The Arch Company eyes microbrewery network and tenant ‘production line’

It is well known that the Arch Company is under intense public pressure to establish a productive relationship with existing tenants based at the UK’s railway arches. But what other plans does the company, newly created today, have in mind for the 5,200 properties it bought from Network Rail? The £1.5bn deal hands joint venture partners Telereal Trillium and Blackstone Property Partners a national portfolio that includes around 900 empty railway arches. The most valuable assets are based in London, Manchester and Birmingham. [caption id="attachment_964006" align="alignright" width="200"] Adam Dakin[/caption] Adam Dakin, who today (4 February) becomes director of the Arch Company, alongside his existing role as managing director for new business and services at Telereal, has several aspirations for the sites. “There will be several hundred empty arches that we can use,” he says. “In total, there are 900, but some of those we may never be able to bring back into use due to access issues. But we are expecting to bring the majority back into use. One of our objectives is to invest capital into the refurbishment of these assets. “When we talk to councils, they are very interested in the idea of us bringing the new space back into use. They want to know if we can use some of that space as incubator space for start-ups. We like the idea of having entrepreneurs based at the arches and creating a production line of future tenants. We want to get the right mix of tenants within the estate.” Dakin’s earlier experience saw him work on Telereal’s 2001 deal with BT, when it entered into a 30-year venture agreeing a number of sale-and-leaseback transactions. He says that the £1.5bn arches deal has many similarities – and one crucial distinction. “At Telereal, a lot of what we’ve done has involved large portfolios, such as the BT deal and buying Land Securities’ outsourcing arm, Trillium. What’s similar for us about the arches portfolio is that it’s a national portfolio. It is also a large deal, and to run it properly requires detailed professional property management. It also requires good communication with tenants. “It is different, however, in that overnight we have become the largest landlord for small to medium-sized enterprises. Before, we generally worked with larger clients.” The Arch Company is made up of a combination of Telereal and Network Rail employees. In total, 100 Network Rail staff are moving over to the new firm, including finance director Rod Jenkins, who becomes director at the Arch Company, reporting to Telereal chief executive Russell Gurnhill. Telereal, which has given 30 of its employees new roles at the Arch Company, will be responsible for the day-to-day management of the arches business. Blackstone will sit alongside Telereal on the board, and any big strategic decisions will be taken together. The first immediate priority is launching a consultation with its tenants in order to forge a good working relationship going forward. Dakin says that the firm would be prepared to offer financial assistance to some tenants on a case-by-case basis. “The objective of the consultation is to figure out the best way of providing support. “We are sympathetic to the fact that you may have long-standing tenants, small businesses or family businesses that have been at the arches estate for 30 years and are struggling to pay rents that have gone up. We are sympathetic towards that type of business.” Going forward, Dakin is hopeful that the firm will strike another deal with Blackstone, the arches being its first to date with the private equity giant. “We have really enjoyed working with Blackstone, and would like to find other things to do  with them. “For Telereal on its own, we’re always looking for sites that require detailed asset management – but those deals don’t come along every day of the week.” To send feedback, e-mail anna.ward@egi.co.uk or tweet @annaroxelana or @estatesgazette Photo © The Arch Company