From the Experts
Network Rail sells 5,000 of its arches to fund upgrades
Network Rail’s decision to sell its commercial property portfolio for nearly £1.5bn, which mainly includes converted railway arches, sparked a heated debate across the industry. While the rail manager promises the money will be put to good use to fund its railway upgrade plan, opponents are decrying the risks this move poses to hundreds of small community businesses.
The successful buyers, Telereal and Blackstone, are planning to be long-term owners of the estate and promise to invest in the refurbishment of hundreds of currently disused railway arches to house more local businesses. The companies vouched to engage with the tenants and communities “in an open and honest manner”.
However, the owners of hundreds of varied small businesses currently located under the targeted arches – everything from furniture restorers, metal-shop workers, café owners, hairdressers, tyre sellers, artists, and more – fear that after experiencing rent spikes of as much as 350%, the new sale could force many to close up shop.
Sir Peter Hendy CBE, chairman of Network Rail:
“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.”
Image courtesy of Network Rail
David Biggs, managing director at Network Rail Property:
“We are proud to have fostere d so many small, independent, diverse businesses and communities across the country and we are confident that these will continue to thrive under the new owners.
“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.”
Graham Edwards, co-founder and chairman of Telereal
“The arches portfolio is a unique and vital part of the UK economy. We are tremendously excited by the prospect of working with its entrepreneurial tenant base – made up of car mechanics, bakeries, micro-breweries, restaurants, and just about every type of business you can think of. These tenants are a vibrant part of many local economies and communities. As a long-standing real estate investor in the United Kingdom, we and our partner Blackstone believe that our ownership of the portfolio will provide the supportive environment in which these businesses can flourish on a long-term basis.”
Image courtesy of Telereal
Guardians of the Arches, a non-profit organisation representing the concerns and voices of railway arch tenants nationally:
“We are already under huge pressure from Network Rail. Many of us have faced in-year rent rises of up to 350%, as our landowner seeks to increase the long-term ‘value’ of the arches. Some of us have already been forced to close as a result. Stop this sale of the railway arches. Stop the unnecessary destruction of local businesses and local economies all over the country.”
John Biggs, mayor of Tower Hamlets:
“The rent hikes imposed on tenants were unreasonable, but it is important we now focus our efforts on making sure the new landlords live up to the commitments they are making.
“It is essential that the issue of rent reviews is looked at in a clear and transparent way as a priority and we look forward, with interest, to learning more about the new financial support structures they are proposing.
Will Brett, director of communications at the New Economics Foundation:
“Like many public asset sales, it makes little sense no matter how you look at it. In financial terms, selling off the asset means Network Rail – and by extension the public – will no longer benefit from the steady annual rental yields generated by the portfolio. And it’s no excuse to say there’s no other way of funding infrastructure improvements. The Government is currently able to borrow at historically low interest rates, but instead they are forcing public bodies to sell income-generating assets to fund investment.”