top of page

Amtrak makes case in court for immediate takeover of Union Station

Amtrak presented its case Monday for seizing control of D.C.'s Union Station, arguing before a U.S. District Court judge that an immediate takeover of the station’s leasing rights — now controlled by a private company — is necessary to modernize the nation’s second-busiest intercity train hub.

Judge Amit P. Mehta on Monday heard arguments from both sides, noting growing tension in recent months between Amtrak and Union Station Investco (USI) amid efforts to reach a settlement. Amtrak told the court in March that discussions had hit an impasse after 10 meetings failed to yield a purchase price that satisfied both sides.

The hearing marked a turning point in Amtrak’s attempt to take the reins of the station’s operations and management to pursue multibillion-dollar investments. The eminent domain case is, in part, a response to a rise in vacancies and a drop in riders at the city’s largest transit hub, which is slated to receive a makeover in the next two decades.

Monday’s hearing focused on Amtrak’s request for immediate possession of the station as the rest of the eminent domain case winds through court in a process that could take several months, if not years. Regardless of how Mehta eventually rules, the case will move to determining fair compensation Amtrak would pay for leasing rights.

“Every day we wait, we are postponing the opportunity to improve the facility,” Amtrak chief executive Stephen Gardner testified Monday. “We are increasing project costs … and we are delaying the services and improvements necessary to give our customers the experience that they expect from us.”

Taking over the station in short order, Gardner said, would allow Amtrak to advance “a whole series of projects” that are critical to rail operations in the Northeast Corridor. Amtrak is ready, he said, to make changes at the station such as adding seating and signage in the main hall, creating a dedicated area for law enforcement, increasing security surveillance and expanding customer service in an area Amtrak already leases.

The station, which opened in 1907 in the heart of the nation’s capital, is owned by the federal government but is leased to and operated by other entities. In its complaint filed in April 2022, Amtrak sought control of the property interest owned by USI, a subsidiary of New York-based Ashkenazy Acquisition, which in 2007 obtained subleasing rights through 2084.

Amtrak’s complaint also names as a defendant Kookmin Bank, a South Korean investment trust and lender in the property. Real estate investment management company Rexmark took ownership of USI after a foreclosure case last year.

The defense on Monday questioned Amtrak’s strategy of seeking to acquire the lease, saying the railroad filed the eminent domain case within days of offering USI $250 million to acquire leasing rights. Defense attorney Paul Kiernan said the railroad “squeezed this process,” questioning whether Amtrak negotiated in good faith.

Dennis Newman, Amtrak’s executive vice president for strategy, planning and accessibility, said the railroad was “very concerned” about the status of Union Station and USI’s financial troubles, which eventually led to the company’s foreclosure sale. He said Amtrak never received a counteroffer and multiple communications went unanswered, which the railroad took as a sign that USI was not interested in negotiating.

Amtrak owns the station’s platforms and railroad tracks. The U.S. government in 1985 authorized the nonprofit Union Station Redevelopment Corp. (USRC) to oversee the property. Union Station Investco bought sublease rights through USRC.

Defense attorneys argued Monday that Amtrak would need congressional support or action by the U.S. transportation secretary to break the original lease agreement between USRC and USI’s predecessor. The judge questioned why that argument was not made in the months preceding Monday’s hearing.

Under federal code, Amtrak has authority to use eminent domain to acquire interests in property necessary for the use of intercity passenger rail operations. Attorneys for the companies have challenged Amtrak’s authority to use eminent domain, saying the carrier hasn’t met requirements under U.S. law to take over Union Station, including proving the entire property is needed for its transportation operations.

Amtrak’s proposals include a long-planned concourse expansion and repairs to a tunnel the railroad said is “in serious need of repair or replacement.”

Amtrak argued Monday that negotiating for more space and permits to advance projects at the station has been challenging over the years and slowed progress on important work for railroad operations. By taking control of the station’s leasing rights, Amtrak said it would remove a governance layer — the private company — at the station and allow Amtrak to negotiate directly with USRC about changes to Union Station.

Gardner introduced plans at the hearing for an overhaul of the station’s spaces, including the addition of a children’s area in the main hall similar to playgrounds at some U.S. airports. In addition, he said, Amtrak would expand its lounge area for first-class passengers, expand and modernize baggage facilities, create a space for crew members to take breaks and return its headquarters offices to the building. Amtrak’s administrative offices moved out of Union Station five years ago after lease negotiations fell through.

Amtrak said it would add customer service stations, restrooms and new passenger seating areas, including in the main hall. It also plans to repurpose space in the lower level formerly occupied by a movie theater.

Michael Rebibo, founder and managing principal at Rexmark, said if Amtrak is granted authority to take over, it would “effectively terminate the [existing] leases.” He said it would also undo efforts in the past year to attract retail and food businesses to the station, which Rexmark has been negotiating since it took over USI.

“I think those efforts will be undone,” he said, noting the company has worked with Amtrak on projects and has not denied the railroad’s requests. He also said Amtrak could complete its concourse renovation under the existing arrangement.

Defense attorney David Scharf agreed, saying none of the projects Amtrak cited in its lawsuit are slated for immediate construction or required the immediate transfer of leasing rights.

“The Amtrak sublease provides Amtrak with the ability to move forward with the projects without hindrance,” he said.

Amtrak’s legal moves come amid a push from the railroad and USRC for a multibillion-dollar expansion and overhaul of Union Station that would add concourses, tracks, retail options, a new train hall and modern parking and bus facilities. The proposed expansion, at least a $9 billion private and public investment, calls for a transformation of the hub by 2040.

Since last year’s filing, a new management team at USRC has spearheaded efforts to improve the station’s public areas and draw more support for the redevelopment. Short-term changes have centered around improving cleanliness, lighting and security. Restoration work for the historic main hall is being planned as part of about $20 million in projects over the next few years.

Amtrak recently completed upgrades to its premium lounge and restrooms near the boarding gates. It also plans to add an art display later this year as part of beautification efforts.

In the longer term, Amtrak has planned for years to remake the concourse to double capacity, improve accessibility and alleviate crowding, but that project — which was to begin in 2019 — has been on hold.

Amtrak subleases a small portion of the station — about 13.4 percent — for railroad operations, which includes the concourse area where passengers enter before going to the platform. Officials say they want to create a more modern space for the 100,000 intercity, commuter and local travelers who pass through Union Station daily.

In filings last year, Kookmin and USI rebutted Amtrak’s allegation that the station is plagued by poor maintenance and a lack of capital investment. According to the Amtrak filing, about $75 million in deferred maintenance is needed at Union Station, citing an assessment by USI and the Federal Railroad Administration.

Rexmark took over the station’s commercial side late last year and named Matt Barry, who led Tysons Corner Center for four years, as general manager to oversee revitalization efforts. The company has been negotiating leases to fill empty storefronts, noting recent improvements in cleanliness and amenities.

It could be weeks before Mehta rules on Amtrak’s request for immediate possession of Union Station. Meanwhile, the eminent domain case will move forward to determine a fair compensation amount that Amtrak would pay to Rexmark, which has argued Amtrak’s offer of $250 million is inadequate. If the two sides can’t agree, the process might take years, possibly including a trial.

This article originally appeared on Washington Post

7 views0 comments


bottom of page