Tritax Big Box agrees to buy £49m Royal Mail site from LondonMetric

Tritax Big Box has exchanged contracts with LondonMetric to acquire a national distribution centre on Danes Way at the Daventry International Rail Freight Terminal in Northamptonshire, currently let to Royal Mail Group, the two firms announced on Monday.

The total consideration was £48.82m excluding purchaser's costs, both FTSE 250 companies confirmed, which reflected a net initial yield of 5.0%.

Tritax said the purchase was being funded from equity.

“Purpose-built in 2003, this modern, high specification parcel delivery hub with a 24/7 on site operation provides a centrally located and adaptable national distribution centre to all Royal Mail parcel hubs across the UK,” the Tritax board said in its statement.

“The cross-docked property has a gross internal area of 272,603 sq ft, an eaves height of between 6 and 13 metres, 360-degree circulation and an extensive service yard area, providing an exceptionally low site cover of [around] 18%.

“The investment has been acquired with an unexpired lease term of approximately six years, subject to annual upward only rent reviews indexed to the Retail Price Index capped at 3%.”

Tritax said the next rent review is due in August 2018.

The facility is situated within the so-called 'golden triangle' of logistics, Tritax added, saying it has “excellent” road, airport and rail connectivity.

DIRFT is a rail-road intermodal freight terminal, located at the intersection of junction 18 of the M1 motorway, the A5 and A428 roads being four miles east of Rugby and six miles north of Daventry.

It also has a rail connection from the Northampton loop of the West Coast Main Line to other national and European rail freight terminals.

As an “established core logistics location”, Tritax noted it had attracted a “significant” number of major occupiers, including DHL, Eddie Stobart Logistics, Sainsbury's and Tesco.

The company also recently acquired Royal Mail's regional distribution centre for the Midlands at Atherstone.

“We are very pleased to have acquired our second distribution centre let to Royal Mail, which with annual upward rent reviews linked to RPI offers the potential for strong and frequent rental growth,” said Tritax partner Colin Godfrey.

“The modern, high specification facility, which is situated in an established core logistics location, also has the potential for future value enhancement.”

LondonMetric said it acquired the 272,000 square foot warehouse in 2014 for £36m, which reflected a net initial yield of 6.7%.

It said the property had generated a profit on cost of 31%, and had been sold at marginally-above book value.

“This asset has performed strongly, delivering an ungeared internal rate of return of 15% pa,” said LondonMetric chief executive Andrew Jones.

“We will recycle the proceeds into our pipeline of investment and development opportunities, particularly in urban and regional logistics where we continue to see value and good prospects for further rental growth.”