Network Rail agrees £1.46bn commercial estate sale to Telereal Trillium and Blackstone Property Partners

Network Rail has agreed terms with Telereal Trillium and Blackstone Property Partners for the sale of its commercial estate portfolio. Proceeds from the £1.46bn transaction will be used to fund the railway upgrade plan.

Telereal and Blackstone will hold equal ownership stakes and intend to be long-term owners of the estate. Telereal will oversee the day-to-day property management of the portfolio.

Both parties say they will adopt ‘tenants first’ approach, cemented in a tenants’ charter, which offers a commitment to engage with all tenants and communities in an open and honest manner.

Network Rail launched the sale of its commercial estate last November. The portfolio is made up of around 5,200 properties, the majority of which are converted railway arches. The sites are being sold on a leasehold basis, with Network Rail retaining access rights for the future operation of the railway.

David Biggs, managing director, Network Rail Property, said: “We are proud to have fostered 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.”

Sir Peter Hendy, Network Rail chairman, said: “This has been a very thorough, detailed and complex process.”

Graham Edwards, co-founder and chairman of Telereal, said: “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.”

The companies’ business plan anticipates several hundred currently disused arches being upgraded so they can provide space for more local businesses.

“With our permanent capital structures, we will be investing in the portfolio for many years,” said Edwards. “We believe that the long-term success of this portfolio rests on strong relationships with our tenants, as well as with 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.”

James Seppala, head of European Real Estate at Blackstone, added: “The portfolio is unique in its character and function, and we are excited by the tremendous opportunity for us to contribute to the continued revitalisation of the railway arches in the UK, always recognising the role that they play in stimulating economic activity, growth and prosperity, in particular amongst SMEs and local communities.”