Network Rail set to be handed a property bonanza

Network Rail, the company poised to take over Railtrack plc, has asked the Government to lift restrictions on the amount of money it can generate from its vast portfolio of property and land.

If approved, the move could lead to a building boom around Britain's railway tracks and stations to help pay for improvements to the creaking network.

When Network Rail takes control of the infrastructure later this year it will inherit the regulations that governed Railtrack. This means that over a five-year period, once it has generated £1bn from property, some 25 per cent of excess revenues must go to the Treasury.

Policed by the Office of the Rail Regulator (ORR), the so-called "clawback" rules were established to prevent property revenues being passed to private shareholders.

But in informal meetings with the ORR and the Treasury, Network Rail has argued that because it is a "not for dividend" company, surplus cash from property could be reinvested in the network.

However, speaking to The Independent on Sunday, the rail regulator Tom Winsor warned that any changes to the rules would have to benefit both the network and train operators.

"If the clawback arrangements were abandoned then this would be a significant departure from the existing arrangements," he said.

Mr Winsor argued that instead of creating a greater incentive to develop, allowing Network Rail to keep all its property profits may reduce its appetite. "If it keeps 75 per cent of property revenues then [Network Rail] has to do more schemes to meet its targets."

Meanwhile, Railtrack Group, the part of the company that is not in administration, has appointed surveying firm Jones Lang LaSalle to sell its property division as a going concern. The net value of its assets is £24m.

On top of this, Railtrack Group owns a portfolio of property units under railway arches, which is worth around £22m. It has received interest from quoted property group Workspace Group and from Railtrack plc, the part of the business that is in administration, which also owns a portfolio of arches, within a business called Spacia.