Tritax Big Box Reit Plc (LON:BBOX) has entered into a development management agreement with Tritax Management LLP to deliver a 125MW data centre scheme at Chelmsford, Essex, the second in its data centre pipeline.
Under the Agreement, which emulates the existing arrangements for the delivery of Tritax Big Box’s first data centre scheme at Manor Farm, Heathrow, Tritax Management has been appointed to provide development management and technical services. These include pursuing planning, overseeing construction, pre-letting services, technical electrical expertise and managing the technical aspects of the scheme and all power-related elements.
Consistent with its first data centre scheme, Tritax Management will receive a payment of c.£3.3 million in respect of project assembly services to date at the Chelmsford scheme; a development management fee of up to 5% of the development cost of the scheme[1], contingent upon receiving planning consent; and a profit share[2] of 17.5% of the total development profits, contingent upon full delivery of a practically completed and let data centre. 50% of the Manager’s profit share payment will be applied to the subscription or acquisition of shares in the Company[3].
The targeted yield on cost for the scheme of 10-11% includes these payments.
Tritax Management is a related party of the Company pursuant to UKLR 11.5.3R. The payments to Tritax Management set out above are deemed to be a relevant related party transaction 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.
[1] The development management fee is payable by reference to different milestones, with 3.5% payable in quarterly instalments contingent on and commencing from the grant of satisfactory planning permission and 1.5% payable following the later of the date of grant of satisfactory planning permission and the date of exchange of an acceptable pre-letting agreement.
[2] The profit in respect of the above contingent profit share arrangement is calculated as the fair value of the asset base at the time of completion (as confirmed by an independent valuer) less all associated costs.
[3] Subject to a 12-month lock up arrangement.
