A century prior to 1970, St. Thomas was chosen as the headquarters for the Canadian Southern Railway. This railway was the most efficient route between New York state and Michigan state, at the time, two of the most industrial states in the United States of America. Despite it’s positioning, the Canadian Southern Railway was never financially viable. It eventually went bankrupt, was bought by New York Central, who merged into Penn Central, who went bankrupt and was purchased by Conrail and later purchased by a joint venture between Canadian National Railways (CN) and Canadian Pacific Railways (CP). The joint venture by CN and CP decided to mothball the line in the mid 1990′s and even today they are in the process of tearing out the tracks.
Not a good omen for the architectural masterpiece at the center of it all, is it?
The station itself (pictured below in it’s heyday), was the headquarters of the line. After the abandonment by CN and CP, the station rapidly deteriorated. Citizen groups were formed, taxpayer dollars were handed out, and there was an effort made to revitalize the station as part of a larger revitalization of downtown St. Thomas.
A wonderful idea! Just what a city with a failing local economy needs! The City was overjoyed with hope that this would be its path back to greatness, or at least relevancy. The City of St. Thomas was quickly losing the middle class manufacturing jobs that kept the tax coffers full and a bonus of 25% more life than neighbouring London. This could be the silver bullet. And then we heard nothing.
Several years passed, the economic picture in St. Thomas turned even more grim. Troubles in the automotive industry forced the closure of two major assembly plants. Sterling Trucks and Ford Motor Company had left the city, taking thousands of jobs with them. Other parts plants were on reduced shifts, tied to closely to General Motors and Chrysler (both of which were in bankruptcy protection). Hundreds more jobs lay on the brink and the North American Railway Hall of Fame (the current owner of the station) releases its business plan and restoration recommendations.
The recommendations were sound, highlighting the various areas that needed significant work, the vision for the future and ultimately how to preserve the stations heritage while modernizing it. It provided examples of other stations that were similarly updated, nice renderings of things that could be. It also attached a price tag: Eleven and a half million dollars. I had to write that out, because the numerals would not do it justice. As a note, this doesn’t include equipment (lighting, fixtures, furniture, etc) or taxes. Some modest assumptions in these two areas and including inflation, puts the final price closer to fourteen million dollars.
But they’ve been working for 15 years gathering donations for this project, right? These have to be substantial, don’t they? Unfortunately not. Donations for the work ahead are in the ballpark of a million dollars. To me, that seems like a considerable short fall. How would this work then, the station would need to pull in significant income to pay off a thirteen million dollar loan ($67,000 a month with generous terms). At the end of the day, it can’t… well not for almost 500 years.
I dug into the aforementioned business plan, where one of the titles is “We’ve done our homework!” (which is irrelevant if the answers are all wrong). It is full of feel good words and grand schemes to attract tenants. All quite interesting (and obviously written by Ivey students) but avoiding the elephant in the room – generating cash. Making the station viable seems to come in second to making it look nice. Not the best business plan.
I scrubbed the documents that were provided to get a picture of the economic situation. The plan calls for about 2,700 square feet of retail space (@ $22/sqft), 10,700 square feet of office space (@ $20/sqft) and a 5,000 square foot banquet room (@$400/day). This leaves some 21,000 square feet (including the platform under the reconstructed awning) for housing the North American Railway Hall of Fame, administration, mechanical, storage and thoroughfares. It seems odd that less than 50% of the building is being leveraged for paying tenants but that’s not where I noticed the first problem. Where in St. Thomas are they going to find retail and office tenants willing to pay so much for this space, isolated several hundred feet from the road with limited parking and no foot traffic (other than vandals)?
I decided to take a look at comparable properties for retail and/or office space along Talbot Street. Immediately prices of $10-$14 per square foot came up for office space, or non-food service retail. These locations were closer to the road, with abundant parking. Certainly, they don’t look as nice as a fully restored train station, but money speaks volumes to small businesses.
Directly across the street from the station sits the former site of Lor-El’s restaurant. The entire building for sale at the bargain price of $165,000. This includes the main floor restaurant at some 2,400 square feet, and up to three apartments (or owners residence) above. That amount of space would cost some $48,000 a month at the station, across the street including the same factors for maintenance, utilities and a mortgage of $300,000 (renovation investment) at 7% over 5 years you would be looking at $7,400 a month, plus a free place to live. Or, a cost of $3.08 per square foot. These proposed rents are becoming even more ludicrous.
Let’s remove the real-estate from the equation (not everyone wants to own the location – valid argument) and take a look at the retail spaces the station provides. The smallest space looks to be some 8′ x 36′, or about 280 square feet at a cost of $6150 a month. Assuming the owner/operator runs a high margin business – say 40% contribution margin – they would need to generate over $15,000 in sales every month to pay the rent, or about $53 per square foot. Do they want to draw a salary themselves? Well, you’ll need more sales for that. For the sake of argument, let’s peg their personal income at $60,000 (it makes the numbers easy). This would require $20,000 in sales every month, about $250,000 in sales per year. For a sole-proprietorship this is well above average (US IRS stats point to ~$130,000 in revenue). Where in St. Thomas are you going to find these stellar small businesses to be tenants? I’m guessing they don’t exist.
There’s a similar story with the office space. In St. Thomas professional firms (especially established professional firms) are likely to own their place of business. These are typically older houses in the western area of Wellington Street. For newer firms, there is still a glut of inexpensive office space throughout the city, including many units directly on Talbot Street.
So what does this tell us? Expensive rents, lack of suitable tenants and a large capital investment gap? The dream of the CASO station being the center of a cultural revival in St. Thomas is just that, a dream. Unless there is a very wealthy benefactor that steps forward to foot most of the $13,000,000 bill the project should be abandoned.
