Airport jv airborne with 165 acres

Development fund launched with £800m of property around Heathrow, Gatwick and Stansted A joint venture agreed this week between BAA and Morley Fund Management expects to expand to £1bn as it develops 165 acres of land surrounding Heathrow, Gatwick and Stansted airports. BAA will transfer 3.5m sq ft of existing property as well as the land, in total worth £801m, to the 50/50 jv, in order to fund further UK and overseas development (15 January, p23). Morley, which competed with Hermes for the deal, will invest £225.5m on behalf of life fund clients. BAA will retain a similar equity stake and the fund will raise £350m of non-recourse debt. Asset manager BAA Lynton said a further £200m would be added to the fund’s value in “short order” by building out the imminent phases of BAA’s development pipeline around Heathrow, Gatwick and Stansted and through asset management. Morley’s head of property life funds, Richard Jones, said: “The airport sector has come out the other side of the downturn brought on by September 11 and is experiencing rental and capital growth. The shortage of land around the M25 will also help to underpin demand for buildings around London airports.” He added: “The partnership will be in the market to purchase assets that fit the existing profile of the fund and build out the fund’s development portfolio.” City Place, a 300,000 sq ft office campus at Gatwick airport, will be one of the first developments to be built by the new joint venture. “We will build it out on either a speculative or prelet basis, depending on how demand unfolds,” said BAA Lynton managing director John O’Halloran. The site has consent for another 250,000 sq ft of offices. Airport Property Partnership Some 60% of the property going into the Airport Property Partnership is located around Heathrow, 20% at Gatwick and 12% at Stansted. Cargo warehouses account for 60% by value; offices 22%; and developable land and investments in indirect vehicles make up the balance. Further properties around BAA’s seven UK airports will be added. BAA – which has commitments of £7.5bn to develop its terminal buildings and runways over the next 10 years – plans to use the proceeds from the sell-down of its property to pay down debt. DTZ advised Morley. King Sturge and NM Rothschild represented BAA. JLL acted for Hermes.