The Arch Company, the joint venture between Telereal Trillium and Blackstone Group, posted a £429.5 million loss due to a £466.6 million valuation writedown, accounts filed earlier this month show.
The loss for the year ended 31 March 2023 compares with a £710.3 million profit a year earlier, which was lifted by a £686.1 million valuation boost, according to the accounts. The portfolio of properties, mostly under railway arches across the UK previously owned by the government, is now worth £2 billion.
Revenues increased 9.5% to £118.9 million from £108.6 million a year earlier driven by higher rental income, service charges and other property related income. Operating costs fell to £58 million from £63.7 million. The operating profit before the write-down increased to £61 million from £44.9 million.
The Arch Company has £856.3 million of secured borrowings, including £700 million of debt fixed at 2.457% until 15 November 2031 and a £156.3 million floating loan, priced at LIBOR (the London Interbank Offered Rate) plus 160 basis points margin, which matures in November 2024. The Arch Company said it is confident that the loan can be refinanced with new or existing lenders before it matures. The accounts were prepared on a going-concern basis. The auditors, however, warned that the refinancing of the loan presents a material uncertainty, which “may cast significant doubt on the group’s and company’s ability to continue as a going concern”.
Rent collections improved during the year, hitting a collection rate of 91%, but still below pre-pandemic levels of 98%. Overall occupancy decreased slightly. Bad debt provision rose to £22.7 million from £18.4 million a year earlier. It covers historical and COVID rent arrears.
The Arch Company signed 556,000 square feet of new lettings, down from 635,000 square feet in 2022 with a passing rent of £7.8 million compared with £9.9 million in 2022.
“However, we have continued to see resilience in the customer base with quarter-on-quarter collection rate improvements and recovery of significant sums of historic arrears that accrued during the pandemic,” The Arch Company said in its accounts.
Telereal Trillium and Blackstone bought the portfolio of 5,200 properties in 2019 for £1.46 billion from Network Rail.