Segro is taking full control of the Airport Property Partnership (APP) from joint venture partner Aviva Investors.
The UK real estate investment trust (REIT) is paying Aviva Investors £365m (€418m) for the remaining 50% stake in APP, a portfolio of property assets near London’s major airports.
The deal has been funded by Segro through a £573m rights issue, which the listed company is also using for its development pipeline.
Segro, which had held half of APP since 2010, said the deal is part of its strategy to build scale in its core markets and that having full control would improve operational flexibility and future decision-making.
Segro’s chief executive David Sleath said: “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.”
Around 87% of the £1.1bn portfolio, which generates £42m in annual rent with 7.5% vacancy, is near Heathrow.
“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,” Sleath said.
“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.”
As well as £216m in cash, Segro said it is giving Aviva Investors four London assets and a Portsmouth manufacturing facility worth a total £149m. The five assets covering 70,000sqm generate £6m in annual rent.
Ed Casal, chief executive for real estate at Aviva Investors, said: “We see real upside in the assets we have acquired through this transaction, and are confident they will contribute strong performance for our clients.”
Segro took a 50% stake in APP in June 2010 and acted as asset manager for the joint venture, with Aviva Investors as fund manager.
Casal 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.”
Segro raised £325m via a placing in September last year.
At the time, Sleath said it was “too early to assess the longer term impact of the UK vote to leave the EU”.
Speaking to IPE Real Estate last month, Segro chief investment officer Phil Redding said: “The picture over the past few years has been really good.”
Redding pointed to strong investor demand for good-quality warehousing. “Market fundamentals remain very strong, yields have fallen and the amount of investors targeting the UK remains really high,” he said. “It’s a favourable backdrop.”
Read more on the logistics sector and Segro here.
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