Jim Armitage: Network Rail property bidders start to get cold feet over awful publicity

An increasingly well organised group of small businesses based in railway arches, from MOT centres to hairdressers, have been campaigning against Network Rail’s plans to sell the properties off.

The state-owned rail company is auctioning 5476 arches across the UK for an expected £1.5 billion.

It won’t surprise anyone reading this on a commuter train that it has handled the process badly, warning some tenants they’ll evict them if they don’t pay fivefold increases in their rent. That has triggered inevitable claims it is trying to strong-arm tenants paying lower rents into leaving to make the portfolio look more attractive to bidders.

Tenants now fear any buyer paying top dollar for the sites will be looking to whack up rents and bring in the likes of Starbucks to replace SMEs

It’s not a good look. Many tenants tell of having invested significant sums turning the premises from dingy druggies’ hangouts into vibrant, popular enterprises, only now to be repaid with voracious demands for more money. The publicity has been predictably awful.

Now, it seems some potential bidders are getting cold feet.

And so they should.

Bidders who got through the last round include Li Ka Shing’s CK Asset Holdings, Guy Hands’ Terra Firma and former Sunderland football club owner Ellis Short’s Kildare Partners.

However, others are dropping out.

Legal & General Capital walked from the last round after being concerned it would not be able to push up the rents enough to justify the price.

Today, one of the surviving front-runners — a consortium of Goldman Sachs and Wellcome Trust — has also quit.

Wellcome Trust — a charity, lest we forget — won’t discuss why, but you have to assume potential reputational damage played its part.

For all bidders, this is a difficult deal to do. The arches are spread all over the country, in varying states of repair, yet the auction process is on a very tight schedule.

I wonder if it wouldn’t have been better for Network Rail either to sell the estate in chunks or go for a lower sale price in return for stringent assurances that tenants would be well treated.

After all, these are the taxpayers’ assets, and we all want our local SMEs to thrive.

Cheap TalkTalk is finding its groove

Don’t get too carried away by TalkTalk’s 5% share price jump on today’s trading figures. The stock is so bombed out, with City expectations so low, that it couldn’t go much lower.

That said, there are causes for hope in today’s numbers. The policy of being the Ryanair of broadband seems to be paying off, with 80,000 new customers in the quarter.

Revenues per user fell, but that was an inevitable part of the plan. As premium players like Sky and BT fight tooth and nail at the top end of the market, TalkTalk is differentiating itself nicely.

Early days yet, but the urgent turnaround plan is making sense.