Real estate intermediation as a hindrance to further projects: Amtrak seeks to "condemn" the retail lease at Washington Union Station

Real estate development is complicated, involving land, buildings, uses, construction, finance, and ownership. It is typical for projects large and small to be divvied up in various ways--parking operations outsourced, retail operations separately managed, certain buildings, especially hotels, being sold off, etc.

What happens then is the loss of the sense of a "common interest" and common goals.  Instead the various interests have and pursue their own interests.

It's the parking lot operator at 700 Pennsylvania Avenue SE being uninterested in providing special parking rates to crafts vendors at Eastern Market, because when they bought the rights to the parking operation, that wasn't built into the contract.

Or trying to sell a bike parking concept to an multi building mixed use retail and apartment development, but one of the buildings was sold off and the new owner wasn't interested, and to work, the concept needed to be applied to the entire project.

Or how department stores at shopping malls own their sites separate from the malls.  So Lord and Taylor at White Flint fought the developer's plans to redevelop the area ("Jury awards $31 million to Lord & Taylor in White Flint dispute," Washington Post).  They were successful, because the original contract had a very static definition of how the property was to operated.

And this isn't limited to for profit operations.  It's a problem especially with "public-private partnerships" between governments at various scales and private interests operating as contractors.

JFK Airport, with some terminals privately owned and others not, has problems of coordination and service quality as a result ("Privatizing (Dulles and National) Airports," 2018).  

Similarly, the City of Chicago, by selling off parking operations and city-owned parking structures under 99 year leases to raise short term capital ("A lesson to cities that they need to be very careful when leasing assets to public private "partnerships"," 2012), has created problems as well.

The State of Maryland's PPP to build the Purple Line ended up with one concessionaire abandoning the project and the state having to find a new construction "partner" with the end result of a four year delay in the project ("New construction contract for Maryland's Purple Line signed," Post).

And of course, sports stadiums and arenas ("I’ve studied stadium financing for over two decades – and the new Bills stadium is one of the worst deals for taxpayers I’ve ever seen," The Conversation).

In short, these aren't partnerships, but contracts, and when interests are "intermediated"--split up and out over multiple parties--when circumstances change it can be very difficult if not impossible to get the various interests to agree to act "together" and revise how they operate in order to create better outcomes.

How Union Station operates today is much different from when it first opened in 1907, when trains were the primary form of long distance transportation in the United States.

This is the case with Union Station in Washington, DC.  Amtrak wants to add significantly to the operation there, making it into a new and much bigger hub on the Northeast Corridor service ("Amtrak moves to seize control of Union Station," Post).  

Union Station is unusual is that it is the only train station in the country owned by the US Department of Transportation, a result of the bankruptcy of Pennsylvania Railroad.  Because it's owned by USDOT, I've argued that the station should be treated as a testbed for best practice.

The station further declined as passenger rail travel declined.  An attempted revival of the station for the Bicentennial didn't have much traction, but USDOT has assigned operation of the station to the Union Station Revitalization Corporation, and the station reopened in the late 1980s as a train station and retail center ("A grand station offers a model for Philadelphia," Philadelphia Inquirer).  At some point after the reopening, to raise fund, USRC sold a 99 year lease to operate the retail side of the station.  

People walk through Union Station in Washington, July 25, 2012. Amtrak, the U.S. passenger rail service, plans a $7 billion expansion of Washington, D.C.'s Union Station with the goal of making it a high-speed rail and commercial hub, Amtrak said on Wednesday. The proposal calls for doubling the number of trains that can be handled at the crowded site, the second-busiest Amtrak station in the country. REUTERS/Jonathan Ernst ("Amtrak plans $7 bln upgrade of Washington, DC, station").

Since then the lease was re-sold to and is now held by Ashkenasy Acquisition Corporation, a firm which has developed a "specialty" in owning these kinds of "festival marketplace" assets.  

The problem is that in multiple instances Ashkenasy has run these assets into the ground, such as the ruination of Harborplace in Baltimore ("Judge takes Baltimore's Harborplace out of owner's control, paving way for possible sale," Baltimore Sun).

From the Post article:

Amtrak’s filing makes the case that acquiring leasing control will allow the railroad to repair the train tunnel “so that safety and stability are maintained.” Completing that project soon is critical to replace structurally deficient beams, girders and columns, said the railroad, and avoid collapse, which would have significant effects on train travel. 

Amtrak said it also plans to expand ticketing and waiting areas, improve accessibility and passenger flow, and add more passenger amenities while increasing capacity to meet future demand. Amtrak said that it “lacks both the space and control to make much needed improvements” at Union Station, which carries more than 5 million rail passengers annually and is a top stop in the Northeast Corridor, the backbone of the nation’s passenger rail system. The station was designated a historic landmark by the District in 1964 and listed in the National Register of Historic Places in 1969.

Amtrak, arguing that Ashkenasy is not willing to work with them to accomplish improvements, calls instead for a "condemnation" of the lease through eminent domain.  If successful, they will have to buy out the lease.  

Festival marketplaces share characteristics with big train stations. Interestingly, "festival marketplace" type spaces are not just places like South Street Seaport in Manhattan, Faneuil Hall in Boston, Harborplace in Baltimore, but also train stations like Union Station in DC, and Penn and Grand Central Stations in New York City.

This is especially true in European and Asian cities where train stations are hubs of retail and community activity beyond the strict function of transportation.  Stations like Saint Pancras and many others in London, Gare de Lyon in Paris, the Hamburg Hauptbahnhof, etc. are great examples

Train stations are a form of business improvement districts, even if under a single owner's control.  And such spaces need a lot more "partnership" and cooperation between various interests than typical real estate assets.  

This is why "business improvement districts" have been created in various places, to provide extranormal services, creativity, and promotion than could be provided by any one particular interest.

A great book I am two years behind in reading, Learning from Bryant Park, offers a lot of insight into these issues and how to best manage multifaceted public spaces like parks, business districts, and train stations.

Another issue is public planning processes can be needed in private ownership situations.  I wrote about this extensively in terms of Reston Town Center and paying for parking.

Conclusion.  Disintermediating ownership interests in complex property development and management can be extremely problematic in the long term, as operating conditions and goals and objectives change over time, and contractual relationships are not flexible enough to allow for changes in how these relationships work financially and operationally.

It's easier probably to keep the ownership in house, even if you contract out certain operations, so that changing the terms of the relationship isn't so difficult it means a trip to court. 

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Southeast Corridor not on the table.  WRT Union Station, it's a shame that Amtrak isn't using the revitalization and expansion of Union Station as the way to leverage the creation of higher speed service further south (see "More need for redundancy/"hardening" in the DC area rail transit system: Amtrak's temporary shutdown of service south of DC").

These extensions would contribute to the creation of a Southeast high speed rail corridor complementing the Northeast Corridor, conceptualized as an extension of the existing rail assets. 

-- Southeast Corridor Project

-- "FRA issues Southeast HSR DEIS," Railway Age

-- DC 2 Virginia Southeast Rail Corridor