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Entire Network Rail Commercial Property portfolio for sale

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LowLevel

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At Alsager, London Midland is a new service, previously only EMT called.
At Kidsgrove, London midland is a new service and Northern hourly service was for many years peak only (since 1993 or so). EMT was the obvious choice therefore as the provider of the majority of services at the time these things were shared out.

The thing with those stations is that unless you put them with Virgin who happen to operate all the nearby larger stations they're fairly arms length for all the operator's normal management hubs - they're right at the edge of the operational sphere of all the 'local service' (for the purpose of travel around the Potteries and Cheshire I count the LM Euston trains as a local service) operators. Consequently they stay where they are with the operator descended from Regional Railways Central and Central Trains who inherited the original core service.

As for NR managing stations I don't really have a problem with It, looking after the background operations of some of these massive terminals is a huge job and given that NR have a degree of responsibility for all stations anyway it doesn't seem too daft for them to be managed at arms length.

Except at Birmingham New Street for whatever reason the TOCs provide their own operations staff regardless.
 
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Mojo

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Except at Birmingham New Street for whatever reason the TOCs provide their own operations staff regardless.
I thought it was infact the opposite at New St, where all of the operational activities were the responsibility of NR and retail activities the responsibility of Virgin.

Central Trains used to provide dispatch staff for all Tocs, however these were Tupe’d across to Network Rail when the franchise was split in November 2007. This is in contrast to say Leeds where Northern Rail, Transpennine and East Coast run three separate dispatch teams (EC also dispatch XC trains).

At the same time was the creation of the current XC franchise. XC dealt with mobility assistance until April 2010 and the XC station staff that did mobility assistance were Tupe’d to Network Rail. XC also had its own staff doing customer service on the platform and concourse, there are a few of these left but not to the same extent, XC created a new role a few years ago to bolster their Revenue team made up of mostly ex-CSAs from New St. In addition to the ticket selling Virgin also staffed the information booth.

LM used to manage the manual ticket checks but this has now been done by Virgin since the gateline.

I heard a year or so ago a rumour that they wanted train dispatch to go back to the responsibility of a Toc(s), I’ve not been there in a while so I’m not sure if this happened/is going to happen.
 

carriageline

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As someone not so upto speed with commercial and properties arrangements, what actually is a leasehold in this sense?

Do NR get paid a yearly “lease/rent” still?
 

tspaul26

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As someone not so upto speed with commercial and properties arrangements, what actually is a leasehold in this sense?

Do NR get paid a yearly “lease/rent” still?

It is the same legal concept as a residential leasehold i.e. a temporary right to hold land or property for a given period in return for a rent.

With a leasehold of longer duration, it is customary (in England) for a premium (an upfront lump sum) to be paid when the lease is granted or transferred. The rent will then often be some nominal amount such as £1 per annum.

There is a market hall in Manchester subject to a commercial lease where the rent is a quart of milk, loaf of bread and pint of ale annually (if demanded).

With respect to Network Rail, my view is that they will be looking to grant long leaseholds out of the freehold in return for a premium and that the rents will be peppercorns. This means that they get a wodge of cash upfront and the day-to-day management of the properties is dealt with by the new leaseholder(s), who will then generally grant shorter 'occupational' leases to shops, cafes and so on (e.g. a lease of a retail shop with a five year term and rent of £12,000 per annum).
 

TBirdFrank

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And a provision for immediate access for over-riding railway needs to attend to urgent maintenance, railway access needs, emrgency incidents etc.

How many years purchase would you capitalise that income at - normal market - 8 - 8.5 Railway arches - half that???

Only under a tory government!
 

The Planner

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It will also allow NR pretty much unconditional access to the structures as I would expect some sort of clause in the lease.
 

tspaul26

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And a provision for immediate access for over-riding railway needs to attend to urgent maintenance, railway access needs, emrgency incidents etc.

True. I was trying to avoid over complicating matters for the benefit of other posters.

How many years purchase would you capitalise that income at - normal market - 8 - 8.5 Railway arches - half that???

It would depend on the figures.

To use an example that I worked on a few weeks ago, a retail park with annual rental and service charge income of roughly £1million per annum was purchased for about £20million.

However, the income figure is not pure profit as the landlord is required to cover various expenditures, maintenance and administration (to say nothing of rent arrears)*.

I'm not really allowed to divulge any more details I'm afraid.

* One of the collateral advantages of leasing out the commercial estate is that the management cost and responsibility becomes someone else's problem.
 

HowardGWR

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I am astonished that some colleagues appear not to know the difference between leasehold and freehold. Perhaps google Duke of Westminster and discover how he makes his money. He owns Belgravia and never, never, sells a property except on leasehold.

I also don't understand what all that discussion about managing stations had anything to do with this subject.
 

tspaul26

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It will also allow NR pretty much unconditional access to the structures as I would expect some sort of clause in the lease.

I would expect a covenant for access for operational maintenance, but not one for unconditional access come what may. Such a wide clause might render the whole exercise invalid from a property law perspective.
 

route:oxford

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Edinburgh Park is owned by Network Rail and managed by ScotRail unless it's been sold off since it's been built.

Edinburgh Park does seem to be quite complex... Railtrack applied for the original planning permission to build the station, but New Edinburgh Limited (then owners of Edinburgh Park) funded it to the tune of £4.5M, and much of it was built on land owned by New Edinburgh Limited.
 

LowLevel

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I thought it was infact the opposite at New St, where all of the operational activities were the responsibility of NR and retail activities the responsibility of Virgin.

Central Trains used to provide dispatch staff for all Tocs, however these were Tupe’d across to Network Rail when the franchise was split in November 2007. This is in contrast to say Leeds where Northern Rail, Transpennine and East Coast run three separate dispatch teams (EC also dispatch XC trains).

At the same time was the creation of the current XC franchise. XC dealt with mobility assistance until April 2010 and the XC station staff that did mobility assistance were Tupe’d to Network Rail. XC also had its own staff doing customer service on the platform and concourse, there are a few of these left but not to the same extent, XC created a new role a few years ago to bolster their Revenue team made up of mostly ex-CSAs from New St. In addition to the ticket selling Virgin also staffed the information booth.

LM used to manage the manual ticket checks but this has now been done by Virgin since the gateline.

I heard a year or so ago a rumour that they wanted train dispatch to go back to the responsibility of a Toc(s), I’ve not been there in a while so I’m not sure if this happened/is going to happen.

Not clearly put I accept but hence 'Except for', IE Birmingham New Street is the exception to the rest of the statement!
 

Chester1

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Leasehold is a bizarrely emotive topic in UK. Residential leasehold is fundamentally different because of the reforms by the Tories in the early 90s which where then added to by Labour in 2004. The system can be abused but you can avoid problems through proper checks during a purchase and lease extensions with no ground rent are relatively cheap to obtain either through a deal with the freeholder or through the tribunal system. A good rule of thumb is 5% the value of the flat for the statutory 90 year extension with no ground rent. Commercial leases are different and much more varied in terms of ground rent level and lease length.

Perhaps the government thinks the commercial property market has peaked? In which case selling long leases could be value for money for the taxpayer.
 

strawbrick

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True. I was trying to avoid over complicating matters for the benefit of other posters.



It would depend on the figures.

To use an example that I worked on a few weeks ago, a retail park with annual rental and service charge income of roughly £1million per annum was purchased for about £20million.

However, the income figure is not pure profit as the landlord is required to cover various expenditures, maintenance and administration (to say nothing of rent arrears)*.

I'm not really allowed to divulge any more details I'm afraid.

* One of the collateral advantages of leasing out the commercial estate is that the management cost and responsibility becomes someone else's problem.
Not sure about that last point (unless it is meant to be ironic):
  1. The Freeholder owns the property
  2. Leaseholder pays the freeholder (generally a lump sum) to buy a fixed term possession of the property for a fixed period of time - aka "the term"
  3. The Leaseholder may retain specifies rights over the property, e.g. an access route to another of his properties which he can include in other Leases (i.e Leaseholder B can have access of Leaseholder A's site)
  4. The Leaseholder may also pay an agreed sum on a regular basis as "rent"; this "rent" may increase over time
  5. If allowed in the terms and conditions the Leaseholder may sell on the Freehold for the remaining term
  6. At the end of the term the Freeholder may decide to "repossess" the property or to sell a new lease to anyone who is willing to pay the price sought, this may not be the previous Leaseholder
  7. Typically there will be a clause in the t & c that requires the Leaseholder at the end of the term to either return the property in it's "original" condition" or to pay the Freeholder a sum of money to "cover" the assessed cost of the works.
  8. The t & c may or may not require the Leaseholder to maintain the fabric of the property to a specified standard throughout the term
  9. If it does so require then the Freeholder should carry out regular inspections to see that this is being done and take action if needed
Thus the Leaseholder can either manage the property or cut the management cost and let it go to rack and ruin, in either case the problems remain and must be paid for.
 

tspaul26

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Not sure about that last point (unless it is meant to be ironic)

[SNIP]

Thus the Leaseholder can either manage the property or cut the management cost and let it go to rack and ruin, in either case the problems remain and must be paid for.

It was not meant to be ironic in any way.

My point was that the new leaseholder of the portfolio would be interposed between freeholder - Network Rail - and the occupational tenants; viz.:

Freehold in reversion
From which is granted a
[portfolio] Leasehold in reversion (Subject to any extant occupational leases)
From which are granted
[occupational] Leaseholds in possession

It would not be in the 'portfolio leaseholder's' interest to allow the properties to enter a state of disrepair as this would damage the marketability of any new occupational leases as the original occupational leases expire.
 

Starmill

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This is in contrast to say Leeds where Northern Rail, Transpennine and East Coast run three separate dispatch teams (EC also dispatch XC trains).

XC trains are now dispatched by Northern at Leeds. I don't know when the change was made.
 

DarloRich

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Worth noting that Network Rail has generated £67m following the sale of a logistics centre and some car parks according to the FT: https://www.ft.com/content/74d6c1e2-cae3-11e7-ab18-7a9fb7d6163e

I am astonished that some colleagues appear not to know the difference between leasehold and freehold. Perhaps google Duke of Westminster and discover how he makes his money. He owns Belgravia and never, never, sells a property except on leasehold.

I also don't understand what all that discussion about managing stations had anything to do with this subject.

Indeed! Although i suspect the Duke of Westminster doesn't offer many 999 year leases.

My point was that the new leaseholder of the portfolio would be interposed between freeholder - Network Rail - and the occupational tenants; viz.:

Freehold in reversion
From which is granted a
[portfolio] Leasehold in reversion (Subject to any extant occupational leases)
From which are granted
[occupational] Leaseholds in possession

That is exactly what will happen.

I expect the leasehold in reversion to be on a long term for a peppercorn in exchange for a large premium. Once sold these assets are sold they are gone, never to return along with all the people working for NR property n the commercial estate department. Sigh.
 
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Chester1

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Indeed!

That is exactly what will happen.

I expect the leasehold in reversion to be on a long term for a peppercorn in exchange for a large premium. Once sold these assets are sold they are gone, never to return along with all the people working for NR property n the commercial estate department. Sigh.

The government will outlast all of us and therefore its financial perspective is different. Even 100 year commercial lease will loose value every year and the value of the freehold increase slowly. For instance the government has taken the Grosvenor approach to property in Westminster and has leased out a swathe of its buildings to move to cheaper locations. Eventually the leases will revert and therefore the value of the freehold will slowly increase. I agree with your point in terms of people and jobs but the property may revert in time. I suspect the motivation is to make it harder for a potential future Corbyn government to nationalise everything.
 

DarloRich

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The government will outlast all of us and therefore its financial perspective is different. Even 100 year commercial lease will loose value every year and the value of the freehold increase slowly. For instance the government has taken the Grosvenor approach to property in Westminster and has leased out a swathe of its buildings to move to cheaper locations. Eventually the leases will revert and therefore the value of the freehold will slowly increase. I agree with your point in terms of people and jobs but the property may revert in time. I suspect the motivation is to make it harder for a potential future Corbyn government to nationalise everything.

I would be very surprised if the leases were not for a considerable period of time making freehold reversion unlikely in any sensible time period.
 

Chester1

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I would be very surprised if the leases were not for a considerable period of time making freehold reversion unlikely in any sensible time period.

100 years is sensible period in the context of government finances. In very simplified terms the lease loses 1% of its value each year and the value of the freehold correspondingly increases. Depending on opperating profit and risks this may or may not be a good investment for the taxpayer vs running businesses.
 

WatcherZero

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999 year leases are generally when the landowner doesn't particularly want the property back. If your a farmer setting aside some of your land to build houses but still want to maintain access to your fields for farming then that's a good idea as you don't particularly want to be bothered managing a load of houses and tenants petty concerns. A lot of them were done by people setting up mills building houses for their workers, it allowed them to still set covenants on the property and behaviour of the tenants according to their religious values. However if you do want the land back eventually or don't want to actually lose it because its so valuable for other reasons then 99 year leases are generally the way to go as it makes reacquiring the property down the line more practical. There generally isn't much more value generated from a 1000 year lease versus a 100 year one when its longer than the structures on the land are expected to last.
 

yorksrob

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The government will outlast all of us and therefore its financial perspective is different. Even 100 year commercial lease will loose value every year and the value of the freehold increase slowly. For instance the government has taken the Grosvenor approach to property in Westminster and has leased out a swathe of its buildings to move to cheaper locations. Eventually the leases will revert and therefore the value of the freehold will slowly increase. I agree with your point in terms of people and jobs but the property may revert in time. I suspect the motivation is to make it harder for a potential future Corbyn government to nationalise everything.

Yes, they have form on badly organised sell offs to frustrate the aspirations of future democratically elected Governments.
 

Chester1

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Yes, they have form on badly organised sell offs to frustrate the aspirations of future democratically elected Governments.

Every government tries to act in a way that makes it difficult for its successors to reverse a decision. It is not a trait unique to the Tories! I expect if they are struggling in the polls by three years time they will offer direct awards to extend many franchises past June 2027 to frustate Labours policy of nationalising services when franchises expire. While Labours hardcore supporters want nationalisation without compensation (i.e. theft) Labour wouldn't have much choice but to buy out the franchises or delay the policy for 5 years unless it wants the UK to be a financial pariah.
 

tspaul26

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999 year leases are generally when the landowner doesn't particularly want the property back. If your a farmer setting aside some of your land to build houses but still want to maintain access to your fields for farming then that's a good idea as you don't particularly want to be bothered managing a load of houses and tenants petty concerns. A lot of them were done by people setting up mills building houses for their workers, it allowed them to still set covenants on the property and behaviour of the tenants according to their religious values. However if you do want the land back eventually or don't want to actually lose it because its so valuable for other reasons then 99 year leases are generally the way to go as it makes reacquiring the property down the line more practical. There generally isn't much more value generated from a 1000 year lease versus a 100 year one when its longer than the structures on the land are expected to last.

I think this is highly likely. And after 99 years the land is simply given back to China.

There is also the potential to forfeit if the new leaseholder does something that prejudices railway operations in some way.
 

swt_passenger

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No, they really shouldn't - they make some half decent money from managing the major stations through retail activities.

Also how does that work at a station with multiple TOCs? who gets the lead to manage them and take that lovely retail money?

Plenty of 2nd tier stations where one TOC manages and 3 or 4 others operate. A station such as Reading has only recently changed to NR management, it wouldn't be difficult to go back to the previous FGW (now GWR) operation.
 

Clip

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Plenty of 2nd tier stations where one TOC manages and 3 or 4 others operate. A station such as Reading has only recently changed to NR management, it wouldn't be difficult to go back to the previous FGW (now GWR) operation.

Apologies I meant from where we are now as TOCs would be fighting over them whereas stations outside the RT/NR portfolio were decided at the time of privatisation and has generally stayed the same bar a name change of TOC
 

Chris M

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Apologies I meant from where we are now as TOCs would be fighting over them whereas stations outside the RT/NR portfolio were decided at the time of privatisation and has generally stayed the same bar a name change of TOC
Generally, but there are exceptions. For example Cardiff Central is currently managed by Arriva Trains Wales but I'm fairly certain that it was managed by Great Western at the time of privatisation.
 

snowball

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The sale appears to have happened.

https://www.theguardian.com/busines...elereal-trillium-blackstone-property-partners

Network Rail sells railway arches to real estate firms for £1.5bn
Worried tenants told they will be protected by ‘charter’ but it lacks promises on rent rises

Network Rail has sold its railway arches to a pair of real estate investors as part of a £1.5bn deal and vowed that businesses working from the newly acquired spaces will be protected by a “tenants’ charter”.

Telereal Trillium and Blackstone Property Partners won the bidding for 5,200 properties, the majority of which are arches, the operator of Britain’s rail network said on Monday.

The sale has raised fears among tenants, such as independent shops, restaurants and craft breweries, that the new owners may impose unaffordable rent hikes. Concerned tenants have united under the banner of the campaign group Guardians of the Arches. The Guardian has approached the group for comment.

Network Rail said the £1.46bn proceeds from the sale would help it fund railway upgrades, bringing “major improvements for passengers and reducing the need for taxpayers to fund the railway”.

It said Telereal and Blackstone, which will hold equal ownership stakes, agreed to address tenants’ concerns by signing a charter guaranteeing them certain rights.

The charter includes promises to listen to tenants’ worries about rent reviews and engage with them in a timely fashion, but does not make any promises to avoid rent rises.

“We are aware that in recent years, increases in market rents have created financial pressures for some tenants,” the charter says.

It promises the owners will consider “new structures to provide financial or other support” to tenants struggling to pay their bills.

A further 1,800 properties were not included in the sale because Network Rail either needs to keep them to operate the railways or because they are part of the northern gateway redevelopment plan, under the auspices of Manchester city council.

Network Rail’s property estate, most of which is changing hands in the sale, brought in revenues of £304m last year, turning a profit of £81m.

But the company that oversees Britain’s rail infrastructure has been looking to offload the majority of the estate to raise funds. The sites are being sold on a 150-year lease, with Network Rail retaining the freehold to ensure it still has right of access for the future operation of the railway.

The Network Rail chairman, 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.”

David Biggs, the managing director of 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.”
 
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