Should Amtrak Become a Real Estate Company as well?

Lately I've been thinking about the profitability of passenger rail and its associated economic development. It's clear that Amtrak services, except in very few cases, do not cover their operating costs let alone their capital costs. We all know that passenger rail alone is very difficult to operate without subsidies.

What I'm proposing is that Amtrak should be more than a transportation operator. When new services start, land value rises, and multimillion dollar developments spring up. If operating as a real estate company, Amtrak purchased large, semi-vacant sections of land near proposed stations, then when service begins this land would continue to increase in value as more people travel to those destinations. If I'm not mistaken this is the mentality Florida East Coast has with All Aboard Florida. I believe they own the land of the former Miami or Orlando station and would see huge profits if it could be developed with a high speed rail station.

I don't forsee this happening in the near future, but if there's a push for the long term viability of Amtrak, this additional revenue could help foot the costs of rail projects.

Let the speculation begin!

I like your thinking... Thinking in general is a good idea...

...BUT...

Amtrak isn't the most entrepreneurial entity. This model may work better if Amtrak was broken up the way AT&T was.

FRN9 wrote:I like your thinking... Thinking in general is a good idea...

...BUT...

Amtrak isn't the most entrepreneurial entity. This model may work better if Amtrak was broken up the way AT&T was.

I believe Amtrak does something like this where they own property (such as 30th street.) However, I don't see Congress giving Amtrak additional funds to purchase swaths of land for development as new service begins.

ThirdRail7 wrote: I believe Amtrak does something like this where they own property (such as 30th street.) However, I don't see Congress giving Amtrak additional funds to purchase swaths of land for development as new service begins.

nor should the feds give them money for real estate development but if it's profitable, they shouldn't need a subsidy to do it. I doubt amtrak is capable of doing things like this but it would be good if they did and probably reflect an organizational shift. Amtrak's RE department generally lacks vision and ambition as far as I can tell. you're right, Amtrak does have subsidiaries for Chicago and Philadelphia, they just don't utilize them enough.

If there is a reasonable probability that real estate development will be profitable at least commensurate with risk, private developers will be willing to invest. The government should not utilize taxpayer funds to engage in providing services that free enterprise is ready, willing and able to provide. Let Amtrak concentrate on its core business, that is transporting persons primarily over medium to long distance, and not be distracted by engaging in ventures not essential to the core.

This is exactly what the Penn Central ended up as - a real estate corporation. Even today, PC exists as a "paper railroad" owning ROWs as seen on tax maps.

I'll second that Penn Central ended up as a real estate company.
Beware how Amtrak realizes its entrepreneurial role. Many railroads sold, or at least proposed selling, the valuable land on which their station approaches sat, and gave their remaining passengers longer walks to the station building, or moved the station to less valuable land. Something kind of like this happened in Miami and Orlando, hence there's no downtown Miami station today, and the Orlando station's several blocks from where it used to be, although as you mentioned in the first post, Florida East Coast may be planning to reap some real estate benefit from having stations in those presumably better locations.

Other examples pre-Amtrak:
I believe some folks seriously thought of terminating the Northeast Corridor at Rt 128 station instead of downtown Boston, and selling all the real estate.

One reason why we lost the old Penn Station New York was Penn Central's real estate arm made lots of money letting all the buildings that are now above "Madison Square Garden's basement" get built.

I'll also second the thought that Amtrak does own, buy and sell real estate near its stations, prior posts have mentioned 30th St, I'm pretty sure Amtrak sold land near its tracks south of Walnut St to the University of Pennsylvania, where age old plans had been for a loop track to help turn Harrisburg trains, and air rights just north of 30th St for the Cira Center office building and garage.

Patrick Boylan wrote:I'll second that Penn Central ended up as a real estate company.
Beware how Amtrak realizes its entrepreneurial role. Many railroads sold, or at least proposed selling, the valuable land on which their station approaches sat, and gave their remaining passengers longer walks to the station building, or moved the station to less valuable land. Something kind of like this happened in Miami and Orlando, hence there's no downtown Miami station today, and the Orlando station's several blocks from where it used to be, although as you mentioned in the first post, Florida East Coast may be planning to reap some real estate benefit from having stations in those presumably better locations.

Other examples pre-Amtrak:
I believe some folks seriously thought of terminating the Northeast Corridor at Rt 128 station instead of downtown Boston, and selling all the real estate.

One reason why we lost the old Penn Station New York was Penn Central's real estate arm made lots of money letting all the buildings that are now above "Madison Square Garden's basement" get built.

I'll also second the thought that Amtrak does own, buy and sell real estate near its stations, prior posts have mentioned 30th St, I'm pretty sure Amtrak sold land near its tracks south of Walnut St to the University of Pennsylvania, where age old plans had been for a loop track to help turn Harrisburg trains, and air rights just north of 30th St for the Cira Center office building and garage.

of course, west market st in Philadelphia was also the result of real estate redevelopment that allowed them to bury electric trains. I don't agree with the idea that it's somehow a distraction from their core mission, if they don't do it, someone else will, benefitting from public dollars in infrastructure. there's no reason why it has to be a distraction, a company of its size can do both. I only think that it should develop real estate related to its core mission (rather unlike the penn central making money on the southwest). of course, in those days, over regulated, over taxedmoney losing railroad corporations were using outside investments (that were taxed at lower rates than railroad operations) to subsidize rail operations. that's essentially the model Amtrak should use..using profitable real estate development to improve station digs, etc that are related to moving people. if Amtrak wants new miami digs, buy land, sublet to a developer at preferred rates in exchange for station improvements.

Let's not.

You have decide what AMTRAK is in the business of doing:

a. Providing medium- and long-range rail transportation (and connections), as a public service, or

b. Making as much money as possible.

You can't have both.

Going into real estate is option B.

I probably wouldn't mind if they owned railroad related real-estate in some cases (like railroad stations). But general real-estate, nah.

Let them focus on their core function, delivering self-loading/unloading freight.

I believe commuter rail has economic real estate benefit. I can't imagine how an amtrk train can operate as a commuter rail enterprise and generate the same economic growth. Amtrak is an anachronism whose time has come and gone. ken patrick

I'd be all for Amtrak finding whatever ways it could to generate a profit, but as pointed out above, do most intercity passenger trains cause enough "spillover" commercial uses to make much of an impact around the station? Not sure.

However, Amtrak should look at playing more of a role in building its own stations, if it doesn't already. There is a new station in Charlotte being built, and a reputable real estate developer is handling the project, which consists of an Amtrak station, a transit center and other developments. I haven't heard a thing about Amtrak's involvement; perhaps Amtrak is missing out on profits from such things.

The model isn't exactly new. Hong Kong does it. I'm pretty sure both JRs as well. And I think most European rail operators are able to take advantage of real estate opportunities as and when they occur.

Generally, I agree with the following statements:

1. Real estate must be secondary to railroad operations. That is, if Amtrak were to utilize real estate, it would be a supplemental source of income, meant to subsidize railroad operations. Railroad operations would have to be its core mission; real estate deals that undermined maximal operational efficacy and flexibility would thus conflict with its primary goal, and thus not be allowed.

2. Amtrak would have to be split. From a real estate standpoint, it is rather difficult to concentrate on specific assets when your real estate arm spreads from Boston to L.A. To best utilize real estate assets, a more regional, you'd need a more regional, corridor-focused view. In addition, by splitting Amtrak, you shift attention from supporting a skeletal long-distance network to a series of more natural regional networks. For this to work, however, the splits would have to be along logical regional boundaries: the Northeast, Midwest, Southeast/Florida, Texas, and West (which would actually be three discrete smaller networks lumped into a single organization).

SouthernRailway wrote:However, Amtrak should look at playing more of a role in building its own stations, if it doesn't already. There is a new station in Charlotte being built, and a reputable real estate developer is handling the project, which consists of an Amtrak station, a transit center and other developments. I haven't heard a thing about Amtrak's involvement; perhaps Amtrak is missing out on profits from such things.

What role do you expect Amtrak to take in such a development?

You don't say whether Amtrak owns the land that is being developed, but since your question is irrelevant if it doesn't, I'll assume it is for the sake of argument.

I'm sure Amtrak has people on their side looking out for Amtrak's interests in this. If there are profits to be made, I'm sure Amtrak is making sure they get their cut. However, Amtrak is not a development company, and in particular, not a development company with expertise in building things in Charlotte. So if they own some land that they'd like to develop (and get some income from), the logical thing to do is to contract with a local development company to do the development. After all, even if they were just building a station, they'd hire a local company to design and build it.

This is the point of saying "Amtrak is not a real estate company." In order for Amtrak to actually do real estate development, as opposed to hiring developers, they would have to spend the time, money, and personnel to acquire the in-house expertise and experience needed to develop properties without losing their shirts. And they'd have to do this separately for each market: real estate, and real estate development in particular, are very, very local. Every municipality has different codes, different procedures, and different officials (and different ways of wanting bribes ) What works in Durham won't work in Charlotte. Developing this in-house development capability would take resources and management attention away from Amtrak's primary business: running trains.

amm in ny wrote: You don't say whether Amtrak owns the land that is being developed, but since your question is irrelevant if it doesn't, I'll assume it is for the sake of argument.

Please argue with the OP, if anyone, rather than me. I was simply trying to find something to say that may be of interest in light of the original post.