Morning briefing: Tritax Big Box signs up for second data centre development

Tritax Big Box REIT (BBOX) has entered into a development management agreement with fund manager Tritax to deliver a second data centre of 125MW capacity in Chelmsford, Essex. The agreement, which emulates the existing arrangement at Manor Farm, Heathrow, which gained government planning approval last week, will see Tritax paid £3.3m for work it has done so far. It will also receive a development management fee of up to 5% of cost dependent upon receiving planning consent; and 17.5% of development profits. Tritax has agreed to plough half of its profits into buying BBOX shares.

QuotedData’s senior analyst Matthew Read said: “This is another important step in Tritax Big Box’s move to turn parts of its landbank into a data centre opportunity. Chelmsford is now the second scheme in the pipeline, following Manor Farm, Heathrow, and the targeted 10–11% yield on cost gives a clear indication of why the company is looking beyond traditional logistics development where appropriate.

“The attraction for BBOX is obvious. Power-enabled sites suitable for large-scale data centres are scarce, demand is strong and, if successfully delivered and let, these schemes could create value well in excess of what might be achievable from conventional big-box logistics. However, this remains a development story, with planning, power, construction and letting risk still to be navigated. Nevertheless, if Chelmsford and Heathrow can be delivered successfully, data centres could become a meaningful additional growth leg for the business.”

Stay a step ahead. Our daily newsletter brings you the latest on investment trusts and active ETFs. Subscribe here.