Business & Real Estate

Sacramento downtown railyard on verge of sale with cleanup deal

Three key stakeholders in the downtown Sacramento railyard disclosed Wednesday they have reached an agreement in principle on final toxic cleanup of the 240-acre site, clearing the way for an anticipated sale this summer to a local development group.

Sacramento developer Larry Kelley, principal of Downtown Railyard Venture LLC, confirmed his company has reached an accord with Union Pacific, the site’s former owner, and Inland American Real Estate Trust, the current owner, on a long-standing tripping point: Who is responsible for financing toxic remediation at the former industrial yard.

Union Pacific officials said a deal was struck this week, negotiated in part by State Sen. Darrell Steinberg and Sacramento Rep. Doris Matsui, that clears the way for Inland to turn over control of the largely empty site to Kelley sometime this summer for development. The agreement likely keeps the yard in the running as a possible site for the World Food Center envisioned by leaders of the University of California, Davis.

Both Steinberg and Matsui have called the railyard one of the most critical future development properties for downtown Sacramento growth.

“Over the last few weeks, Sen. Steinberg and I made it clear to all parties how important the railyards are to the future of both our downtown and the entire region,” Matsui said in an email to The Bee. “The railyards has a long and complicated history, but I am very optimistic that a new chapter is about to begin.”

The railyard and its shops area were used for more than a century by Southern Pacific and later by Union Pacific for locomotive repair and numerous other industrial projects. Most of the toxic remediation has been completed on the site, but some work, including the cleaning of an underground water plume, is expected to continue for years. The agreement includes an arrangement for shared financial responsibility for cleanup of as-yet-undiscovered toxic materials.

The entities declined to describe details of the deal, but said it includes the price of the 240-acre railyard, one of the largest urban infill parcels in the nation.

“We have an agreement in principle (on price),” Kelley said. “The reason it has taken so long is getting an agreement among all the parties to the toxics. That is a big risk in anything these days.”

Inland American spokesman Jared Ficker called the tentative agreement “huge.” His Illinois-based company found itself the accidental owner of the land several years ago when a previous owner, Atlanta-based developer Thomas Enterprises, defaulted on a major loan from Inland. Inland, which is not a development company, has since been preparing the site for development by building roads and bridges, and looking for a developer to take control. It reached an exclusive negotiating deal with Kelley last year.

Ficker cautioned, however, that the deal is not done.

“We are still finalizing our terms on this consistent with the agreement in principle,” he said. “There is more work to do.”

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