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San Luis & Rio Grande Railroad sale clouded by competing offers

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A late bidder and San Luis Valley recreation groups are challenging Denver-based railroad company Omnitrax’s planned acquisition of the San Luis & Rio Grande Railroad.

Omnitrax announced last month that it was buying the historic 155-mile railroad, marking its 26th rail operation. The San Luis & Rio Grande Railroad was built in 1870, connecting rail lines from the Eastern Plains to communities in the San Luis Valley of southern Colorado. The railroad’s owner, Iowa Pacific Holdings, filed for bankruptcy in 2021.

Omnitrax said last month it planned to study the line and plan upgrades with a focus on freight. A coalition of San Luis Valley groups—including San Luis Valley Great Outdoors—filed objections to Omnitrax’s acquisition of the railroad.

“They’re not very pedestrian-friendly,” said Mick Daniel of San Luis Valley Great Outdoors, who has spent years trying to weave trails between valley communities, many of which would parallel or cross train tracks. “As we think about valley connectivity and access to public lands and trails, we think Omnitrax shouldn’t figure that out.”

Earlier this year, after announcing a railroad auction in June, bankruptcy trustee William Brandt attracted the interest of 65 potential buyers. At least 41 of them signed nondisclosure agreements with Brandt to study the assets and finances of the railroad. Six visited the Alamosa Rail Yard. Five offers submitted. None had finalized a deal by the June auction date and the only bid submitted before the June auction did not include a minimum deposit, so the auction was delayed.

In September, Brandt reached an agreement to sell the railroad to Omnitrax for $5.75 million. Then came a higher offer from Stefan Soloviev, a billionaire heir to an East Coast real estate empire. Soloviev’s Crossroads Agriculture operates 400,000 acres of land in eastern Colorado, Kansas and New Mexico. Its Colorado Pacific Railroad along Colorado 96 east of Pueblo connects eastern Colorado communities to the national rail system. An email to his attorney was not returned this week.

(Soloviev and his Colorado Pacific Railroad pushed the Surface Transportation Board to approve his freight plan for the long-inactive Tennessee Pass Railroad between Cañon City and Dotsero. Soloviev opposed the fledgling railroad’s plans Colorado Midland & Pacific provide freight and passenger service on the Tennessee Pass Line.

Colorado Midland & Pacific is owned by the same company planning the new Uinta Basin Railroad, fueling speculation that the company could ship Uinta Basin crude oil up the mountain route as an alternative to its controversial plans to to move oil down the Colorado River through Colorado.)

Daniel thinks Soloviev would work with communities in the valley on recreational access. San Luis Valley Great Outdoors recently received a $100,000 grant from the Colorado Office of Outdoor Recreation – which distributes outdoor recreation grants from the state of Colorado with funding from the U.S. Economic Development Administration – to initiate planning for the Heart of the Valley Trail.

“We’re really curious about how we can connect not just communities to communities, but also communities to public lands,” Daniel said. “We often find this in rural communities where people find themselves without pedestrian opportunities to access downtown areas or public lands.”

The planned 154-mile trail would span the San Luis Valley, cross six counties, and largely follow federal, state, and local roads between Walsenburg and South Fork and Antonito and Salida. Many proposed sections of the trail would involve rail rights-of-way. A national heavyweight like Omnitrax, Daniel said, might not weigh in on community concerns as much as a smaller operator.

“Who knows what Omnitrax wants to do with it, but this is our opportunity. This is our Hail Mary to say there might be a different view here and should we take that into account, he said. “We are not opposed to the sale of the railway. We simply oppose Omnitrax.

The auction for the San Luis & Rio Grande Railroad – which is expected to include Omnitrax, Soloviev and railroad lender Big Shoulders Capital LLC, which lent money to the Iowa Pacific in 2017 and was among the lenders who forced the railroad owner into bankruptcy – set for Nov. 17 has a minimum bid of $6.05 million with a $450,000 deposit and $150,000 “break-up fee.”

Brandt told US bankruptcy court in Colorado last week that the deal with Omnitrax was “reasonable”, but he “acknowledges that it is possible that interested parties may consider submitting a higher and better offer”.

As part of the bankruptcy process, the court held a hearing to approve the sale of the railroad to Omnitrax and that’s when Solovyov made his offer. Following this offer, the court ordered the November 17 auction.

“So we’ll see what happens at that auction,” Brandt said in an email.

The court has scheduled a hearing for the end of November to confirm the highest bidder in the auction.

Omnitrax, as one of the largest private rail operators in the country, has a history of shutting down unprofitable railroads. Earlier this year, the company won approval from the Surface Transportation Board to cease operations of its Central Texas & Colorado River Railway in Texas, which left businesses on all 67.5 miles of track without rail service. Omnitrax told the board it had invested $2 million in the line since it was acquired in 2016 and had lost more than $6 million maintaining and operating the line.

The transportation and real estate company has expanded in recent years, acquiring the Winchester & Western Railroad, Cleveland and Cuyahoga Railway, Cleveland Port Railway, Alabama & Tennessee River Railway, and Fulton County Railway. In Colorado, Omnitrax owns the 300-acre Access 25 Logistics Park in Mead, the Great Western Railway of Colorado and the 700-acre Great Western Industrial Park in Windsor.

Omnitrax CEO Dean Piacente told The Sun last month that the railroad could remove “tens of thousands of trucks from Colorado’s highways and the scenic La Veta Pass of the Sangre de Cristo mountain range.”

“Rail continues to be the most environmentally friendly ground freight solution and that’s especially important for such a vibrant part of our state,” Piacente said.