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Network Rail agrees £1.46bn commercial estate sale to Telereal Trillium and Blackstone Property Partners

Network Rail agrees £1.46bn commercial estate sale to Telereal Trillium and Blackstone Property Partners

10 September 2018

Network Rail has agreed terms with Telereal Trillium and Blackstone Property Partners for the sale of its commercial estate portfolio. Proceeds from the £1.46 billion transaction will help fund the railway upgrade plan, bringing major improvements for passengers and reducing the need for taxpayers to fund the railway.

Telereal and Blackstone will hold equal ownership stakes and intend to be long-term owners of the estate. Both parties have adopted a ‘tenants first’ approach, cemented in a tenants’ charter, which offers a commitment to engage with all tenants and communities in an open and honest manner.

Both companies have long and successful track records of operating large commercial estates across the UK. Telereal will oversee the day-to-day property management of the portfolio. 

Network Rail launched the sale of its commercial estate last November. The portfolio is made up of around 5,200 properties, the majority of which are converted railway arches. The sites are being sold on a leasehold basis, with Network Rail retaining access rights for the future operation of the railway.  

Sir Peter Hendy CBE, Network Rail chairman, said: “This has been a very thorough, detailed and complex process and we are pleased we’re now in a position to announce Telereal Trillium and Blackstone Property Partners as the new owners of the commercial estate.

“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.”

David Biggs, managing director, Network Rail Property, said: “We are proud to have fostered so many small, independent, diverse businesses and communities across the country and we are confident that these will continue to thrive under the new owners. 

“Ultimately our role is to run, improve and grow the railway, and managing these properties isn’t essential to that. The new owners will invest in and grow the estate, and we can focus on our core business of running the railway.”

Graham Edwards, co-founder and chairman of Telereal, said: “The arches portfolio is a unique and vital part of the UK economy. We are tremendously excited by the prospect of working with its entrepreneurial tenant base – made up of car mechanics, bakeries, micro-breweries, restaurants, and just about every type of business you can think of. These tenants are a vibrant part of many local economies and communities.

“As a long-standing real estate investor in the United Kingdom, we and our partner Blackstone believe that our ownership of the portfolio will provide the supportive environment in which these businesses can flourish on a long-term basis. For example, our business plan anticipates investing in several hundred currently disused arches so that they can provide space for more local businesses.

“With our permanent capital structures, we will be investing in the portfolio for many years. We believe that the long term success of this portfolio rests on strong relationships with our tenants, as well as with local communities and local government. We intend to remain particularly sensitive to the small businesses that have been long-term tenants of the Network Rail estate, and look forward to a long term partnership with Network Rail.” 

James Seppala, head of European Real Estate at Blackstone, said: “We are honoured to have been chosen as the new owners of Network Rail’s commercial estate. The portfolio is unique in its character and function, and we are excited by the tremendous opportunity for us to contribute to the continued revitalisation of the railway arches in the UK, always recognising the role that they play in stimulating economic activity, growth and prosperity, in particular amongst SMEs and local communities.”


Media contacts:

Paula Whitworth
07809 375 947

Andrew Dowler
020 7451 4275

Notes to editors

The entire Network Rail commercial estate is made up of around 7,500 properties. Around 5,200 were included in the sale, with properties in Scotland and those that have an ongoing requirement to support the running of the railway not included.

Proceeds from the sale will help fund the railway upgrade plan, which is bringing 170,000 seats into major cities, 6,400 extra train services and 5,500 new train carriages – a 30% increase in capacity.

Rothschild & Co acted as sole financial advisor to Network Rail on the sale. Clifford Chance and Eversheds Sutherland acted as legal advisors to Network Rail.

Cushman & Wakefield, Grant Mills Wood, Kirkland & Ellis and Gowling WLG acted as advisors to Telereal and Blackstone on the transaction.

Initial initiatives for supporting tenants within the estate

(a)  As part of our Tenants’ Charter, we shall, in our dealings with tenants within the commercial estate in relation to their respective leases:

(i)  communicate clearly and openly with tenants (and their appointed agents) in relation to their leases, and respond to any reasonable queries in a timely manner;

(ii)   act with respect towards tenants;

(iii)  provide information in a timely manner to tenants on the roles and responsibilities of the tenant, ourselves and Network Rail (as ultimate landlord) in respect of the maintenance and management of the relevant properties occupied;

(iv)  provide an opportunity to tenants to raise any concerns in relation to their lease prior to any rent review or in the context of any renewal discussions, including any specific factors relevant to their businesses, and to take such concerns into consideration in the context of such rent review or renewal discussion;

(v)   engage tenants in a timely way on rent reviews with a view to enabling the review to have been concluded as soon as practicable;

(vi)   abide by RICS Professional and Ethical Standards, where applicable.

(b)   We will make available to tenants a written report, no less than once a year, setting out the number of arches which have had a change of use as well as the number of units that have been refurbished in each case during the previous 12 month period.

(c)   We intend to launch a Comprehensive Tenant Consultation process so that we better understand the considerations and concerns of tenants, and the communities they serve.  Once the transaction completes, every tenant will be contacted directly and given the opportunity to provide their thoughts and feedback. 

(d)   The results of the consultation will be used to develop an enhanced Tenants’ Charter, which will augment the Tenants’ Charter.  This will draw on existing best practice and offer clear commitments on various matters, including the timeliness of communications.

(e)   An Engagement Team will be established to support tenants on a highly responsive and transparent basis.  Tenant engagement will include: the creation of a website and hotline where tenants can email and call in questions; regular meetings with tenant groups to better understand their needs; regular customer satisfaction surveys of tenants; and responsive provision to tenants of improvements to the portfolio.

(f)   We are aware that in recent years increases in market rents have created financial pressures for some tenants.  We will seek to work with long-tenured small business tenants that face financial pressure. New structures to provide financial or other support to such

tenants, that are not currently available, are being considered as part of our commitment to best practice and recognition of the vital role tenants play and will continue play to the commercial estate and to local communities. Further details will be announced following the conclusion of the transaction and the CTC.

About Telereal Trillium

Over the last 20 years Telereal has established a UK-wide portfolio of c. 7,000 properties, including major portfolios principally occupied by BT, the Department of Work & Pensions, and Royal Mail, together with its own multi-let commercial estate. To manage these assets, Telereal has assembled a nationwide team of asset managers, strong processes for engaging with tenants, and a proprietary information system to inform its management decisions. Telereal believes that this has culminated in a platform uniquely suited to investing in Network Rail’s real estate portfolio.

About Blackstone

Blackstone is one of the world’s leading investment firms. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, and the communities in which we work. Our businesses include investment vehicles focused on real estate, private equity, public debt and equity, non-investment grade credit, real assets and secondary funds, all on a global basis. Further information is available at