Railroads are a different breed of real estate. Most
real estate stays put. The purpose of a railroad (like
that of a road, a canal, or any other corridor) is to
facilitate motion. Railroads get us from place to place.
A railroad derives its value from its ability to connect
points and move traffic between them. A railroad in
operation has value to the extent that traffic wants to
move between those points (or any other points along the
corridor) and that competitive means of transportation
Railroads date from the days when the only competition
was from boats and horses. Across the nation, the survey
plans for rail corridors date from the 1800s and are
largely unrevised. The internal combustion engine, the
wireless, satellites, and eighteen-wheelers have changed
the world in which railroads operate. Some railroads
continue as they have for 150 years, hauling passengers
and freight over long distances. Their value is in a
combination of elements: the land underlying the
corridor, rolling stock, freight contracts, and all the
other elements that contribute to the value of a going
concern. Other railroads, losers in the battle with
alternate means of transportation, are defunct. Their
track, if still in place, is in disrepair and may have
value for little more than salvage. Whatever value they
may have had for rail use is lost.
A defunct corridor is a corridor available for a new use.
Some new uses begin spontaneously. The general public
puts an abandoned corridor to informal use as a walking
trail. Where the noise of the engines once prevailed is
now the peace of open space. Motor bike riders sometimes
use abandoned rail corridors, though these are less
preferred than utility easements on more hilly terrain.
Abutters on occasion use portions of corridors in
industrial neighborhoods for parking or material storage
and sometimes encroach with buildings. A corridor can
serve as the location for a utility, including fiber
optic, whenever the corridor is a better alternative than
a roadway. Sections can be converted to roads and
driveways to access rear land. The most popular current
form of surface re-use is redevelopment as a public
bicycle path. Bicycle paths on rail corridors today exist
in relatively short stretches. In urban areas, they are
heavily used by walkers, joggers, bicyclists, and roller
bladers. The East Coast Greenway is a vision for a
continuous, motor-free corridor from Maine to Florida.
Sixty years ago, the Appalachian Trail had a similar
visionary origin. Today, the Trail is a highway for
hikers. Whether the Greenway reaches similar fruition
will be seen in coming decades.
When a rail business is abandoned, the corridor's value
is as real estate. Appraisers have developed a variety of
methods of valuation. One is the "across the
fence" method. It works on the premise that the
value of a corridor should bear some fixed relationship
to the value of the land through which it passes. A
difficulty with this approach is that it does not fully
consider the corridor for its special function, as a
means to join two points.
An alternate method of valuation is liquidation analysis.
The owner has the ability to produce a cash flow from
various non-rail means, including sale of the track as
scrap, sale of pieces to abutters, and sale of licenses
and easements to utilities like fiber optic. Cash flows
produced over time may be converted to a value estimate
through discounting techniques.
Perhaps the best method of analysis is the Sales
Comparison Approach. Though abandoned corridors differ
greatly in location and other respects, when sold, they
show a relatively high degree of consistency in terms of
price per lineal mile.
Corridor valuation also involves consideration of special
issues. One is contamination. Another is the legal
impediments to liquidation in those instances in which
government requires that the corridor not be dismantled.
For some, title issues may result from abandonment of the
original rail use. An appraiser may require advice from
environmental consultants and title experts. Proper
valuation of a corridor requires consideration of those
elements that make the corridor unique.
Eric T. Reenstierna, MAI
The Reenstierna Associates Report is published as a
service to the clients of Eric Reenstierna Associates and
other real estate professionals. The views expressed are
those of the articles' authors and do not necessarily
reflect those of other members of the organization.
Copyright 2000. All rights reserved.
Eric Reenstierna Associates
24 Thorndike Street
Cambridge, Massachusetts 02141
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