MPs outline concerns over £1.5bn railway arches sale
MPs have said they remain “unconvinced” that the sale of a portfolio of mainly railway arches by Network Rail for £1.46bn to Blackstone and Telereal last year represents the best value for the public and the public sector finances in the long term.
The pre-sale valuation of the of 5,261 commercial rental spaces, of which 70% were railway arches, was just less than £1.2bn and it was eventually marketed at a price of £1.4bn.
A report from the Public Accounts Committee said that, despite the portfolio achieving a “fair price”, uncertainty remains about the value as Network Rail “may need to buy back properties for future railway development purposes, but it does not yet know how many or how much this might cost”.
MPs have said they remain “unconvinced” that the sale of a portfolio of mainly railway arches by Network Rail for £1.46bn to Blackstone and Telereal last year represents the best value for the public and the public sector finances in the long term.
The pre-sale valuation of the of 5,261 commercial rental spaces, of which 70% were railway arches, was just less than £1.2bn and it was eventually marketed at a price of £1.4bn.
A report from the Public Accounts Committee said that, despite the portfolio achieving a “fair price”, uncertainty remains about the value as Network Rail “may need to buy back properties for future railway development purposes, but it does not yet know how many or how much this might cost”.
Network Rail has also foregone around £80m a year in rental income with the sale.
“Ultimately, government took a short-term decision to sell a profitable asset to plug a funding gap,” the committee added.
In addition, the committee said that Network Rail and the Department for Transport had “failed to consider the interests of tenants until far too late in the sale process, despite them being those most affected by the sale”, which echoes a similar conclusion by a separate investigation into the sale by the National Audit Office earlier this year.
Blackstone and Telereal Trillium have committed to work with the tenants to establish a “tenants’ charter”and are expected to invest in the properties.
However, the committee voiced concerns that the commitments are not legally binding and that there is no certainty that future owners would have the same intentions should any properties be sold on.
Furthermore, future tenants’ rights will be weakened as Network Rail has required that all new tenants’ leases must be contracted out of the Landlord and Tenant Act 1954.
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