The sale of Network Rail’s Arches portfolio has drawn interest from more than 20 bidders.
It is understood that the 5,476-asset collection has attracted indicative offers of more than £1.3bn – a yield of around 6%.
Bids for Project Condor, as the process has been code named, have come from private equity and traditional property investors including Blackstone, Goldman Sachs, Criterion Capital, Apollo Global Management, Terra Firma Capital Partners and Telereal Trillium.
The highly competitive process, which attracted more than 100 initial expressions of interest, has, however, resulted in a number of parties that were expected to bid deciding not to participate. These include Lone Star, Oaktree Capital Management, Brockton, London & Regional and Starwood Capital.
Preferred party
A preferred party is due to be selected in the summer.
The ultimate buyer of the portfolio will have to demonstrate an ability and track record of managing important infrastructure assets and be able to maintain their security effectively.
The Arches portfolio is said to have substantial reversionary rental potential of more than 31%, a long list of enhancement and development opportunities and surplus space which currently generates no income but which has potential to be commercialised.
There is also the opportunity to re-gear longer leases with the average unexpired lease term currently 3.1 years.
It forms the totality of Network Rail’s commercial portfolio that it is selling in order to invest into its infrastructure. Some 73% of the portfolio is railway arches, 18% are buildings and 9% is land.
Management team
The opportunity also comes with a management team of more than 100 which has its headquarters based in one of the railway arch properties in Burrell Street, SE1.
Some 77% of the £80.4m is generated from London assets with 11% from Manchester, 8% from Leeds and 5% from Birmingham.
The tenant make-up of the portfolio, which is 95% occupied, is highly diverse. By use category, 28% is industrial, 11% is storage, 14% is leisure, 23% is retail, 14% is offices, and 9% is car parking, with the remainder made up of uses including agriculture, residential and goods depots.
Rothschild is advising Network Rail.
Click here to read an in-depth analysis on the portfolio
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