Norfolk Southern CEO warns Atlanta HQ move will be derailed without Gulch deal
By Maria Saporta
Norfolk Southern CEO Jim Squires says that if the Atlanta City Council fails to approve CIM’s Gulch deal at its meeting on Nov. 5, the railroad company will not be moving its headquarters to Atlanta.
Norfolk Southern Corp. (NYSE: NSC) owns about 16 acres of the land in the Gulch, which has laid vacant for decades. Los Angeles-based CIM has proposed buying the land and turning the Gulch into a mixed-use urban center next to the State Farm Arena.
Squires said Norfolk Southern’s ability to sell its property in the Gulch is essential to it being able to move its headquarters from Norfolk to Atlanta.
“I would hate to see this slip away,” Squires said in an exclusive telephone interview with Atlanta Business Chronicle. “But if it does, we will move on.”
Squires said Norfolk Southern would like to move its headquarters to Atlanta, but it has to make economic sense.
“We have been entertaining relocating our headquarters to Atlanta for some time now,” Squires said. “Atlanta is an attractive headquarters locale for us. We already have a large number of employees in Atlanta.”
But the railroad has three conditions before agreeing to move its headquarters. The first is selling its property in the Gulch as a way to pay for the headquarters relocation. The second is having an incentive package with both the State of Georgia and the City of Atlanta. And the third is developing a new headquarters location in Atlanta. The railroad currently operates out of a building in Midtown on Peachtree Street between 14th and 15th streets.
Squires said Norfolk Southern has “made excellent progress” on the incentive package and on the development of a new physical headquarters in Atlanta.
“We appreciate the support we have received from Gov. (Nathan) Deal and Mayor (Keisha Lance) Bottoms and the economic development officials at the city and state,” Squires said.
But the pending sale of the Gulch land to CIM remains a problem because the Atlanta City Council has not approved CIM’s development and financial proposal.
“We have been waiting for City Council action for quite some time now,” Squires said. “It’s up to the City Council to pass judgment on this deal. We are just waiting to see if we can sell our property to CIM.”
People close to the situation have said Norfolk Southern had wanted for the Gulch sale to be completed before now, but it had been willing to wait for the CIM project to get approved by the city.
But Norfolk Southern said it can’t wait any longer because it’s wrong for their employees in Norfolk to be kept in suspense.
“If we don’t sell our property because the Gulch deal does not move forward, we will not be relocating our headquarters,” Squires said. “The reason is that the headquarters relocation is a costly proposition.”
The proceeds from the sales of the Gulch property would go towards defraying the costs of relocation.
“We have been in a holding pattern for some time,” Squires said. “There’s been growing anxiety among our Virginia workforce. I feel it is my responsibility to make a decision.”
Squires acknowledged that Norfolk Southern had decided to move the headquarters to Atlanta for business reasons.
“Atlanta is an excellent location for our headquarters, but every business transaction has its price,” Squires said.
If the headquarters were to move to Atlanta, it would mean the relocation of 500 jobs from Norfolk as well as 350 jobs from other parts of the railroad’s system, which encompasses 22 states. That’s in addition to about 2,500 Norfolk Southern employees already in Atlanta.
“If City Council were to approve the deal, the next step for us would be to close on the sale with CIM,” Squires said.
Then the railroad would look to finalize the city and state incentive packages and work on the development of the new headquarters in Atlanta.
“We would be looking at moving a certain number of employees in the next six months, and then moving another wave upon completion of our building,” Squires said.
This is the first time Squires has been interviewed on the Gulch deal by a journalist in Atlanta. He said the railroad purposefully has remained quiet.
“We have not wanted to put undue pressure on people,” Squires said. “This is a much larger development for the City of Atlanta. But we can’t keep our own employees in limbo indefinitely.”
Squires repeated that it’s hard for him “to imagine a more attractive value proposition for Norfolk Southern” than moving its headquarters to Atlanta. But time is of the essence.
“It feels like a moment in time,” he said. “That’s why we are seeking to complete the deal. We have to give our employees some certainty.”
The City Council vote on the Gulch is scheduled for Monday. The midterm election is the next day, which Georgians will be going to vote for a new governor. That also helps explain the timing of Norfolk Southern’s decision.
“The incentive package we have been negotiating is with the current administration,” Squires said. “I would expect to have to renegotiate that with a new governor.”
If the Gulch deal does not move forward in the next several days, Squires said the railroad would not be moving its headquarters to Atlanta. And he offered little hope that the railroad would revisit that decision.
“We most likely will not be looking at a headquarters relocation for the foreseeable future,” Squires said.