Blackstone nears deal to take full management of UK railway arches | USAEMALL.com

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Blackstone is closing in on a deal to take full control of a £2bn portfolio of more than 5,000 UK railway arches, buying out its partner five years after a deal that symbolised the advance of US private equity into the UK economy.

The US private capital group, which is the world’s largest commercial property investor, has agreed to buy TT Group’s half of the portfolio, which the two investors acquired from Network Rail for £1.5bn in 2019, according to people familiar with the matter.

The transaction would involve Blackstone buying out TT’s stake in the Arch Company, which owns the portfolio. The deal, first reported by Green Street News, has yet to be finalised.

The brick arches under railway lines are an iconic part of British streetscapes and home to a range of small businesses from micro breweries to auto repair shops and hairdressers.

Network Rail’s sale of the vast portfolio became symbolic of private equity’s increasing role in the UK domestic economy, making Blackstone and TT the landlord to thousands of small businesses.

The deal brought greater investment to the arches, but also raised concerns about more aggressive management and rent increases.

Some small businesses faced steep rent increases as they were dealing with the hardship of the Covid-19 pandemic.

The Arch Company at the time offered some occupiers rent holidays and set up a hardship fund to assist struggling businesses. It also negotiated a “tenants charter” with the Guardians of the Arches tenants association.

The new owners also invested heavily in the portfolio. Some 1,400 arches were derelict when Network Rail agreed the sale and are now being brought back into use.

TT Group, owned by the Pears family and formerly known as Telereal Trillium, is one of the UK’s largest privately held real estate investors, with a portfolio worth more than £9bn.

The group is looking to free up capital for new investment while Blackstone would prefer to have complete control of the portfolio, said one of the people familiar with the matter.

Blackstone and TT declined to comment.