Network Rail sells arches for £1.4bn to fund upgrade

NETWORK Rail has agreed a deal to sell off its commercial property business to Telereal Trillium and Blackstone for £1.46billion.

The move will see thousands of railway arches, occupied by small businesses, come under the ownership of the investment giants.

Telereal and Blackstone will hold equal ownership stakes and said yesterday they intend to be “longterm owners” of the estate. Amid fears existing occupants – such as bars, bakeries, breweries and garages – are set for rapid rent increases, the duo claimed to have adopted a “tenants first” approach.

They added this will be cemented in a “tenants’ charter”, which offers a commitment to “engage with all tenants and communities in an open and honest manner”. Adam Dakin, who will oversee the estate, said: “We’re not guaranteeing there won’t be rent increases, but we will provide financial support to those businesses that might require it.”

He also insisted the character of the arches and the communities would be respected.

Sir Peter Hendy CBE, Network Rail chairman, said: “This deal is great news. For tenants it will mean significant commitment and investment, and for passengers and taxpayers it will mean massive, essential improvements without an extra burden on the public purse.” Network Rail’s portfolio includes 5,200 properties. The sale is required to fund a budget shortfall as it embarks on a railway upgrade plan.

Rent from the portfolio made up the bulk of Network Rail’s total rental income of £293million in 2017.

The new owners said they would invest in several hundred currently disused arches so they can provide space for local businesses. Graham Edwards, chairman of Telereal, said: “We believe the long-term success of this portfolio rests on strong relationships with our tenants, local communities and local government.

“We intend to remain particularly sensitive to the small businesses that have been long-term tenants of the Network Rail estate, and look forward to a long-term partnership with Network Rail.”

Blackstone and Telereal beat off competition from Terra Firma, CK Asset and Kildare Partners.