eLifespaces building

State-owned Palmetto Railways is appealing a jury's decision that the eLifespaces property on Meeting Street Road is valued at $3.75 million. The Charleston-based railroad had offered $1.8 million for the site. David Wren/Staff

A short-haul railroad operated by the state is appealing a jury's decision to give a landowner $3.75 million for property it needs to develop a large cargo transfer hub for the Port of Charleston.

A jury in April said Palmetto Railways must pay that amount to Gateway Properties of Greater Charleston LLC for a 0.55-acre parcel located at 1799 Meeting Street Road. The railroad plans to install new tracks on the property that will let trains access the transfer site.

Charleston-based Palmetto Railways had offered $1.8 million for the Gateway property, which includes land and a two-story structure built for locally based electronics contractor eLifespaces.

Gateway declined the offer, saying its location isn't typical office space because it was custom-made to showcase the technological and electronic systems that eLifespaces sells and installs. Items like a 3-foot concrete slab foundation, miles of electrical and data cabling, a soundproof room and acoustical millwork drive up the value, the landowner said.

Thomas Hartnett, an appraiser who testified for Gateway in the condemnation hearing, put the value at nearly $4.6 million.

A Charleston County jury split the difference with its $3.75 million award, plus nearly $360,000 in interest and fees, setting up the railroad's notice of appeal this month with the state's Court of Appeals.

Palmetto Railways, a division of the S.C. Commerce Department, has said in court documents that Hartnett used the wrong method to value the Gateway property. Instead of using fair market value, or the price a buyer would be willing to pay for the property, Hartnett based his appraisal on what it would cost to construct the same building elsewhere.

Hartnett said during the four-day court hearing that he used the "cost approach" method because the building's construction is so unique he couldn't find comparable properties to determine the value.

Judge Alex Kinlaw said there was plenty of evidence to support both the higher valuation and Hartnett's method for determining that value.

Kinlaw said in an order denying the railroad's request for a new trial that "just compensation is that amount of money which would put the landowner in as good position monetarily as he was in prior to the taking of the property."

Palmetto Railways has taken possession of the property while it awaits a final court decision on how much it must pay. Fred Fabian, the owner of eLifespaces and Gateway, said during the hearing that he plans to build a new site with the same special materials and features on nearby property.

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"Our basic case is that just compensation is a constitutional requirement and the landowner is entitled to that and nothing less than than," said John Linton, a Charleston attorney who represents Fabian in the case.

Jeff McWhorter, president and CEO of Palmetto Railways, declined to comment on the case beyond what's included in court filings.

Palmetto Railways plans to build a transfer facility where cargo containers will be transferred between trucks and rail cars as they are hauled to and from the nearby Leatherman Terminal to be operated by the State Ports Authority on the former Navy base in North Charleston.

The railroad hopes to begin construction this year on 118 acres near Hobson Avenue and Viaduct Road. Completion is scheduled for about the same time the first phase of the new container terminal opens in 2021.

Funding for the $291 million rail project will come from a mix of public and private sources.

Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_