Background to the report

In February 2019, Network Rail completed the £1.46 billion sale of a commercial property portfolio to Telereal Trillium and Blackstone Property Partners (‘The Arch Company’). The portfolio consists of 5,261 rental spaces across England and Wales that Network Rail judged are not essential for running the railway. The portfolio is concentrated in the London area (60% by number of rental spaces) and most properties are converted railway arches (70% by number of rental spaces). The portfolio generated £83 million of rental income in 2017-18, with the top 100 tenants making up 24% of expected revenues. Around 100 staff have transferred with the portfolio, which was sold on a 150-year leasehold basis.

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Content and scope of the report

This report considers whether Network Rail achieved value for money in the disposal of a major part of its commercial real estate portfolio, including:

  • the background and preparation for the sale (Part One);
  • the process of and proceeds from the sale (Part Two); and
  • the wider impacts of the sale (Part Three).

The report does not consider other sales in Network Rail’s asset disposal strategy or the achievement of the strategy overall.

Report conclusions

Government’s policy is to sell assets where there is no policy reason for continued public ownership. Network Rail sold this property portfolio in pursuit of that policy and did so in a way that achieved the primary sale objective of not prejudicing the safe and sustainable management of the railway infrastructure. Based on this outcome, and the fair price paid for the portfolio, the sale was value for money. It is, however, of some concern that the impact on tenants was not an explicit sale objective and was only considered late in the sale process. The long-term value for money of this transaction will depend upon several factors, including how Network Rail manages its ongoing relationship with the leaseholder and the impact of the sale on stakeholders, including tenants, and local economies.

“Network Rail achieved value for money in terms of the price paid and the achievement of its main objective of obtaining access rights to ensure the continued operations and safety of the railway. However, it is concerning that tenants as stakeholders did not form part of the aims of the sale and that they were only fully considered late in the process.”

Amyas Morse, the head of the NAO


Publication details

Press release

View press release (2 May 2019)

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