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Network Rail sells off railway arches to property developers for £1.5bn

network rail telereal trillium blackstone

Network Rail has agreed terms for the £1.46 billion sale of its commercial portfolio on a leasehold basis with Telereal Trillium and Blackstone Property

According to the AJ’s sister title Construction News, the deal will see Network Rail hive off its commercial estate portfolio and use the proceeds to fund the rail upgrade plan.

Telereal and Blackstone will hold equal ownership stakes, with Telereal operating the day-to-day property management of the estate.

Network Rail launched the sale of its commercial estate last November. Under the deal, the two private firms take over the estate on a 150-year lease.

The portfolio is made up of around 5,200 properties, the majority of which are converted railway arches. Network Rail retains access rights for the future operation of the railway.  

Network Rail chair Peter Hendy said: ‘This has been a very thorough, detailed and complex process and we are pleased we’re now in a position to announce Telereal Trillium and Blackstone Property Partners as the new owners of the commercial estate.

‘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.’

The entire Network Rail commercial estate is made up of around 7,500 properties. Around 5,200 were included in the sale, but properties in Scotland and those that have an ongoing requirement to support the running of the railway are not included.

Speaking at a rail event in London in March, former Network Rail chief executive Mark Carne said it had received expressions of interest from 250 bodies looking to buy parts or all of the commercial estate.

Carne then dismissed reports that the portfolio would be sold off for £1 billion, saying that price was ‘too low’, and adding that the portfolio was ’the best commercial property to come on the market in years’.

Network Rail Property managing director David Biggs said: ‘Ultimately our role is to run, improve and grow the railway, and managing these properties isn’t essential to that.

‘The new owners will invest in and grow the estate, and we can focus on our core business of running the railway.’

Responding to the announcement of the deal a spokesperson for Guardians of the Arches, a group comprising tenants affected by the sale of the portfolio said: ’Throughout this process we have sought to ensure that small businesses are genuinely protected so that the arches can thrive. We continue to dispute whether selling off the whole estate in one job lot is the best way of supporting small businesses and the local economies which rely on them.

’There is a long way to go in the sale process, but if Blackstone and Telereal successfully purchase the estate we trust they will follow up on their stated intention to “put tenants first” in their management of the estate. A starting point would be to meet our demands for a full, transparent rent and lease audit, and to recognise Guardians of the Arches formally as a tenants’ association.

‘We represent hundreds of businesses, and our number is growing every day. It is in the interests of all concerned that our proposals are taken on board.’


Readers' comments (2)

  • Clare Richards

    If and when this deal goes through, Blackstone and Telereal will take on a huge responsibility. Are they up to the task and what are the risks? Blackstone is well-known to be hard-nosed. It claims “our efforts result in solid returns for investors and strong economic assets for communities”. Telereal’s strap line is ‘creating value from real estate’. They are both quite understandably in this to generate profits. It would be naive of any of us, including Guardians of the Arches, to think tenants and communities will be put first. The risks are self-evident:
    - a hike in rents, displacing often long-term local businesses and their employees (such businesses have been a mainstay of communities, ensuring the mix of uses well known to help them to thrive);
    - and gentrification, caused by the replacement of such businesses with others that can afford the rent, including restaurants, trendy shops and galleries (which, as attractors to regeneration can bring a short-term benefit to the local economy, but which quickly lead to a loss of diversification and lack of affordability for locals)

    For the same reasons Blackstone and Telereal are in a very powerful position. Just think what they could achieve if they give their social responsibilities the same attention as their economic responsibilities? We must urge them to apply the following principles:
    - investigate and so thoroughly understand the local context prior to redevelopment
    - listen to local people and employ their knowledge (collaboration produces the best results)
    - think long-term (ultimately a thriving, mixed and inclusive community will bring economic benefits to all)
    - avoid displacing existing tenants, while encouraging a broad range of new ones (a mix of uses generates a healthy local economy and social diversity)
    - look at successful precedents (like Argent’s redevelopment of King’s Cross) and copy the best ideas

    This is a massive deal in every sense. The AJ can take a lead in keeping these issues on the agenda.

    ft'work helps to create thriving communities and to ensure that clear social principles underpin all new development. www.ftwork.co.uk

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  • Very well said, but is this bean-counter language?

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