Three of the most famous faces in global and European investing are amongst a surprise shortlist of five parties to have been taken through to the next round of bidding for Network Rail’s £1.5bn Arches portfolio.
CK Asset Holdings, the company backed by the family trust of Hong Kong’s richest man, Li Ka-Shing, is vying to buy the 5,476 asset collection of properties predominantly located below railway arches.
The company is one of the largest and most aggressive infrastructure investors in the world and last week also bought 5 Broadgate, EC2, from GIC and British Land for £1bn.
Guy Hands’ private equity firm Terra Firma has also progressed. The company has also been circling Lone Star’s £2.5bn Quintain and its 7,000-flat Wembley project but is understood ultimately not to have bid.
Ellis Short, the former chairman and owner of Sunderland AFC and former vice chairman of Lone Star, is also competing through Kildare Partners, his fund management firm that typically focuses on distressed assets. Last year its latest and second fund closed with almost $2bn (£1.5bn).
They are joined on the shortlist by two joint venture bids from Blackstone with Telereal Trillium and Goldman Sachs with Wellcome Trust.
Telereal is a long-term partner of the public sector, which is seen as a potential advantage given the importance of the safety and security of the assets situated underneath railways. Goldman and Wellcome are also hoping their track record in management may be considered an advantage once a final party is selected, together owning the second-largest student accommodation company in the UK, the £3.2bn iQ.
A shock omission from the shortlist is Legal & General Capital in a joint venture with Lendlease. The duo were amongst around 17 parties that submitted bids in March and were anticipated to be one of those to bid most aggressively for the portfolio with each party exploring creating special purpose funds or structures to hold the Arches.
However, it is understood that Legal & General felt that it would not be able to push on the rental level of the portfolio sustainably in order to justify the price that will have to be paid by the winning bidder. The sales process has been criticised by protest group Guardians of the Arches, which says small businesses will be driven out of their premises under a new owner.
Despite the joint venture not progressing through to the next round Lendlease is understood to still be exploring opportunities to remain involved with the process.
A final party is not expected to be selected for the process, codenamed Project Condor, until towards the end of the summer.
The eventual sale will have to be signed off by Chris Grayling, the secretary of state for transport, who is currently under pressure due to disruption on the UK’s railways as a result of the botched introduction of new timetables.
Rothschild is advising Network Rail.
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