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 last month announced it was buying the historic 155-mile railroad, marking its 26th rail operation. The San Luis & Rio Grande Railroad was built in 1870, connecting Eastern Plains rail lines with communities into the San Luis Valley in southern Colorado. The owner of the railroad, 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 — have filed objections to Omnitrax’s acquisition of the railroad.
“They are not very pedestrian friendly,” said Mick Daniel with San Luis Valley Great Outdoors, which has spent years trying to weave trails between the valley’s communities, many of which would either parallel or cross the railroad tracks. “As we think about valley connectivity and access to public lands and trails, we are thinking Omnitrax should not get this.”
Earlier this year, after announcing a June auction of the railroad, bankruptcy trustee William Brandt fielded interest from 65 potential buyers. At least 41 of those signed nondisclosure agreements with Brandt to study the railroad’s assets and finances. Six toured the railyard in Alamosa. Five submitted bids. None finalized a deal by the June auction date and the sole bid submitted before the June auction did not include a minimum deposit, so the auction was delayed.
In September, Brandt entered into a deal to sell the railroad to Omnitrax for $5.75 million. Then came a higher bid from Stefan Soloviev, a billionaire heir to an East Coast real estate empire. Soloviev’s Crossroads Agriculture farms 400,000 acres of land in eastern Colorado, Kansas and New Mexico. His Colorado Pacific Railroad along Colorado 96 east of Pueblo connects eastern Colorado communities with the national rail network. An email to his attorney was not returned this week.
(Soloviev and his Colorado Pacific Railroad have pushed the Surface Transportation Board to approve its freight-hauling plan for the long-dormant Tennessee Pass railroad between Cañon City and Dotsero. Soloviev objected to plans by nascent railroad company Colorado Midland & Pacific to offer freight and passenger service on the Tennessee Pass Line.
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Colorado Midland & Pacific is owned by the same company that is planning the new Uinta Basin Railway, fueling speculation that the company may ship Uinta Basin crude oil over the mountainous route as an alternative to its controversial plans to route the oil along the Colorado River through Colorado.)
Daniel thinks Soloviev would work with the communities of the valley on recreational access. San Luis Valley Great Outdoors recently secured a $100,000 grant from Colorado’s outdoor recreation office — which is distributing Colorado State Outdoor Recreation Grants with funding from the U.S. Economic Development Administration — to kick start planning for the Heart of the Valley Trail.
“We are really curious about how we can connect not only communities with communities but communities to public lands,” Daniel said. “We find this a lot in rural communities where people are left without pedestrian opportunities for access to downtowns or public lands.”
The planned 154-mile trail would span the San Luis Valley, traversing six counties and largely following federal, state and local roads between Walsenburg and South Fork and Antonito and Salida. Many proposed legs of the trail would involve railroad rights-of-way. A national heavyweight like Omnitrax, Daniel said, might not weigh community concerns as much as a smaller operator.
“Who knows what Omnitrax wants to do with this, but this is our opportunity. This is our Hail Mary to say there could be a different vision here and should we consider that,” he said. “We don’t object to the sale of the railroad. We just object to Omnitrax.”
The auction for the San Luis & Rio Grande Railroad — which is expected to include Omnitrax, Soloviev and the railroad’s lender, Big Shoulders Capital LLC, which loaned Iowa Pacific money in 2017 and was among the lenders that forced the railroad owner into bankruptcy — set for Nov. 17 has a minimum bid of $6.05 million with a $450,000 deposit and a $150,000 “break-up fee.”
Brandt last week told Colorado’s U.S. Bankruptcy Court that the deal with Omnitrax was “reasonable,” but he “recognizes that it is possible that interested parties may possibly entertain 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 Soloviev made his offer. As a result of that bid, the court ordered the Nov. 17 auction.
“So we’ll see what happens at that auction,” Brandt said in an email.
The court has set a hearing in late November to confirm the highest bidder from the auction.
Omnitrax, as one of the country’s largest private railroad operators, has a history of closing unprofitable railroads. Earlier this year the company secured Surface Transportation Board approval to cease operations at its Central Texas & Colorado River Railway in Texas, which left businesses on the 67.5 miles of track without rail service. Omnitrax told the board it had invested $2 million in the line since acquiring it in 2016 and had lost more than $6 million maintaining and operating the line.
The transportation and real estate company has been growing in recent years, acquiring the Winchester & Western Railroad, the Cleveland and Cuyahoga Railway, the Cleveland Port Railway, the Alabama & Tennessee River Railway and the Fulton County Railway. In Colorado, Omnitrax owns the 300-acre Access 25 Logistics Park in Mead, the Great Western Railway of Colorado and 700-acre Great Western Industrial Park in Windsor.
Omnitrax CEO Dean Piacente told The Sun last month the railroad could remove “tens of thousands of trucks from Colorado’s highways and the Sangre de Cristo mountain range’s scenic La Veta Pass.”
“Rail continues to be the most eco-friendly freight solution over land and that’s especially important to such a vibrant part of our state,” Piacente said.