The transaction consists of £216 million in cash and a £149 million disposal of assets to Aviva. APP is valued at £1.1 billion.
APP comprises of 21 direct property assets totalling 350,000 square metres, with 87 percent located at London’s Heathrow Airport. The portfolio currently runs a vacancy rate of 7.5 percent and an average lease length of 11 years.
The portfolio generated £42 million of annualised rent as of December 2016, with a further £6 million expected after expiry of rent-free periods.
Segro, which first acquired its stake in APP in 2010, funded the cash element of the deal through a £573 million rights issue. The remainder will be invested in the company’s development pipeline.
The assets that Aviva has acquired consist of four London industrial properties and a Portsmouth manufacturing facility, totalling 70,000 square metres and generating £6 million of annualised passing rent.
According to Segro, the acquisition is in line with building scale in core markets and taking full control of developments to improve operational flexibility.
David Sleath CEO of Segro, 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.”
Ed Casal, CEO of 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.
He added: “We see real upside in the assets we have acquired through this transaction, and are confident they will contribute strong performance for our clients.”