Segro Regulatory News (SGRO)

12 June 2015

SEGRO AND M&G REAL ESTATE TO DISSOLVE HEATHROW BIG BOX JOINT VENTURE

SEGRO plc ('SEGRO' or 'the Group') today announces that it has exchanged contracts with M&G Real Estate to dissolve The Heathrow Big Box Industrial and Distribution Fund ('HBB') ahead of its termination date in June 2016.

HBB was formed as a 50/50 joint venture between Brixton PLC and M&G Real Estate in 2004 to own two assets in the vicinity of Heathrow Airport: Axis Park and Heathrow Corporate Park. SEGRO acquired the interest as part of its takeover of Brixton PLC in 2009.

Details of the transaction

Under the terms of today's agreement, SEGRO will take full ownership of Axis Park which is valued at £144.9 million, while M&G Real Estate will take full ownership of Heathrow Corporate Park at a value of £118.7 million. In addition, SEGRO will sell HCH House in Poyle to M&G Real Estate for £15.0 million. All three assets will be sold at prices in line with December 2014 book values. The transaction is expected to complete before the end of June 2015.

Benefits of the transaction

· In line with SEGRO's strategy: The acquisition is aligned with SEGRO's strategy of expanding its wholly-owned presence in its target UK markets and of reducing the number of non-strategic joint ventures in the Group.

· SEGRO already manages Axis Park: SEGRO is very familiar with Axis Park through its current asset management role.

· Simplicity of management: Full ownership of Axis Park improves SEGRO's flexibility with regard to the asset, with minimal impact on its financial and operating metrics.

Commenting on the transaction, SEGRO's Chief Investment Officer, Phil Redding, said:

"Axis Park is in a prime position both for serving Heathrow Airport and for distribution to London and South-East England and this transaction allows us to increase our wholly-owned exposure to the attractive Heathrow market. We know the Park well and, with occupier demand for urban distribution space improving and supply conditions remaining tight, there are opportunities to realise further value from this asset."

Asset details

Axis Parkcomprises 60,942 sq m of warehouse space across six units next to junction 5 of the M4 and junction 15 of the M25 motorways, approximately five miles north-west of Heathrow Airport. Royal Mail Group is the largest tenant, occupying approximately 42,000 sq m of the Estate. The vacancy rate at 31 December 2014 was 5 per cent, reflecting a single empty unit, and the weighted average lease length to earliest of break or expiry is 5.8 years. The property generates annualised net rent of £7.5 million and the purchase price of £144.9 million reflects an EPRA net initial yield of 5.0 per cent and a true equivalent yield of 5.4 per cent at 31 December 2014.

Heathrow Corporate Park consists of approximately 50,300 sq m of warehouse space across 13 units, around two miles from Heathrow Airport. The asset is fully let and the average lease length to earliest of break or expiry is 4.6 years. The property generates annualised net rent of £6.9 million and the sale price of £118.7 million reflects an EPRA net initial yield of 5.5 per cent and a true equivalent yield of 5.4 per cent at 31 December 2014.

HCH House is a 5,700 sq m building let to Heathrow Cargo Handling until November 2021. The property generates annualised net rent of £0.9 million and the sale price of £15.0 million reflects an EPRA net initial yield of 5.6 per cent and a true equivalent yield of 5.5 per cent at 31 December 2014.

ENDS

For further information, please contact:

SEGRO plc

Justin Read (Group Finance Director)

Tel: +44 207 451 9110 / justin.read@segro.com 

Lizzie Humphreys (External Communications Manager)

Tel: +44 (0) 20 7451 9129 / lizzie.humphreys@segro.com

FTI Consulting

Richard Sunderland / Claire Turvey

Tel: +44 (0) 20 3727 1000

About SEGRO:

SEGRO is a UK Real Estate Investment Trust (REIT), and a leading owner, asset manager and developer of modern warehousing and light industrial property. It owns or manages 5.7 million square metres of space in £6.0 billion of assets (at 31 December 2014, SEGRO's share of which totals £4.8 billion), serving 1,200 customers from a wide range of industry sectors. Its properties are located around major conurbations and at key transportation hubs across eight European countries, principally in the UK, France, Germany and Poland.

For further information see www.SEGRO.com/investors.