Mt. Hood Railroad sees one potential buyer walk; creditors seek local purchase

With Mt. Hood in the background, un-used tank cars sit in storage on Mt. Hood Railroad tracks north of Parkdale.

With Mt. Hood in the background, un-used tank cars sit in storage on Mt. Hood Railroad tracks north of Parkdale.

Hood River businessman Andy von Flotow recently approached the Chicago owner of the Mount Hood Railroad about a possible purchase.

Sources close to the railroad said von Flotow decided not to pursue a deal.

“We did speak with Mr. Von Flotow,” said Ed Ellis, president of Iowa Pacific Holdings, which owns Permian Basin Railways Inc., which has owned Mt. Hood Railroad since 2008.

“You would have to speak with him (von Flotow) as to why he wasn’t interested. He called us, we said sure, we’ll talk about it.”

Private creditors in Hood River county have also been approached about a deal, according to one of them.

According to that source, who requested anonymity, a deal with von Flotow appeared close last week, but stalled when he backed away.

“I hope things go well for Hood River County, with respect to future ownership and operation of Mt Hood Rail Road,” von Flotow said in response to an e-mail query. “I’m offering no further comments.”

The suggestion of an imminent deal surfaced in new corporate filings with the state of Oregon last month. Three new business entities were registered by Robert Kabacy, an attorney with Kell, Alterman & Runstein, LLC, a law firm based in Portland.

The entities were:

  • Hood River Depot
  • Hood River Rail Operations
  • Hood River Railroad

Those filings were reported March 30 in The Buzz. No names other than Kabacy’s were included with those filings, but articles of incorporation filed with the state listed the principal place of business for the businesses as 1750 Country Club Road in Hood River.

That is the residence address for von Flotow, a founding partner in unmanned aircraft companies Insitu and Aerovel, and owner of Hood Technology.

Idle tank cars sit on Mt. Hood Railroad tracks on either side of Bassler Drive near Allen Road north of Parkdale.

Idle tank cars sit on Mt. Hood Railroad tracks on either side of Bassler Drive near Allen Road north of Parkdale.

Von Flotow in recent years has channeled earnings from those booming aerospace ventures into several Hood River real estate purchases, including the former Dee Mill property, the former Cliff Smith Motors site on West Cascade Avenue near Les Schwab, and undeveloped land zoned for residential use north and west of west Sherman Avenue.

Ellis last week told the Buzz that he had received an unsolicited inquiry about purchase, but declined to name the suitor until other sources confirmed it. Von Flotow and his attorney at that time declined comment.

“Like many holding companies, Iowa Pacific isn’t opposed to selling anything at the right price,” said Robert I. Melbo, state rail planner with the Oregon Department of Transportation.

He said a source inside Iowa Pacific told him “that (sale) price has not yet been offered, so the deal is not moving forward at this time.”

The local creditor expressed a preference for trying to find a local buyer or buyers.

Ellis said purchase inquiries aren’t unusual. Since Iowa Pacific acquired majority interest in the Mt. Hood Railroad, he said, he has gotten about 20 inquiries.

“When we bought the Mt. Hood Railroad, it was losing money,” Ellis said. “It’s profitable now. We made money last year. We’re on track to make more money this year.”

Required federal filings show that the railroad has grown gross receipts from $2,050,949 in 2012, to $2,694,467 in 2014, the last year for which figures are available.

Interest in railroad assets was filed in 2014 by the Hood River Rail Co., listing Fred Duckwall as registered agent, and including the Hanel Development Co. and Katharine Mills as parties. Kate Mills is the widow of the late Jack Mills; they bought the railroad in 1987. A source connected with that group said the secured debt is “substantial.”

They aren’t the only creditors. Earlier this month, the railroad obtained new financing that led FC Business Capital of New Orleans to file a security interest against all assets of the railroad.

In a news release by the railroad in mid-March, it noted plans to modify its summer tourist train routes this summer, turning around at Dee instead of Parkdale.

Why? The economy.

As the energy market adjusts to a glut, shipments of oil and propane are declining. In response, the Mt. Hood Railroad is renting its upper valley tracks for storage of empty tank cars.

The creditor source said as many as 150 cars are already stashed on rail lines south of Dee, hidden from most public view in woods and behind orchards. The person expressed displeasure with that use, instead preferring that the railroad sustain an active tourist train to Parkdale.

“We’re in business to make money,” Ellis said. “Railcar storage is going on all over the country. It’s because of a downturn in the industrial economy.

“There are probably 1.5 million rail cars in this country, and 10 percent are going into storage this year. That takes a lot of track. There is some money in that.”

Melbo with the Oregon Department of Transportation said he thought empty oil and gas tank cars like those stored in orchards north of Parkdale posed minimal safety risk, compared to full cars.

Ray Hubbell, hazmat compliance specialist with ODOT, said the cars are empty liquefied natural gas (propane) cars. He said people shouldn’t worry.

“As far as safety concern, no, they’re sitting there, and they’re safe as they are,” he said.

“Mount Hood Railroad is practicing a more aggressive monitoring campaign than others. They’re working with local police departments, who are checking on cars frequently.

“From what they’ve relayed to me, it sounds like they’re doing a pretty good job of being on the forefront of this.”

Changes, Government, Miscellaneous, Northwest News Partnership, Property deals, Uncategorized

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