The privatisation of railway arches has led to rent hikes and business closures
Running through Hackney and Tower Hamlets is their nineteenth-century backbone of railway arches, which house scores of small businesses now struggling to survive in these times of Covid. But the perilous position of these small businesses - in common with thousands of others the length and breadth of the country - is being compounded by problems of rent hikes from their new landlord, the Arch Company, which has in many cases demanded threefold increases in rent.
Examples of the Arch Co’s villainy abound: ‘I’ve rented this arch for twenty years and never missed a payment. But now, because of Covid, I’ve been unable to trade. I am currently eight months in rent arrears with no funds or income. The landlord has threatened to take me to arbitration if I do not agree a fifty per cent increase. I think I’m screwed’ (comment from an Arch tenant). Another tenant was fed up with these ‘dodgy people’ and had decided to move:
In my row of arches there are two occupied and seven empty. I can afford £18k to £20 max. Yet they’re hounding me for £30k a year and being dishonest about what others are paying to trick me into paying more. Why don’t they fill all the empty arches and charge a fair rent? Also the service charges are high but there’s rubbish everywhere. They have promised refurbishment but done nothing and now they say the contract makes me liable for the leaks in the ceiling.
The Arch Co’s insistence on higher rents and arrears payments serves another purpose: exacting demands that push out existing tenants provide Arch Co with an opportunity to suspend the protection of the 1954 Landlord and Tenant Act, as new tenants can then be signed up new leases with higher rents and insecure tenure. While Transport for London (TFL), the previous owner, had caused serious problems for its railway-arch tenants five years earlier, pressure from tenants had succeeded in winning improvements. Now, in these testing times of Covid, Arch Co’s tenants are striving for the adoption of TFL’s practice of greater flexibility and understanding of tenants’ needs. A union called the Guardians of the Arches is currently combining tenants to defend their livelihoods and prevent them from being picked off one by one. They have come together to organise for fair rents and security, and for the landlord to continue to operate according to the practices of TFL.
So, who is Arch Co? First, it is no small outfit. It is now the UK’s largest small-business landlord. It is jointly owned by two property giants, Blackstone and Telereal Trillium, who came together in 2018 expressly to buy Network Rail’s arches. Privatisation is mainly thought of in terms of the emblematic sell-offs of the gas, electricity and water utilities, or British Telecom, British Airways and public housing: much less attention has been focused on what is perhaps the largest - and certainly the least acknowledged - privatisation, that of huge swathes of once public land and property. (Brett Christophers estimates that approximately two million hectares of publicly owned property in Britain were privatised between 1979 and 2018.1) Blackstone and Telereal Trillium have been among the biggest financial winners from this land grab.
Blackstone is the world’s largest alternative asset manager, meaning it’s one of the biggest property investors in the world, with assets under its management of approximately $545 billion in 2019.2 That same year Reuters reported that the Blackstone Group had raised the largest ever real estate fund of $20.5 billion for global property investment. CEO and co-founder, Steve Schwarzman, honed his skills in mergers and acquisitions at Lehman Brothers before setting up Blackstone in 2008. The year before, in 2007, Schwarzman’s competitive zeal had been noted in the Guardian, which quoted him as saying: ‘I want war, not a series of skirmishes … I always think about what will kill off the other bidder’.3 Being a devotee of domination seems to have paid off. According to Reuters, ‘Schwarzman pocketed at least $610.5 million in 2020 from dividends and compensation, more than any other private equity executive and up 20% from last year despite the impact of the Covid-19 pandemic’.4 Schwarzman is unashamed of this, and unguarded in his opportunism. He is a friend of Donald Trump, and was one of his most loyal allies, serving as chair of Trump’s Strategic and Policy Forum: ‘I supported President Trump and the strong economic path he built’.5 Although many of Trump’s top aides had ‘undisguised contempt for some establishment business groups’, this was not the case for Schwarzman: ‘He has been a close confidant of Trump’s throughout his presidency’. But on Trump’s demise he was quick to announce that he was ‘ready to help President-elect Biden and his team as they confront the significant challenges of rebuilding our post-Covid economy’. (It might be added that, had it not been for Blackstone’s loyal support, some of those post-Covid challenges might have been easier to overcome.)
Telereal Trillium was formed in 2001 for the purpose of acquiring the property of British Telecom. It grew rapidly after its precursor, Telereal, bought the one and a half million square-metre property portfolio of the Department for Work and Pensions in 1998. Amongst its web of property interests is the management of Job Centres, the property of the DVLA and the Royal Mail. In 2009 it was taken over by the William Pears property group, owned by the Pears family and headed by brothers Mark, Trevor and David. All three appear annually in the Sunday Times Rich List, and in one year, 2018-19, their main company’s assets rose by £45.6 million to reach £1.046 billion. It is, however, very likely that their wealth is far greater than this. When articles do occasionally appear about the family they are frequently referred to as secretive, shadowy, mysterious and publicity-shy. In a rare Daily Telegraph article in 2011 - ‘to set the record straight’ - Mark Pears (who wouldn’t have his picture taken) said: ‘We’ve got nothing to hide, but we are a private company’. Some would say extremely private indeed - especially the supporters of the Syndikat bar-collective in Neukölln, Berlin, who were evicted from the premises in 2020 after it had been acquired by the group’s company Firman Properties, hoping to cash in on the gentrification of Berlin.6 The Syndikat only discovered the identity of their landlord after lengthy investigations: Pears Global was concealed behind scores of shell companies registered in Luxembourg for tax avoidance purposes. Data disclosures from the Panama Papers showed that in 2017 alone Pears had raked in $53 million (€44.75 million) in Berlin rents and sales.
Telereal Trillium has certainly benefitted from the Conservatives’ privatisation policies, and when its connections are examined this seems unsurprising. Since 2009 its advisor has been Lord Griffiths, who was head of the Prime Minister’s Policy Unit from 1985 to 1990 and a chief architect of Margaret Thatcher’s privatisation and deregulation programmes. In 2009, as Vice-Chairman of Goldman Sachs International, Griffiths courted controversy when he defended the bank’s bonuses, arguing that the general public should ‘tolerate the inequality as a way to achieve greater prosperity for all’.7 In 2019, along with other Goldman Sachs executives, he was criminally charged with defrauding the Malaysian government for his alleged role in the 1MDB scandal and could have been sentenced to up to ten years in jail. However, since a £3bn out of court settlement with the Malaysian government the bank has protected itself from further charges; but it is still not out of the woods and faces possible charges and fines in the US 8. For someone like Griffith who has written and lectured extensively about the relationship of the Christian faith to politics and business this must be a rather embarrassing situation.
The sale to Arch Co of a 150-year lease on Network Rail’s railway arches, for nearly £1.5 billion, was the achievement of Chris Grayling when he was transport minister. Shortly before Grayling’s time in government ended, following the £33 million lost on the ferry boat debacle, Labour totted up the cost of his blunders to taxpayers as over £2.7 billion. It is not clear whether this tally included the Network Rail sale, but there’s no doubt that it represented a huge loss of rental income for Network Rail - estimated as between £80m and potentially up to £160m; and it has also deprived many communities of secure and affordable premises.
When the Arch Co took over from Network Rail, rents were already running high. They had been hiked up by as much as 400 per cent to inflate the value of the portfolio before the Tories’ fire sale. In Hackney, Mayor Philip Glanville backed the Guardians of the Arches and helped broker a tenant’s charter with the company. It now proudly vaunts its ‘open and honest’ ‘tenants first’ approach, but tenants claim that the charter is being cynically flouted. The collaborative approach that tenants and Hackney council wanted seems a remote fiction. Rents are being aggressively forced up and tenants forced out. Given its parentage, Arch Co’s comportment should come as no surprise. We need to resist the diversity and character of our community being malevolently reshaped for financial gain by property companies that have no productive role in the economy. Tenants deserve fair rents and security.
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