Mandan News

Ellen Huber: Realtor for railroad property clarifies lease terms

In late January, this column addressed the challenge in finding businesses willing to lease or buy buildings along Main Street situated on land owned by the railroad. These properties include locations with some of the best traffic counts in Mandan – the former Mandan Supply and Equipment buildings at 1121 East Main Street and the former McDonalds, now Ressler Chevrolet property, at 1005 East Main Street.

Businesses interested in these locations would need to buy or lease the buildings from their current owners and pay a land lease to the railroad. Standard railroad lease agreements are for a year at a time and include a clause that the lease may be terminated with 30 days notice. These terms have deterred parties from investing in the buildings or from constructing new buildings on the property.

In April, transaction managers with Jones Lang LaSalle, the real estate firm Burlington Northern Santa Fe contracts with for management and lease of its properties, provided clarification. They indicated a willingness to propose a definite term lease, or long term lease, to the railroad if there is a party interested who will be investing a substantial amount of money in the property. They note all decisions ultimately rest with BNSF and that they would need financial justification, such as the length of term on a bank loan and the need for longer term security.

The Jones Lang LaSalle representatives pointed out the lease cancellation clause may only be implemented if the property is needed for railroad purposes such as a realignment of track or some other railroad function. They explained that the railroad would not terminate a lease “just because.” They also noted a possibility of extending the termination clause to 60 days with BNSF approval and said some definite term leases allow up to 180 days with an agreement that the railroad will purchase property improvements if it cancels the lease.

Potential also exists to split the former Mandan Supply and Equipment property into two parcels for separate tenants and uses.

In meeting with the railroad property transaction managers, city officials emphasized the importance of securing more retail and restaurant services in Mandan, that these properties are in prime locations, and would likely be filled were it not for BNSF lease terms. The clarifications on lease terms provide a degree of optimism.

Parties interested in the properties may contact local realtors listing the properties on behalf of the building owners. Both properties are within Mandan’s Renaissance Zone, which means that buyers and tenants making a qualifying re-investment in building improvements may apply for a five-year 100 percent property tax exemption and a five-year 100 percent exemption on state income tax from business activity.

For more information about programs available to assist with business start-ups and expansions in Mandan, contact the Business Development Office at 667-3485.