Airport operator BAA Ltd. Tuesday said it has sold its 50% stake in the Airport Property Partnership, or APP, to Segro PLC (SGRO.LN) for GBP116 million as part of its strategy to dispose of non-core assets.

The remaining 50% stake in APP, which is focused on airport-related industrial assets in and around major U.K. airports, is owned by clients of Aviva Fund Management Ltd.

Segro, Europe's largest listed industrial landlord, will take on BAA's share of APP's debt and other liabilities of about GBP128 million, resulting in net proceeds for BAA of GBP116 million. The total consideration includes GBP3.7 million in asset management fees and partnership distributions from Jan. 1, 2010, to completion, said BAA, which is a unit of Spain's Grupo Ferrovial SA (FER.MC).

Segro said the acquisition price implies a property valuation of GBP446.6 million on 100% ownership, which excludes indirect investments, and a net equivalent yield of 7.6%.

At the same time, Segro said it's in talks with Aviva Investors to expand the joint venture through the purchase by APP of GBP240 million of complementary assets within Segro's existing portfolio. The two transactions are expected to generate net cash proceeds of approximately GBP60 million for Segro. BAA said it expects the deal to complete in June.

"The opportunity to expand the APP joint venture through the injection of existing Segro assets meets one of the Group's strategic objectives to leverage its property management skills across a broader asset base," said Segro Chief Executive Ian Coull.

He added that the company's priority is to tackle its Brixton portfolio, which it bought last year for GBP109.4 million and which comprises assets located near Heathrow airport.

In 2008, APP sold 33 assets to the Arora Family Trust for GBP309 million and the joint venture now owns 18 industrial warehouses in or near Heathrow, Stansted, Edinburgh and Gatwick airports.

Separately, Segro said in a trading update that it has made encouraging progress despite the challenging conditions in the occupier market across the U.K. and Continental Europe.

With limited new supply coming on stream, the group is recommencing its development program in response to specific occupier demand, with a carefully selected number of pre-let developments.

It said it expects to begin speculative development of a number of small light industrial projects in Continental Europe later in the year, namely Paris, Dusseldorf, Warsaw and Berlin, but CEO Coull said those plans could be derailed by weak economies.

"Our priorities continue to be to stay close to our customers, to fill empty space, to manage our finances and other risks prudently, and to recycle our capital into suitable reinvestment opportunities, particularly pre-let development," Coull said.

By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299; kaveri.niththyananthan@dowjones.com
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