Tritax Big Box invest £59m in new TK Maxx distribution facility

Tritax Big Box REIT plc has completed the land purchase and entered into contracts to provide forward funding for the development of a new regional distribution facility, pre-let in its entirety to TJX UK (TK Maxx).

The investment price is £59m, reflecting a yield of 5.32% (net of land acquisition costs).

The purchased land is located at the junction of the M62 and A1 directly off the J33 roundabout, providing good access to Leeds, Manchester and the ports of Liverpool and Hull.

In addition, the new distribution facility will also benefit from the planned lane expansion on the M62 between West Yorkshire and Manchester, as well as the upgrade of long stretches of the A1 to motorway status by 2017.

The region is quickly establishing itself as a major UK distribution location after attracting giant occupiers such as B&Q, Next, The Range and ASDA.

The new distribution facility will comprise an internal floor area of approximately 635,000 sq ft., with an eaves height of approximately 17 metres, a low site cover of 40% and will accommodate the installation of three mezzanine floors that will create an additional 765,000 sq ft of useable space.

Upon completion, the property will be leased to TK Maxx on a new 20-year lease, subject to five yearly upward only rent reviews indexed to the Retail Price Index, providing a minimum 1% pa rental growth (capped at 3% pa). During the construction phase, Tritax Big Box will receive an income return equivalent to the rent from the developer.

The development is being undertaken by Caddick Developments Limited and guaranteed by Caddick Group. Construction of the main works is expected to commence in September 2015 with practical completion of the construction targeted for January 2017.

The land purchase is expected to be funded by Tritax Big Box from equity proceeds, with senior debt finance to be introduced in the near term.

Colin Godfrey, partner of Tritax, said: “This off market acquisition is a strong addition to our portfolio, further diversifying our tenant mix and increasing the weighted average unexpired lease term to approximately 16.7 years. The property occupies a key logistics location that is achieving strong rental growth. This purchase takes our total pre-let forward funded developments to six assets, including the recently completed initial construction phase of the development let to Rolls-Royce Motor Cars at Bognor, due to deliver, in aggregate, over 3 million sq ft. of new logistics buildings by the beginning of 2017.”

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