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You can find the current article at its original source at https://www.theguardian.com/business/2019/may/02/railway-arches-sold-off-with-no-thought-for-tenants-says-watchdog
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| Railway arches sold off with no thought for tenants, says watchdog | Railway arches sold off with no thought for tenants, says watchdog |
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| A £1.46bn sale of Network Rail’s property portfolio to private sector buyers was carried out without consideration of the impact on the lives and livelihoods of thousands of sitting tenants, Whitehall’s spending watchdog has found. | A £1.46bn sale of Network Rail’s property portfolio to private sector buyers was carried out without consideration of the impact on the lives and livelihoods of thousands of sitting tenants, Whitehall’s spending watchdog has found. |
| The National Audit Office (NAO) also found that the rent charged for 5,261 properties sold to Telereal Trillium and Blackstone Property Partners could increase by 54% over the next three to four years. | The National Audit Office (NAO) also found that the rent charged for 5,261 properties sold to Telereal Trillium and Blackstone Property Partners could increase by 54% over the next three to four years. |
| The deal, signed off in September, sparked anxiety and anger among tenants – including independent shops, garages and craft breweries – who feared that the new owners would impose unaffordable rents. | The deal, signed off in September, sparked anxiety and anger among tenants – including independent shops, garages and craft breweries – who feared that the new owners would impose unaffordable rents. |
| The NAO report, issued on Thursday, will fuel further criticism of Chris Grayling, the transport secretary, whose department oversaw last year’s sale. | The NAO report, issued on Thursday, will fuel further criticism of Chris Grayling, the transport secretary, whose department oversaw last year’s sale. |
| Leni Jones, the director of Guardians of the Arches, which represents former Network Rail tenants, said ministers and the rail operator ignored small business owners and local communities until they protested. She said: “This report confirms that tenants’ interests were only considered during the sale process because we forced Network Rail and the government to listen. That was a major dereliction of duty by both Network Rail and the government.” | |
| Jones said the predicted rent increase would destroy many businesses based in railway arches. “This is exactly what arches tenants fear the most,” she said. “We are the backbone of our communities, driving local economic development and bringing variety and vitality to urban neighbourhoods all over the country. Big rent increases will kill that vitality stone dead.” | |
| Auditors examined the sale and concluded that tenants’ concerns were well founded. They said “that the impact on tenants was not an explicit sale objective and was only considered late in the sale process.” The report added: “The department suggested a charter quite late in the process and it is not legally binding.” | |
| Addressing tenants’ rent fears head on, auditors said they were told by the operator that rents would rise swiftly. “Network Rail highlighted to prospective buyers the upside potential of rents: it estimated a 54% rental increase for a sample of properties over the next three to four years owing to market conditions,” the report said. | Addressing tenants’ rent fears head on, auditors said they were told by the operator that rents would rise swiftly. “Network Rail highlighted to prospective buyers the upside potential of rents: it estimated a 54% rental increase for a sample of properties over the next three to four years owing to market conditions,” the report said. |
| Until the sale, Network Rail received £83m a year in rent from the properties. Sale proceeds were put towards Network Rail’s funding shortfall and used to reduce the transport department’s borrowing, the report said. | Until the sale, Network Rail received £83m a year in rent from the properties. Sale proceeds were put towards Network Rail’s funding shortfall and used to reduce the transport department’s borrowing, the report said. |
| The new owners did set out initiatives to support tenants, auditors found, but these intentions were not legally binding. | |
| Auditors have recommended that Network Rail, and any department selling assets, should monitor whether future owners comply fully with the commitments they made in their final bid and be held to account. | |
| Payments to advisers hired to see through the deal – including BAE Systems, Clifford Chance, Eversheds and EY – cost nearly £35m, which was £15m more than planned, the report found. The arches were sold on 150-year leases because Network Rail wished to retain the right to access the buildings in order to check the railway lines. | |
| The Labour MP Meg Hillier, chair of the public accounts committee, said the sale was designed to plug a gap in Network Rail’s budget while leaving publicly owned properties to the mercy of the markets. She said: “It means that the control of this important public asset is now out of the hands of the public sector, so will receive less scrutiny. | |
| “Value includes the wider impact on communities, places and tenants. Government should not, in trying to achieve the best price, lose sight of the wider societal impact when selling a government asset. | “Value includes the wider impact on communities, places and tenants. Government should not, in trying to achieve the best price, lose sight of the wider societal impact when selling a government asset. |
| “Although the NAO found the sale was value for money, existing tenants were considered too late in the day with non-legally binding support only negotiated in the final stages of the sale.” | “Although the NAO found the sale was value for money, existing tenants were considered too late in the day with non-legally binding support only negotiated in the final stages of the sale.” |
| A spokesperson for the Arch Company, which manages many of the properties once owned by Network Rail, said the firm would invest in its estate to regenerate vacant properties and provide space for more businesses. | |
| She said: “We’re listening to our tenants and we’ve consulted with them during the early months of our tenure to help shape a tenants’ charter. This will guide our relationship with them and ensure we support SMEs to maintain healthy local business ecosystems.” | |
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