Formed in 2007, Regional Rail provides freight transportation, car storage, and transloading services across the U.S. and western Canada, spanning over 875 miles of track connecting to a diversified Class 1 railroad network. 

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Overview

Since our initial investment in 2019, Regional Rail has grown from three railroads in the Northeast to seventeen freight railroad operations located across North America. The company’s wholly owned subsidiary, Diamondback Signal, is the premier provider of rail-crossing installation and maintenance services to short-line and industrial customers in the U.S.

In 2023, Regional Rail transported over 65,000 carloads while serving customers across a diversified set of end-user markets including food & agriculture, chemicals, aggregates, heating, fuel blending, lumber, and metals. 

Why we invested

Regional Rail is an essential service provider with high barriers to entry. It has irreplaceable track infrastructure with direct access to key customer facilities and multiple Class I railroad connections.

When we first invested, Regional Rail operated in a premium geography in the Northeast U.S. and was located at the centre of a densely populated corridor within the New York, Philadelphia, Baltimore and Washington DC metro areas. Freight revenue is largely generated from local consumption tied to attractive end markets and the company had experienced strong freight revenue growth of >9% p.a. since 2013.

Regional Rail also offered an attractive platform for consolidation, which the team has been able to capitalise on to significantly grow the business since our initial investment. Follow-on acquisitions have been focused on railroad operations located in attractive geographies with high quality customers and growth prospects.

The railroad sector is the leader in fuel-efficient surface transportation, as freight railroads are, on average, 3 to 4 times more fuel efficient than trucks. Short line railroads like Regional Rail also benefit from bipartisan government support, including tax credits and grant funding for growth and maintenance capital projects, due to environmental and social benefits offered.

Recent developments

Since our investment in Regional Rail, we’ve supported the company to make seven acquisitions, including three railroads in Florida (Florida Central Railroad, Florida Midland Railroad and Florida Northern Railroad) and Carolina Coastal Railway in North Carolina in 2020; three railroads across Illinois and Ohio (Effingham Railroad, Illinois Western Railroad and South Point & Ohio Railroad) and a portfolio of railroads across western Canada, including Great Sandhills Railway in 2022; Clinton Terminal Railroad in North Carolina and two railroads across Indiana and Ohio (Indiana Eastern Railroad and Ohio South Central Railroad) in 2023; and Cincinnati Eastern Railroad in Ohio in 2024.

We’ve also supported management to expand the network of freight rail operations by entering into long-term contracts to provide the rail operations at SeaPort Manatee and Ports of Indiana-Burns Harbor; execute several growth projects, constructing additional trackage on company property to organically grow volumes with major customers under long-term take-or-pay agreements; improve the safety culture and performance of the company, resulting in declining injury and derailment rates even as the platform has expanded; and join the U.S. EPA’s SmartWay Transport Partnership, a collaboration that provides a framework to assess environmental and energy efficiency of goods movement supply chains.