SEGRO property assets around Heathrow
Industrial warehouse developer SEGRO has paid £365m to acquire 100% control of Airport Property Partnership (APP), whose "jewels in the crown" assets include the majority of Heathrow Airport’s airside cargo facilities.
SEGRO has bought the 50% interest in the APP joint venture that it did not already own from partner Aviva Investors in a £216m cash transaction and the disposal of £149m in assets to Aviva Investors.
APP has a £1.1bn portfolio of airside and landside assets at and around London’s major airports, of which 87% (by value) are located at Heathrow.
SEGRO acquired its 50% stake in APP in June 2010 and acted as asset manager for the joint venture, with Aviva Investors acting as fund manager.
The property firm has also announced the launch of a one for five rights issue to raise £573m in proceeds (£556m net of expenses) for SEGRO.
In a statement on the assets swoop, SEGRO concluded “that it would be better to own it outright rather than hold it in a joint venture in order to unlock more value from APP’s unique assets both in the near and longer term. It offers several opportunities to add value in the future”.
These opportunities include, said SEGRO: “In the longer term from the development and redevelopment potential at a number of sites and the Heathrow Cargo Centre, in particular.”
Commenting on the acquisition, SEGRO’s chief executive, David Sleath, said: “The strong working relationship between the teams at SEGRO and Aviva Investors has enabled the APP portfolio to deliver excellent performance over the last five years and we appreciate Aviva’s contribution to making APP such a successful partnership.
“We believe now is the right time to take full control and ownership over APP in which we see a number of opportunities to realise further value from its unique portfolio in the short and long term.
“We look forward to pursuing our development plans, taking advantage of strong occupier demand for facilities around Heathrow from customers needing rapid access both to the airport and to Central London.
“Our Heathrow portfolio is one of the jewels in our crown and we are delighted to be able to add scale in this supply-constrained market.”
SEGRO said of the future development potential on or around Heathrow: “There is one development underway, within the North Feltham Trading Estate, on which 7,300 sq m of new urban warehouse properties are being constructed, but there are also a number of other sites suitable for either near-term in-fill developments or longer-term redevelopment.
“The most significant of the longer-term opportunities is the Heathrow Cargo Centre which was built in the 1960s and requires redevelopment to cater for the current needs of cargo handlers and to expand its capacity to meet occupier demand for space.”
On future expansion of Heathrow Airport, which last year received permission to build a third runway, subject to planning approval, SEGRO added: “The UK government’s decision to support a third runway at Heathrow significantly increases the likelihood of expansion in the medium to long-term which would enable airlines to serve an increased number of international and domestic markets.
“This should, in turn, increase the volume of cargo passing through Heathrow Airport and, therefore, the demand from airlines, airport and airline service companies, cargo handlers and other users of industrial property for the limited space in and around the airport.”
Ed Casal, chief executive, Aviva Investors Real Estate, said: “This is a very positive deal for our clients, and in line with our broader real estate strategy to have direct control of assets and focus on core markets where we are able to drive performance through expert local market knowledge.
“We see real upside in the assets we have acquired through this transaction, and are confident they will contribute strong performance for our clients.”
A Heathrow Airport spokesperson said: “We look forward to working with SEGRO and all our partners to provide an efficient and predictable cargo service and support the growth of British global trade.”