New York New York USA - Canadian Pacific Railway expects to generate substantial proceeds by selling surplus land owned by Norfolk Southern if its proposed $28-billion takeover of the U.S. railroad goes ahead.
 
"I think we'll be able, like we did at CP, to take some of their yards that are probably not needed in my view, and convert them to maybe real estate and generate huge cash flow, huge, without having a negative impact on the railroad," Canadian Pacific chief executive officer Hunter Harrison said in an interview at Bloomberg's headquarters in New York.
 
"It's gravy. It could be a lot. That's why I'm excited."
 
Any proceeds from divesting real estate would come on top of an estimated $1.8 billion in operational savings contained in Canadian Pacific's merger proposal, said Harrison, who declined to give a specific revenue target.
 
Norfolk Southern has been cool to Canadian Pacific's bid, branding the offer "unsolicited, low-premium, non-binding, and highly conditional" after it was disclosed 17 Nov 2015.
 
Harrison has indicated he is willing to sweeten the cash-and-stock deal in his campaign to create a transcontinental railroad.
 
Frank Brown, a Norfolk Southern spokesperson, declined to comment Monday.
 
Harrison, 71, is seeking to replicate a strategy he put in place at Calgary-based Canadian Pacific after becoming CEO in 2012.
 
He closed unneeded rail yards and intermodal terminals, and unveiled plans last year to develop or sell about $1 billion of real estate.
 
Canadian Pacific later formed a venture to market the assets with Dream Unlimited Corporation.
 
Norfolk Southern operates about 20,000 route miles (32,000 kilometres) of track snaking through 22 eastern states, and serves each of the region's major container ports.
 
Its connections with western railroads include Chicago and Kansas City, Missouri, two cities served by Canadian Pacific.
 
"They probably have got the best mile-for-mile physical plant in the U.S., but I think they've got too much of it," Harrison said on Friday.
 
"They've historically been driven and led by civil engineers, wonderful civil engineers, that knew how to build great stuff. They have a franchise that's strategically located in the U.S. It covers the right gateways, it fits with us."
 
Since joining Canadian Pacific, Harrison has led a turnaround that transformed one of the North American industry's least-efficient operators into one of its leanest carriers.
 
While Norfolk Southern now bumps along at the bottom of the major carriers as measured by operating ratio, a benchmark gauge that compares revenue to expenses, Harrison said he's convinced the situation can be fixed.
 
"We see no reason why we can't do there what we've done at CP," he said.
 
"It may be even easier. They have a better infrastructure than we do. They have always been well respected for having a wonderful physical plant. Some of us have teased them about being gold-plated."
 
Frederic Tomesco.