small-town Main Street lined with shops, restaurants and recreation, along with office space and condominiums or apartments.

City Council President J. Michael Schweder said the developer will bring "high-end" economic development to the city.

The current tract includes vacant buildings, the former Bethlehem Steel headquarters on East Third Street, parking lots and five rusted blast furnaces that tower over the Lehigh River.

Since Steel closed its local steelmaking operations in the 1990s, the redevelopment of its 1,800 acres of South Side land has been central to the city's economic development plans.

Steel filed for bankruptcy in 2001 and never emerged until ISG bought the company's operating steel divisions, effectively closing Bethlehem Steel. ISG took ownership of the land when it bought out Bethlehem Steel's assets in May 2003 for $1.5 billion.

ISG never planned to develop the property -- in fact the company didn't want the land at first -- but said it would sell the local real estate to developers with whom Steel had made agreements.

ISG also sold more than 1,000 acres of property to Lehigh Valley Industrial Park Inc., which is developing a LVIP VII at Bethlehem Commerce Center.

Another 550 acres of industrial land is under agreement to Los Angeles-based Majestic Realty.

The potentially large cost of environmental liability at the site has been a sticking point in selling Steel's property. Callahan said Perrucci's group is assuming the environmental liability at the Bethlehem Works property.

Roger Ochse, ISG's Bethlehem-based real estate manager, couldn't be reached for comment Tuesday evening.

Callahan touted Perrucci's commitment to historic preservation at the site, where steel was made from the 1850s to the 1990s.

Bethlehem Works is one of the United States' 11 most endangered historic sites, according to the National Trust for Historic Preservation.

The site made the 2004 list because of a transition in ownership and neglect of the buildings could render them irreparable.

Perrucci is committed to preserving the signature blast furnaces, Callahan said.

Schweder and state Rep. T.J. Rooney, D-Lehigh and Northampton, are acquaintances of Perrucci and worked to bring the developer to the site.

"This has been a long time coming," Rooney said.

As far back as 1997, Bethlehem Steel proposed transforming the property into a shopping, entertainment and museum district that would represent the city's economic rebirth.

The plans were marked with starts and stops as developers and projects came and went.

Schweder said Perrucci's group brings the resources and experience to develop the property.

Partners in the investment group are executives of New York-based Newmark and Co. Real Estate Inc., which Schweder said has a portfolio of 9 million square feet of commercial space.

Schweder said Perrucci plans to develop the site with "sensitivity" to its historic and cultural aspects. "This is a special piece of property," Schweder said.

A number of community organizations have met with Perrucci in recent weeks to explain what they would like to see at Bethlehem Works.

Jeff Parks, founder of Musikfest and president of ArtsQuest, has spent several months rallying support for a massive arts park at Bethlehem Works he intends to call the Stax. Parks could not be reached for comment Tuesday night.

In addition to providing a permanent home for Musikfest and possibly other festivals, the plan incorporates a series of buildings that would house various community organizations.

If the Stax happens, WLVT-TV PBS 39 would build digital production studios at the site.

The original anchor of the entire site, the Smithsonian-affiliated National Museum of Industrial History, has itself had trouble raising the $16 million it needs to begin renovating the former Electrical Shop at Bethlehem Works.

Museum Chief Executive Officer Steve Donches hailed the sale as a "major step forward for the museum."

"It removes that obstacle of uncertainty of ownership," Donches said.

Potential donors to the museum have expressed hesitation to give money until they knew who would own the property, Donches said.

"Now we rally support behind Mike and this project," Donches said.

One tenant that won't be at Bethlehem Works is Northampton Community College.

NCC announced plans last year to renovate the Steel's former East Annex on Third Street into classroom space for a South Side campus.

Talks with Perrucci stalled because the developer wanted to lease the property to NCC while the college wants to own its building.

NCC instead will buy the nearby Discovery Center building. The nonprofit science-education center is moving to a new building at Cedar Crest College in Allentown.

NCC President Arthur Scott said the college will make an announcement Thursday.

"We'll continue to work with Mr. Perrucci toward the redevelopment of South Side as neighbors," Scott said.