Four firms score £1.5bn sale of Network Rail property

Clifford Chance, Eversheds Sutherland, Gowling WLG and Kirkland & Ellis have advised on the £1.5bn sale of Network Rail’s commercial estate to private equity giants Blackstone Property Partners and Telereal Trillium – the biggest investment programme in the railway since Victorian times.

Clifford Chance and Eversheds both acted for Network Rail in its sale of a portfolio comprised of around 5,200 properties, the majority of which are converted railway arches and home to small businesses including start-ups, healthcare centres, breweries, coffee shops, car mechanics and hairdressers.

The Clifford Chance team was led by real estate partners Angela Kearns and Franc Pena, as well as London and global head of real estate Jonathan Solomon and co-head of the global real estate sector Adrian Levy.

They worked in tandem with Eversheds’ head of real estate investment and The Lawyer Hot 100 2013 alum Nicholas Bartlett and partner James Roberts.

US buyout Blackstone and London-based Telereal Trillium was advised by Kirkland, with a team led by finance partner Michael Steele, corporate partner Carlos Gil Rivas and associate Syed Murshed. The US firm worked alongside Gowling WLG partners Michael Twining and Giles Clifford in Birmingham, as well as partner John Burns in London.

Blackstone and Telereal will hold equal ownership stakes and intend to be long-term owners of the estate. Telereal, which was originally set up to acquire properties from the Department for Work and Pensions, will oversee the day-to-day property management of the portfolio.

The sale was announced in November 2017 and attracted a host of other bidders including Hong Kong based multi-national conglomerate CK Asset, Guy Hands’ buyout group Terra Firma and Kildare Partners, which was founded by Ellis Short, the former owner of Sunderland FC.

The sale will generate £1.46bn to help fund an upgrade on the ageing rail infrastructure, improving passenger services and reducing the need for taxpayers to foot the bill.

Background to the deal

Clifford Chance were brought in alongside Eversheds to advise Network Rail in May when the commercial property sale, code-named ‘Project Condor’, was underway.

Against the backdrop of the momentous sale, Network Rail continues to review its legal panel. The public-sector body chose to renew the panel for a further two years in August 2017, which sees the existing structure run until 1 April 2019. In the last review in 2013, Network Rail reduced its legal panel from 13 firms to five. This review will be Network Rail general counsel Stuart Kelly’s first in the role since replacing former legal boss Suzanne Wise

The panel is set to cover the breadth of Network Rail’s legal matters, including construction, dispute resolution, property and several other areas. Network Rail has indicated that it is looking for firms to advise it on corporate functions and devolved route businesses in its “Control Period 6”.

The panel could be worth up to £70m over its five-year lifespan.

Kirkland has a strong relationship with Blackstone in London on the finance side. At the end of last year, the US firm advised advised Blackstone on the £309m acquisition of a European real estate fund, Taliesin Property Fund. Kirkland fielded a London-based team led by partners Michael Steele and David Holdsworth, who moved over from Linklaters the previous year. Steele has also advised Blackstone on the £600m buyout of Clarion Events, which owns the rights to hundreds of UK exhibitions, including the Olympia Horse Show, the House and Garden Show, the World Counter-Terror Congress and the Condé Nast Traveller Luxury Fair.

At the beginning of the year, Blackstone acquired a $17bn stake in Thomson Reuters’ financial and risk business, which was its largest deal since the financial crisis. It sought counsel from longstanding advisers Simpson Thacher & Bartlett

 

 

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