Network Rail: Driving investment in rail upgrades…

Under pressure to upgrade its infrastructure to deliver better service to passengers around the UK, Network Rail needed to raise an extra £1.8 billion for the completion of the Rail Upgrade Plan. The programme is the biggest investment programme in the railways since the Victorian times and will deliver passengers and taxpayers essential improvements without being an extra cost burden. They turned to us to get the critical project off the ground and get it delivered. We helped them prepare to launch a high-profile sale of its non-core commercial properties and the business unit that operated them. We then led the complex separation of the business unit that operated the assets. For Network Rail to receive the sale proceeds, the transformation had to be delivered before the sale completed. Our diverse team of experts gave Network Rail the support they needed to meet the pressured deadline.

Key successes

Achieving £1.5 billion in sale proceeds, £300 million more than projected to support the Rail Upgrade Plan
Launching and completing the sale and achieving full business separation in just 15 months
Prioritising and securing rail safety, with legal protection for continued access to properties
Forming a new, stand-alone unit that could be run independently by an external buyer

Preparing for transformation

Network Rail’s Commercial Estate comprises more than 5,000 individual assets, primarily rental spaces under railway arches, which play host to businesses ranging from car mechanics to high-end restaurants. Its sale to Telereal Trillium and Blackstone Property Partners – dubbed Project Condor – was projected to raise £1.2 billion, representing the largest single potential contribution to meeting the funding shortfall. While Network Rail has a skilled and experienced in-house property team, it lacked the specific expertise to deliver a transformation project of this scale and potential risk.

By embedding our experts in project and programme management and business change on the ground at Network Rail, we gained a deep understanding of the business, allowing a highly practical, flexible and integrated approach to its work. Getting ready to launch a transaction to global investors The first phase of the project involved working with government and Network Rail leadership to build the business case for the sale and, in parallel, to complete the wider sales readiness activities.

Our team provided the overarching project management support to this including:

Business case finalisation and approvals - we helped coordinate multiple areas of work in response to reviews on the business case then managed the substantial formal approvals process across three Government Departments and multiple ministers – this was needed to launch the sale.
Wider sales readiness activities, including preparing the data room that would support the sale to potential buyers.

We provided the overarching project management of this complex set of activities – involving close collaboration with other professional advisers and a broad range of multi-disciplinary Network Rail staff across the county. The safe operation of the railway was our focus, so our team individually scrutinised each asset from multiple perspectives to ensure the required access to inspect, maintain and repair would be preserved.

Leading a high-profile separation

Once the business case received Government approval to launch, the marketing phase began, attracting interest from over 100 high-profile global investors. We then supported the formal sales process by leading the ‘separation’ phase of the project, in which Commercial Estate and its 100-plus employees as well as the supporting IT systems and data, business processes and core supplier contracts would be transferred into a standalone organisation. We ensured this standalone organisation wasn’t reliant on Network Rail’s back office support, again overseeing the work of a wide range of Network Rail staff and suppliers.

Until this could be achieved, the sale could not complete and Network Rail wouldn’t get the proceeds of the sale. This presented a significant challenge, which saw our team leading the work to articulate the scope and demonstrate a robust approach for the entire separation programme with the five shortlisted bidders, any one of which could ultimately have been the buyer. Our robust approach to separation assured bidders that they would be able to operate the business effectively as soon as the sale is complete. And this proved to deliver confidence to bidders. The final sale price achieved was just under £1.5 billion – £300 million more than projected.

Delivering for the future of the network

The proceeds generated by the deal mean Network Rail can meet its investment commitments, with a tangible long-term benefit to passengers by transforming millions of passengers’ journeys and rejuvenating transport hubs across the UK. And the deal was executed in a manner that safeguards the continued safe operation of the railway. Combining its appreciation of these big picture priorities with a flexible, detailed-oriented approach, we coordinated multiple strands of activity and disparate teams of experts within, and beyond Network Rail, to deliver an end result that exceeded Network Rail’s expectations in every respect.