Microsoft inks €125m land deal in Leeds for hyperscale development

he fee is payable in cash in two tranches linked to phased completion of the sale, and represents a premium to the site's book value. The plot is at Harworth's Skelton Grange site.

The asset is split into two parts. Plot 1, which comprises 27 acres, is being sold for £52.9 mln with completion of the deal planned for the second half of this year. The book value as at 31 December 2023 was £39 mln. Alongside completion of the sale of Plot 1, the group will be reimbursed approximately £0.5 mln for the costs it has incurred in securing additional power capacity for the site.

Servicing of plot 1 is expected to be completed by Harworth as development manager under a separate development agreement, which would commence after the transaction completes.

Plot 2, which comprises 21 acres, will be sold on a serviced basis for £53.2 mln. Completion of the sale is targeted for H1 2026. The book value as at 31 December 2023 was £12.9 mln. The forecast total servicing costs are £5.1 mln.

Harworth intends to use the net proceeds to support an increased focus on the direct development of Grade A Industrial & Logistics properties from its strategic landbank which will be transferred to, and then retained in, its investment portfolio, driving an increase in recurring earnings, alongside new investment opportunities.

The former Skelton Grange power station site was purchased by Harworth in December 2014 for £3 mln, with remediation and enabling works commencing shortly after.

The site is located to the south-east of Leeds and the work undertaken by Harworth as master-developer since acquisition is an integral part of the regeneration of the area, bringing in significant investment.

Since acquisition, Harworth has optimised the planning status of the site, securing approval in November 2023 for 800,000 ft2 (74,000 m2) of industrial & logistics space, and most recently in May 2024, a reserved matters approval for a further 320,000 ft2 of industrial & logistics space.

Previous transactions that have contributed to the creation and realisation of value at this development include a 19.5-acre land sale to Enfinium in 2020, on which it is developing a 49MW energy-from-waste (Efw) renewable electricity generation facility for its own operation, and the grant of a lease in 2021 to facilitate the development of a 100MW battery energy storage system (BESS) facility on a 5.7-acre demise.

Harworth acquired a further 21 acres of adjoining land in 2023 to enhance the development potential of the overall scheme.

Upon completion of the transaction, including anticipated cost plan spend, Harworth will have invested £36.7 mln in the site and generated £135.7 mln of sales. The group will retain 16 acres on which to promote 250,000 ft2 of employment space.

This is in addition to the 77 acres owned by way of joint venture with The Aire Valley Land at a neighbouring development, Gateway 45.

Once the development is complete, Skelton Grange is expected to provide 250,000 ft2 of Grade A industrial & logistics space, a hyperscale datacentre, a BESS facility, an EfW facility, and 28 acres of land returned to a natural habitat alongside improved green travel infrastructure.

Lynda Shillaw, chief executive of Harworth Group, commented: 'Since re-listing in 2015 Harworth has successfully completed a number of significant transactions that create value for our shareholders but this sale at Skelton Grange is the group’s largest to date and is yet another exemplary case study that demonstrates the successful regeneration of brownfield land.

'It highlights Harworth’s capabilities in identifying and acquiring complex sites, creating planning-friendly masterplans that maximise site potential, and deploying timely and effective investments into remediation and infrastructure.

'This transaction further builds our expertise to include datacentres and evidences the growing spectrum of industries that continue to be attracted to the schemes that Harworth brings to the serviced land market.'