Segro to buy Roxhill's big-box logistics development portfolio in the UK

Segro has launched a partnership with Roxhill Development which will provide the UK REIT with access to a portfolio of big box logistics warehouse development sites with the potential for over 929,000 m2 in the English South East and Midlands.

Roxhill Management, based in the English town of Rugby, will act as development manager to the new partnership and will work exclusively with Segro once Roxhill has completed a number of existing development projects with other partners.

This is Segro's second partnership with Roxhill following the creation of a joint venture in 2013 at the Rugby Gateway site.

The sites subject to the latest transaction are at various stages of the planning process and Segro said the terms of the transaction allow it to phase its investment. An initial investment, the majority of which is deferred, will be payable in consideration for a 50% share of Roxhill's interests in options over the sites.

The deferred payment is due on each site as and when planning permission is granted, at which point Segro has the right to buy Roxhill's remaining interests in the sites. Under the terms of the agreement, Segro will fund planning fees and development management costs.

After a period of 30 months from completion, Segro has the right to acquire all of Roxhill’s remaining option interests as well as the management platform, RMRL.

Should all of the sites become fully developed, the total potential capital expenditure (including land and infrastructure) is estimated to be around £800 mln over a 10-year period which will deliver over 10 million sq ft of big box logistics warehousing. The developments should generate an estimated blended yield on cost of 7% at today’s rental levels.

The terms of the transaction allow Segro significant flexibility over the timing of development and avoids the initial drag of holding non-income producing land on its balance sheet, Segro noted.

'This partnership establishes a clear path for us to achieve the scale we desire in the attractive UK big box logistics market. We are convinced that this market has very favourable long term prospects given the lack of quality supply and increasing demand from retailers and logistics operators for modern space in the right locations,' said Segro CEO David Sleath.