Scope of the inquiry
In February 2019, Network Rail sold 5,261 rental spaces across England and Wales: the spaces were sold to a consortium of private investors who formed a joint venture named ‘The Arch Co.’ 70% of the properties sold off were railway arches and 60% of the portfolio was based in London. These assets were sold as part of Network Rail’s response in making up its funding shortfall from 2014-19; the shortfall had left a number of major projects underfunded and at risk of delay or cancellation.
The National Audit Office’s report found that the sale achieved a fair price and was well executed. However, Network Rail’s valuation of the option to keep the assets in public ownership was conservative. The process also took longer and cost more than expected. Network Rail may need to buy back some properties in the future, but it has not estimated how much this is likely to cost over the length of the lease. Network Rail did not sell any rental space to existing tenants, and only considered the interests of tenants late in the process.
On Monday 17 June, the Committee of Public Accounts will be hearing from Network Rail, the Department for Transport and HM Treasury to about the management and objectives of the sale and whether the sale will over true value to the taxpayer in the long run. We will also be asking representatives about the impact of the sale on tenants and communities and whether it considered the interests of its tenants throughout the sale process. We will also ask Network Rail how it intends to compensate its lost rental income.
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