BAA seeks investors for pounds 200m hotel partnership

BAA, the country's biggest airports operator, has put out a call for a consortium of investors to take a stake in its airport hotels.

The company plans to create an "Airport Hotels Partnership" through its property development division, BAA Lynton, which would be valued at around pounds 200m.

Earlier this year BAA mooted plans to float off its hotels division, and the latest move seems to be a cheaper way of obtaining capital investment in the project, City analysts said.

BAA owns the Hilton hotels at Gatwick, Heathrow and Stansted, Le Meridien and Travel Inn at Gatwick, the Renaissance hotel at Heathrow and Gatwick and Stakis at Edinburgh. BAA said the partnership would have an initial life of 10 years and a minimum of five members.

Under the proposal, BAA would retain a 25 per cent stake and management control. "The arrangement offers BAA the opportunity to realise the value which it has added to these assets, with minimum risk, whilst still maintaining a management role," said Andrew Jurenko, managing director of BAA Lynton.

One possible investor in the project is Norwich Union ,which is currently building up a pounds 150m fund to invest in the hotel industry.

Under the terms of the proposal, whoever joins BAA in the venture will have to enter into a forward purchase commitment for an pounds 80m extension to the Heathrow Hilton, which will add an additional 245 beds. It is also considering adding other hotels to the portfolio.

BAA Lynton will be the sole developer of any new extension to the partnership hotels and will continue to develop further hotel sites at BAA airports - which it could later sell to the partnership. The company said these could include a new property at Heathrow's Hatton Cross and one at the proposed Terminal 5.

BAA's new chief executive, Mike Hodgkinson, takes over from Sir John Egan on 1 October. Mr Hodgkinson has been responsible for the company's core domestic and international airports business for seven years.