U.S. Steel to relocate corporate headquarters on former Civic Arena site
Two and a half years ago, then-PNC Financial Services Group CEO Jim Rohr told Penguins CEO David Morehouse he'd heard “rumblings” that Pittsburgh was in danger of losing U.S. Steel's headquarters.
He said states such as Illinois and Indiana, where the company has major holdings, were trying to lure the steelmaking giant away from the Steel City, its corporate home of more than a century, as the final five years of its lease in U.S. Steel Tower, Downtown, ticked away.
When Morehouse met U.S. Steel CEO Mario Longhi for the first time at a September 2013 barbecue at the home of Penguins co-owner Mario Lemieux, he said he told Longhi: “U.S. Steel is more than a company for Pittsburgh. It was the foundation upon which this city was built. I looked in his eyes, and I could see that he understood.”
A whirlwind series of meetings began and culminated with the announcement Monday that the Penguins and a developer will build for U.S. Steel a five-story corporate headquarters on the former Civic Arena site by September 2017.
“I knew that we were going to get to this point,” Morehouse said.
U.S. Steel plans to lease the building for 800 workers for at least 18 years from a partnership that includes the Penguins and St. Louis-based developer Clayco. Officials did not disclose the anticipated development costs or terms of the lease, but said construction would begin next summer.
Clayco has worked on several projects in the region, including construction of Ansys headquarters in Cecil, an Eaton Corp. expansion in Moon and construction of a Dick's Sporting Goods distribution center in Smithton.
The U.S. Steel building will include a steel museum and retail space.
“Being able to stay in Pittsburgh after so many decades and being able to look toward the future … it's a really nice thing for us,” Longhi said.
People speculated for years about where U.S. Steel might go when its lease expired. Reports linked the company to a proposed $238 million, 33-story skyscraper on Smithfield Street, Downtown, or a seven-story building there when Oxford Development Co. presented development plans in May 2012. Other reports tied it to a site near Pittsburgh International Airport.
One Downtown site the company considered was a vacant parcel along Fort Pitt Boulevard, behind One Smithfield building, owned by Burns & Scalo Real Estate Services.
“They toured our site and really liked it. Their decision, in the end, was for a more horizontal campus, versus a vertical campus,” said Jim Scalo, president.
U.S. Steel declined to say how many sites it investigated.
Morehouse said real estate executives with U.S. Steel told the Penguins they weren't interested in the Civic Arena site when the team contacted them two-and-a-half years ago.
“It wasn't the right time to have those discussions,” Morehouse said. “After meeting (Longhi) the first time, it was a pretty remarkable turnaround.”
Rohr, the former PNC executive, credited Morehouse and the Penguins with being persistent. “All real estate projects take a long time, but they kept with it.”
Allegheny County Executive Rich Fitzgerald said the county's courtship of U.S. Steel went beyond the Civic Arena site. He said he lobbied federal environmental, transportation and trade officials on the company's behalf.
In late December, Fitzgerald met with company officials in New York to discuss keeping the headquarters in Pittsburgh.
The 64-story U.S. Steel Tower opened in 1970 with the company as its owner and largest tenant. Today UPMC is the largest tenant, occupying about 23 floors, and a New York investment group led by Mark Karasick owns it. As of last year, U.S. Steel occupied 14 floors.
“We were certainly disappointed to learn of U.S. Steel's decision to move out of the tower,” said Thomas Harrington, general manager for Winthrop Management LP, the building manager. He said it would work with government officials to attract tenants.
The 800 company employees will relocate from offices there and at 1350 Penn Ave. Longhi said the move would reduce the company's costs and be more efficient.
He did not say how much the company anticipates saving. “There is a number, and it is a good number compared to the other alternatives that we have.”
The deal provides the first corporate anchor tenant for the 28-acre Uptown site next to Consol Energy Center, where $440 million in development is planned.
“It will be catalytic. Actually putting in a world headquarters, especially one as iconic as U.S. Steel, creates a lot of great momentum for this project. It will help us attract additional tenants,” said Penguins Chief Operating Officer Travis Williams.
Councilman R. Daniel Lavelle of the Hill District said the deal “legitimizes this project.”
“For generations to come, we will be seeing U.S. Steel right here in Pittsburgh and we will keep calling Pittsburgh the Steel City,” Gov. Tom Corbett said.
In October, Corbett announced $30.7 million in state grants for rehabilitation of U.S. Steel's Mon Valley Works plants in West Mifflin, Braddock and Clairton, saying company executives were committed to keeping their headquarters in Pennsylvania.
In September, city officials announced a plan to redevelop Uptown and the Hill District, anchored by the former Civic Arena site. The state committed $15 million to help pay for infrastructure improvements that will prepare the site for development.
Mayor Bill Peduto proposed a 20-year tax-increment financing district, which would take a percentage of tax revenue generated by development and reinvest it in infrastructure and buildings in the neighborhoods. Kevin Acklin, Peduto's chief of staff, said the U.S. Steel development could generate $3 million annually for the redevelopment fund.
“As a Pittsburgh boy, this feels pretty good,” Peduto said. “I didn't want to be the Pittsburgh mayor to lose U.S. Steel.”
Tom Fontaine and John D. Oravecz are Trib Total Media staff writers. Reach Fontaine at 412-320-7847 or [email protected] and Oravecz at 412-320-7882 or [email protected]. Staff writers Sam Spatter and Aaron Aupperlee contributed.