Network Rail regulation and performance

17.11.17

Network Rail announces major sell-off of entire commercial portfolio

Network Rail will seek a major cash boost through the sale of its commercial property portfolio in England and Wales, announced today.

The infrastructure manager is looking for private bidders on a mostly leaseholder basis while retaining the freeholds, meaning it can retain control of access to the properties but still receive an immediate financial gain.

Most of the 5,500 properties in the portfolio that are up for grabs are spaces under rail arches, which means access to them is important for Network Rail to continue its network operations.

While no firm announcement has been made regarding how much the sale will generate, sources estimate that it will be worth more than £1bn – although this figure has not been formally confirmed.

Despite its success and profitability, the decision has been taken to sell off the business because Network Rail considers it a “non-core property asset” which is not essential to keep the railway running. It hopes it will now be able to “place even more focus” on its core business of improving the passenger experience and running a safe and reliable network.

The money generated through sales will go towards delivering ‘mega infrastructure projects’ such as the Thameslink and Great North Rail, and officials say they expect an increase in capacity over the next 18 months due to the increased resources available for such schemes.

“This deal will bring more investment into the commercial estate for the benefit of the local communities and it will help fund a better railway,” commented Mark Carne, the infrastructure owner’s chief executive.

“I hope to see areas around the railway positively transformed with new and refurbished shops, amenities, and extra facilities for local people and passengers.

“The sale will bring a major cash boost to help fund key projects across England and Wales as part of the Railway Upgrade Plan. Passengers are about to see a bigger, better railway, with more reliable, more frequent services, and upgraded stations and facilities as these huge projects finally come to a conclusion in the months ahead.”

The new owner of the property business, whose sale is being handled by Rothschild & Co, is expected to invest heavily into the commercial estate, bringing more businesses and jobs to the affected communities.

Today’s sale announcement builds on an ongoing plan between the government and Network Rail to sell off non-core property and assets, such as electrical power equipment and potentially even including parts of major stations, in order to generate more income.

Last month saw the year’s biggest single property sale deal, with the £35m sell-off of the National Logistics Centre in Ryton, which will be leased back to NR for the operations over the next 15 years.

Top image: Old Union Yard, Southwark (Network Rail)

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Comments

Ampox   17/11/2017 at 13:28

What about the need for future-proofing for an enlarged railway? Danger of short-term thinking for short-term profits.

Enigma   17/11/2017 at 13:41

Inevitable given the debt burden, access to arches always been an issue for NR and that’s when they had a direct relationship with the tenant. Will become a nightmare once a 3rd Party leaseholder is in charge. Expect to see more assets flogged off over next 2 years short term financial fix with medium to long term operational pain.

Railtrackrefugee   17/11/2017 at 14:09

What about using some of this to adequately compensate all those ex employees of Railtrack who were swindled out of thousands by Byers?

Roygc   17/11/2017 at 14:43

Yet again we see potential short-term financial gains, instead of a more sensible longer term view. What IS NEEDED is a focused commercial development programme aimed at generating an ongoing inflow of funds to the railway. Thus the greater the return, the more would come to Network Railway for investment elsewhere. Network Rail has not always developed its commercial portfolio well (I know having dealt with the frustrations of working with 'Spacia' etc.). Instead, Network Rail should develop a management team with the expertise to operate the commercial properties profitably - NOT sell them off. RoyGC

Ivor Richards   17/11/2017 at 14:52

I worked for the Estate and Rating Surveyor at Paddington in the early 1960s and even then could appreciate the value and significance of the land holding in the Western Region. I would have thought £1 billion may be a bit light but I daresay will be very welcome in these straightened times.

GW   17/11/2017 at 16:14

Fools.

Thames Valley Traveller   17/11/2017 at 18:35

If Network Rail sells of any commercial properties bought whilst developments of HS1,2, CrossRail etc are developed, that is tidying up. However, selling land of "Track of Old Railway", closed stations, car parks and such like, those assets are part of operation of a railway and must be protected. West curve at Slough, for example. The line between Bourne End and High Wycombe must be protected for eventual restoration. Many other areas. No, this must be very carefully discussed with local rail groups, local councils and advisors before land is sold, probably for housing. There should also be a 50% sales tax on developers making profit from rail land sales to put back into railway developments

Cfbobserver   17/11/2017 at 19:11

Trouble is this forfeits income over the long term and to our voracious railway a £1-2b one-off pay day is a mere morsel.

Watcherzero   17/11/2017 at 21:46

The sale should raise in excess of 15 years commercial income, as they are paying interest on their debts of around 7% that should provide a significant improvement in their financial position. They are also retaining the Freeholds meaning in essence they are selling the buildings but keeping ownership of the land so they are still guaranteed maintenance access and if the land is needed they can buy out the leasehold on that particular property.

Andrew Gwont   18/11/2017 at 08:15

With the sale of leases of Network Rail commercial property more funds will be released to develop the railway and maybe even cascade some arches down to lines that are in need. Brick arches could be used on rural lines with new concrete arches in city centres an bi-mode arches in between. But care must be taken.

James Palma   18/11/2017 at 08:34

There are a number of journal articles online that discuss how such leasehold disposal should be considered from what have been defined as presence property and protection perspectives. I hope Network Rail take these things in to consideration...titles are: An introduction to london’s Underground railways and land use; a conceptual framework for land use and underground metros; london’s Deep tube railways: visibly invisible. I contacted the author of these a while ago from an interest perspective and they said that these are applicable to main line railways too. Apparently they are also writing a new article on these issues. Thoroughly recommend them.

Andrew Gwilt   18/11/2017 at 18:12

@Andrew Gwont. Very strange name from a troll who has the attention to use my name without permission or is breaking the law on using my name.

Nick   18/11/2017 at 19:31

Andrew, a gentle comment, if I may... When posting anything on the web, I always type my words into an editor (e.g. Notepad), then re-read them a little later, having carefully considered the relevance and accuracy of my statement. Sometimes, I will change the words, and if somewhat contentious, may even delete them entirely! Then copying and pasting into the website is easy - some of your words are actually helpful or appreciated, honestly.

Andrew Gwilt   19/11/2017 at 08:49

@Nick. Fair enough. Or should I say Whatever.

SPT   20/11/2017 at 10:19

A cascaded arch eh?!?! I'd like to see one of those ;) I'm sure Railway Heritage would be very keen too... Think Gwont has created a brand new architectural term... I'm sure the good folk in the West Country are just crying out for them to increase the size of their stations....

J, Leicester   20/11/2017 at 17:22

I don't see selling buildings for leasehold is a particularly bad move from Network Rail's point of view - they'll presumably still write a cut into any contract and will still own the land in any sense, so it's not like Mavis is going to prevent Euston HS2 station from being built because she owns a coffee kiosk on platform 6. The real question is - who would want to buy a leasehold with the knowledge that their business could be cleared away at the drop of a hat? At least with housing the threat is more benign - the railway industry is far more fast moving.

Lutz   21/11/2017 at 14:55

The next step is to start selling the rail routes; Wessex is likely at the head of the list.

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