Some fear BNSF decision may derail downtown development

Last spring, Maisie Sulser Handley and her husband, Michael Handley, thought they were close to completing their purchase of the old Mintana Mills warehouse on Minnesota Avenue at South 26th Street.

Sulser Handley had recently left her job with an architectural firm so she and her husband, a contractor, could start a new business, Restôr Design + Build. They wanted to focus on projects that involved historic preservation, renovation and downtown redevelopment.

She said their plans to convert the abandoned warehouse to six residential units was “a perfect storm of a project,” one that would “really showcase our new business and what we were all about.”

They completed a buy-sell agreement with the owners of the warehouse, Steve and Joni Harman, in March, and were waiting to hear back from Montana Rail Link on their application to lease the underlying property from the railroad.

Montana Rail Link itself leases railroad property in Billings, and along much of the southern route through Montana, from Burlington Northern Santa Fe Railway, which owns the land, including the railroad tracks and most of the right of way bordering the tracks.

For all the other residential conversions that have taken place in downtown Billings, the developers received leases from BNSF but communicated only with Montana Rail Link.

Late in March, the Handleys heard from their real estate agent that BNSF had denied the lease based on plans to convert the building’s use from industrial to residential. Sulser Handley was stunned.

“That was something that had never happened before, in the last 20 years, as far as we know,” she said.

Word quickly spread, and others with an interest in trackside redevelopment shared Handley’s disbelief.

“I was shocked,” Randy Hafer said. “There’s really no other way to say it.”

More than 15 years ago, Hafer, co-owner of High Plains Architects, undertook the first warehouse-to-apartment-building project in Billings, at 1 S. Broadway.

He learned a lot about the ins and outs of working with the railroad and leasing property from BNSF. It was difficult and he grew accustomed to long waits, but the experience made him something of an expert in the process, and he was involved in virtually every similar project in downtown Billings over the next 15 years.

In that time, Hafer said, six abandoned warehouses, some of them in considerable disrepair, have been converted into apartment buildings or multi-use buildings with a total of 51 residential units.

If the railroad stopped allowing leases that included residential uses, Hafer said, it would cripple downtown development not just in Billings but all over the BNSF network. And what of the people who had already invested millions in building conversions, who held leases that might not be renewed?

“This is a huge, huge problem,” Hafer said.

Late last summer, developers, members of the Downtown Billings Alliance and others met with representatives of MRL and BNSF. The talks were described as friendly but inconclusive, ending with pledges from the BNSF representatives to consult with higher-ups in the company about answering all the questions they’d been fielding.

Most of the questions still haven’t been answered, but on Tuesday, the BNSF spokesman in Billings, Ross Lane, did have some new information, including the assurance that there is “certainly no blanket policy from BNSF for not allowing residential use on their property.”

Lane told Last Best News that each project will be considered individually, and that there are “a couple of other” building leases in downtown Billings involving residential use that are now under consideration.

“We certainly share a commitment to development in downtown Billings, but we wanted to make sure it makes sense not only for Billings but for BNSF as well,” Lane said.

Each project is evaluated based on a “whole number of factors,” he said, including appropriate land use, community concerns and future needs of the railroad.

“Once you lose zoned industrial areas, it’s gone forever,” Lane said. “We’ve been in the business for 160 years and we’ve got to be looking to the future of the next 100 years.”

Another factor, he said, is that all across the BNSF network, the railroad continually hears complaints about railroad noise as more and more people move back into urban settings, “despite the fact that they knew what they were getting into.”

Lane said he couldn’t disclose what factors led to the denial of the lease for the Mintana Mills building because “our decision-making process is confidential.”

However, he said, he has been in touch with BNSF’s real estate division to see whether that denial is definitive, or whether the Handleys might be able to appeal the decision or submit a modified proposal for the building.

Hafer said he was puzzled by the denial because the Mintana Mills building is part of a complex of buildings, all owned by the Harmans, that includes the Swift Building Lofts, which has 12 residential units, plus one more unit in an adjacent building that also houses Steve Harman’s law office.

And the Mintana Mills building sits across the railroad tracks from two other warehouses that have been converted to apartments. In fact, Lane himself lives in one of them. (Full disclosure: Last Best News operates out of 1 S. Broadway, the building that was Hafer’s first conversion project.)

Hafer also pointed out that the city of Billings, working with the Downtown Billings Alliance, spent nearly $1.5 million on technology and equipment that made it possible to establish a “quiet zone” in the downtown. That means trains no longer sound their horns through the downtown, relying instead on crossing arms and flashing lights.

Hafer said the alliance also paid to erect fencing between the railroad tracks and trackside buildings that include residential units.

Meanwhile, Sulser Handley said she and her husband would consider converting the Mintana Mills building, which has sat vacant for a year, to a commercial or retail space if it comes to that. She said it would have to be some kind of business that fits in with the area and would add to the slowly accelerating rejuvenation of Minnesota Avenue.

Still, a conversion to residential is her first choice, and she needs to hear back from BNSF.

“I’m not giving up, but we need to know why,” she said.

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