Network Rail is to sell its commercial estate – including railway arches and other property – for nearly £1.5bn resulting in a loss of £81m a year in revenue.
This will reduce Network Rail income by around £400m over a single control period and has prompted an angry reaction from Labour, which has called for a halt to the sale.
The rail infrastructure operator announced that it has agreed terms with Telereal Trillium and Blackstone Property Partners for the sale of its commercial estate portfolio in a transaction worth £1.46bn.
It said the cash will help fund the railway upgrade plan, ‘bringing major improvements for passengers and reducing the need for taxpayers to fund the railway’.
However, Network Rail has confirmed to Transport Network that the income from the commercial estate was £81m last year, suggesting that the sale will see it forego at least £400m in income over Control Period 6, from 2019 to 2024.
Labour’s shadow rail minister, Rachael Maskell MP, called on transport secretary Chris Grayling to intervene to prevent the sale.
She said: ‘The selloff of Network Rail’s commercial estate is a short-term decision that will undermine the financial sustainability of the railway and damage small and medium sized enterprises across the country. Archways are both an asset and a revenue stream for Network Rail so this move highly irresponsible.’
Network Rail launched the sale of its commercial estate last November. The estate is made up of around 5,200 properties, the majority of which are converted railway arches.
It said that the sites are being sold on a leasehold basis, with Network Rail retaining access rights for the future operation of the railway. Although Network Rail said the two firms have adopted a ‘tenants first’ approach, small businesses who generally rent the spaces have repeatedly raised concerns about rent rises.
Network Rail chair Sir Peter Hendy 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.’
In 2015, Network Rail announced that it aimed to sell £1.8bn worth of ‘non-core’ assets to help plug a £2.5bn gap in its finances. As Transport Network has reported, it struggled to identify assets to sell, leading to the decision to sell the commercial estate two years later.
In Network Rail’s 2018 Annual Report and Accounts its managing director, property, David Biggs, disclosed that sales of ‘other assets’ during the year under its strategic disposals programme raised only £36.5m.