Public spending watchdog The National Audit Office (NAO) has supported a £1.4bn Network Rail deal to sell off commercial property, rebuffing safety concerns raised last week.
Network Rail concluded a deal to sell its 5,200 property assets – mostly converted railway arches – in November last year. The converted railway arches are popular locations for start-ups and local businesses and are in high demand in London in particular.
The NAO described the sale as a “fair price” and “more than expected” with Network Rail valuing the portfolio prior to the sale at £1.17bn.
The sale means that Network Rail has balanced its funding for the five-year investment period ending in March 2019.
The deal to sell the leaseholds was struck with Telereal Trillium and Blackstone Property Partners to fund railway upgrade plans.
However, the rail network will only see £500M of the money as the rest goes towards settling debts with the Department of Transport.
The NAO also rebuffed safety concerns, stating the lease-hold nature of the sale meant that the arches would still be maintained.
“The property was sold on a 150-year lease rather than a freehold sale, thereby achieving Network Rail’s primary objective of not prejudicing the safe and sustainable management of the railway infrastructure. It identified that only a leasehold sale would allow access to the properties in the future, for example, for maintenance. However, this objective was at the expense of HM Treasury’s aim of deficit reduction.”
In its latest publication, Confidential Reporting On Structural Safety (CROSS) revealed concerns that the sale of assets could lead to safety issues as engineers will not be able to properly inspect them.
“In the event that space under railway arches is sold off then it becomes almost impossible for inspection and maintenance to be carried out,” the CROSS report states.
NAO auditor general Amyas Morse said the sale achieved its aims despite concerns for current tennats. “Network Rail achieved value for money in terms of the price paid and the achievement of its main objective of obtaining access rights to ensure the continued operations and safety of the railway,” he said.
“However, it is concerning that tenants as stakeholders did not form part of the aims of the sale and that they were only fully considered late in the process.”
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