Targeting exceptional returns
from 147 MW data centre development opportunity
Delivering potential 9.3%
yield-on-cost and significant development profits to
shareholders
Targeting delivery of 107MW
Phase 1 data centre in H2 2027
Expected to be one of the
largest data centres in the UK on completion
Additional c.1GW pipeline of
data centre opportunities across the UK
21 January 2025, Tritax Big Box REIT
plc ("Tritax Big Box" or "the Company") has purchased a 74-acre
site at Heathrow, London within the Slough Availability Zone, a key
FLAP-D prime EMEA data centre location (the "Manor Farm
site").
Simultaneously, the Company has
acquired a 50% share in a joint venture ("the JV") with a leading
European renewable and low carbon energy power generator ("the JV
Partner"). The JV enables accelerated power delivery to the Manor
Farm site using pre-existing grid connection agreements. The
acquisition of an interest in the JV constitutes a related party
transaction for the purposes of the UK Listing Rules, further
details of which are set out below.
Subject to receiving planning
consent, the acquisition of the land and stake in the JV
facilitates an accelerated timeline to the potential delivery of up
to 147 Megawatts ("MW") of power to support the development of a
major data centre scheme at Manor Farm.
In addition, Tritax Management LLP
("Tritax Management" or "the Manager"), working with the JV
partner, has created a further pipeline of potential data centre
opportunities in key locations within the UK utilising power
availability of c.1 gigawatt ("GW").
A
prime location for a latest generation data centre of significant
scale
- The 74-acre Manor Farm
site, located within the Slough Availability Zone near Heathrow
Airport, is adjacent to key data cable routes providing high levels
of connectivity and making it attractive to hyperscaler and
co-location operators.
- The site has the
potential for an initial data centre of 107 MW ("Phase 1") on land
currently used for open industrial storage, targeting commencement
of construction in H1 2026.
- The site also offers the
potential for further expansion with a possible second phase data
centre ("Phase 2") of 40 MW (both of which are subject to planning)
bringing the site's total potential to 147 MW.
- Phase 1 is expected to
be one of the most advanced data centres in Europe totalling
448,000 sq ft of data halls across three floors.
- The JV provides the site
with grid connections to two independent transmission substations
providing exceptional resilience in addition to co-located utility
scale battery storage.
Targeting exceptional returns and accelerated timeline with
9.3% yield on cost[1] and significant development
profits
- The Phase 1 data centre
will be developed on a "powered shell" basis, conditional on the
receipt of planning consent and securing a pre-let:
o Indicative capex costs of approximately £365 million are
inclusive of land, construction, JV stake acquisition, transaction
costs and fees, and the Company's 50% share of the power related
infrastructure costs.
o The
Company expects to fund this project through a combination of
existing financial resources and its ongoing capital recycling
programme.
o The
Company believes the "powered shell" model provides attractive
returns without taking on operational risk and draws upon its
strong track record in delivering large scale logistics buildings
let to sophisticated and demanding clients.
- Based upon expected
rental levels[2], the anticipated yield on cost
from Phase 1 is approximately 9.3%, complementing the returns
within our logistics development pipeline which typically targets a
6-8% range, and is particularly attractive given the prime London
location, the scale of data centre and the accelerated timeline for
delivery.
- With prime data centre
assets currently commanding a stabilised investment yield of
5.0-5.5% the scheme is expected to deliver significant development
profit to the Company's shareholders, in addition to generating an
attractive income stream and diversifying the Company's range of
clients.
- A planning application
for the development of Phase 1 has been submitted, and a
determination is expected in H2 2025. Assuming a pre-let is
achieved ahead of this, construction of Phase 1 would commence in
H1 2026 with practical completion and income recognition expected
in H2 2027.
Tritax Management has created a potential data centre pipeline
of up to 1 GW
- Acute scarcity of
deliverable grid connections has restricted the development of data
centres in this prime location.
- The Manager, having
identified the site's potential for a data centre, has secured a JV
partner enabling contracted and accelerated power delivery to Phase
1 of the Manor Farm site in H2 2027, using the JV partner's
pre-existing grid connection agreements.
- Through this approach,
the Manager has unlocked power faster than applying directly to the
grid where power could have taken more than 10 years to
secure.
- The JV holds the rights
to the Manor Farm grid connections and will own the power
infrastructure, with the JV Partner responsible for the delivery of
power and the associated infrastructure. Meanwhile the Company can
utilise 100% of the power and is responsible for delivering the
land and real estate components (which sit outside the JV and will
be owned outright by the Company).
- Based upon independent
valuations, given the intrinsic value of the JV attached to the
land purchased, the Company expects to benefit from an initial
value increase above the cost of investment in the site.
- In a similar manner to
land options used within the Company's development pipeline, the
Manager has built a pipeline of additional grid connection
agreements across the UK which could provide c.1 GW of power for
further data centre opportunities, beyond those at Manor Farm, and
are expected to be deliverable from 2028 onwards.
An
attractive market at a key inflection point, underpinned by
long-term demand drivers and scarcity of powered
land
- Global demand for data
centres, driven by growth in cloud computing and higher AI
adoption, is expected to rise between 19-22% annually from 2023 to
2030[3]
- London's global standing
and connectivity has made it Europe's primary data centre market
and one of the largest globally.
- Data centre providers
are struggling to keep pace with strong demand for capacity. The
market is constrained by significant barriers to new supply due to
a lack of suitably located land with access to appropriate power
within an acceptable timeframe.
- The UK Government has
recently classified data centres as critical national
infrastructure, emphasising their importance to the UK
economy.
Contractual arrangements
The land at Manor Farm is being
acquired from Airport Industrial Property Unit Trust[4] ("AIPUT"). The JV stake is being acquired from
Tritax Management. All return related figures in this announcement
are presented net of the following consideration and fees payable
to AIPUT and Tritax Management as outlined below:
- AIPUT will
receive:
o An
initial £70 million consideration for the land at the Manor Farm
site, based on a logistics underwrite; and
o A
further consideration of 21% of the Phase 1 development
profits[5], contingent upon full delivery
of a practically complete and let data centre.
- Tritax Management, which
has made significant investments in its power capabilities,
including establishing a dedicated power team who have been
instrumental in originating the data centre opportunity for the
Company, will receive:
o £6.1
million in consideration for its 50% ownership of the JV, including
a first right of refusal for the Company on the Manager's data
centre pipeline;
o A
development management fee, in line with market terms, of up to 5%
of the development cost[6] of the scheme,
contingent upon receiving planning consent; and
o A
profit share[7] of 17.5% of the total Phase 1
development profits, contingent upon full delivery of a practically
completed and let data centre, of which 50% will be applied to the
subscription or acquisition of shares in the Company[8].
- In connection with these
arrangements, the Company has entered into a development management
agreement with Tritax Management pursuant to which Tritax
Management has been appointed to provide development management and
technical services, including pursuing planning, overseeing
construction, pre-letting services, technical electricity expertise
and overseeing the technical aspects of the Company's role in the
JV and all power related elements.
- Tritax Management is a
related party of the Company pursuant to UKLR 11.5.3R. The
development management fee and profit share payments outlined above
to Tritax Management are deemed to be relevant related party
transactions under UKLR 11.5.4R.
- The Board considers that
the agreement regarding the development management fee and profit
share payment is fair and reasonable as far as the shareholders of
the Company are concerned and the Directors have been so advised by
Jefferies International Limited in its capacity as
sponsor.
Aubrey Adams, Chairman of Tritax Big Box,
commented
"This is a decisive and
exciting first step for the Company in the very attractive data
centre market which the Manager has unlocked with its power and
real estate capabilities. This gives the Company a considerable
competitive advantage in capturing the growing demand for data
centre infrastructure. The combination of Manor Farm's prime London
location and accelerated access to critical grid connection
agreements creates the opportunity to develop quickly one of the
UK's largest data centres and deliver exceptional returns for our
shareholders.
"Over the past four years, the
Manager has independently developed and invested in its power
capabilities, securing a joint venture arrangement with one of
Europe's largest major renewable and low-carbon energy generators
which the Company is now acquiring at Manor Farm. This provides
accelerated access to power in this prime data centre location,
where a lack of power has significantly restricted the development
of these nationally critical infrastructure projects. Having taken
extensive and independent professional advice, the Board of Tritax
Big Box has successfully negotiated preferential access and terms
for this opportunity, which generates exceptional returns and
complements our logistics development pipeline. The Board has also
negotiated a right of first refusal with the Manager for all future
data centre opportunities with up to c.1 GW of power
capacity."
Investor call
A Company presentation for analysts
and investors will take place via a webcast with live Q&A at
8.00am (GMT) today and can be viewed at: https://stream.brrmedia.co.uk/broadcast/6777d05d139c6b2fd9c4b3e4.
If you would like to ask a question
verbally rather than through the webcast viewer, please join the
presentation conference call:
UK: +44 (0) 33 0551 0200
USA: +1 786 697 3501
Password: Tritax Company
Announcement
For
further information, please contact:
Tritax Group
Colin Godfrey,
CEO
+44 (0) 20 8051 5060
Frankie Whitehead,
CFO
bigboxir@tritax.co.uk
Ian Brown, Head of Corporate Strategy & Investor
Relations
Kekst CNC
Tom Climie/Guy Bates
+44 (0) 77 601 60 248
+44 (0) 75
810 56 415
Email: tritax@kekstcnc.com
The Company's LEI is:
213800L6X88MIYPVR714
NOTES:
Tritax Big Box REIT plc (ticker:
BBOX) is the largest listed investor in high-quality logistics
warehouse assets and controls the largest logistics-focused land
platform in the UK. Tritax Big Box is committed to delivering
attractive and sustainable returns for shareholders by investing in
and actively managing existing built investments and land suitable
for logistics development. The Company focuses on well-located,
modern logistics assets, typically let to institutional-grade
tenants on long-term leases with upward-only rent reviews and
geographic and tenant diversification throughout the UK.
The Company is a real estate
investment trust to which Part 12 of the UK Corporation Tax Act
2010 applies, is listed on the Official List of the UK Financial
Conduct Authority and is a constituent of the FTSE 250, FTSE
EPRA/NAREIT and MSCI indices.
Further information on Tritax Big
Box REIT is available at www.tritaxbigbox.co.uk
