Network Rail has agreed a controversial deal to sell off its commercial property business to Telereal Trillium and Blackstone for £1.46 billion.
The move will see thousands of railway arches, occupied by small businesses, come under the ownership of the investment giants.
Telereal and Blackstone will hold equal ownership stakes and said on Monday that they intend to be “long-term owners” of the estate.
Amid fears that existing occupants – such as bars, bakeries, breweries, garages and hairdressers – are set for rapid rent increases, the duo claimed to have adopted a “tenants first” approach.
They added that this will be cemented in a “tenants’ charter”, which offers a commitment to “engage with all tenants and communities in an open and honest manner”.
Adam Dakin, who will oversee the estate, told the Press Association: “We’re not guaranteeing that there won’t be rent increases, but we will provide financial support to those businesses that might require it.”
He also insisted that the character of the arches and the communities in which they exist will be respected.
Sir Peter Hendy CBE, Network Rail chairman, 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.”
Network Rail’s portfolio is made up of around 5,200 properties and the sale is required to fund a budget shortfall as it embarks on a railway upgrade plan.
Rent from the portfolio made up the bulk of Network Rail’s total rental income of £293 million in 2017.
The new owners said that they will invest 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,” said Graham Edwards, co-founder and chairman of Telereal.
Blackstone and Telereal beat off competition from Terra Firma, CK Asset and Kildare Partners.