Harworth Group selling Leeds site to Microsoft for £106.6m

27th Jun 2024 12:01

(Sharecast News) - Harworth Group announced on Thursday that it has exchanged contracts for the conditional sale of 48 acres of land at its Skelton Grange site in Leeds for £106.6m.

The London-listed firm said the buyer, MSFT MCIO Microsoft, planned to develop a hyperscale data centre on the site.

It said the sale, which would be completed in two phases, was expected to finalise in the second half of 2024 and the first half of 2026.

The proceeds would be reinvested into Harworth's industrial and logistics development programme, with the company aiming to retain more directly developed prime grade-A properties in its investment portfolio, which currently included 38 million square feet of industrial and logistics sites.

Of that, 5.5 million square feet were either in development or about to enter development, with the potential to deliver a gross development value (GDV) of £0.8bn over the next five years.

Harworth said it was targeting an investment portfolio of £0.9bn by the end of 2029, enhancing recurring earnings from rental income and increasing dividends.

The company said it would continue to create value from sales of serviced land for development and selectively acquire and accelerate the delivery of residential sites to fund growth in its core Industrial & Logistics portfolio.

It said the Skelton Grange development was purchased for £3m in 2014, and had undergone significant remediation and enabling works.

The site now included approvals for substantial industrial and logistics space, with previous transactions including a 19.5-acre land sale for a renewable electricity generation facility and a lease for a 100MW battery energy storage system (BESS).

Harworth said its comprehensive development plan for Skelton Grange included the hyperscale data centre as well as 250,000 square feet of grade-A industrial and logistics space, an EfW facility, and a natural habitat area, representing an estimated £4bn of inward investment to the local economy.

As part of its growth strategy, Harworth said it intended to increase the proportion of industrial and logistics assets in its portfolio to over 85% by 2029, up from the current 60%.

The company said it was on track to deliver £1bn in EPRA net development value by the end of 2027, with a focus on creating sustainable, high-quality development projects.

"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," said chief executive officer Lynda Shillaw.

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

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

Shillaw said that over 60% of the value of Harworth's business was now in the industrial and logistics sectors, adding that as it moved into the second phase of its growth strategy, it expected the weighting to increase to over 85% by the end of 2029.

"The continued successful delivery of our residential sites is integral to our strategy as the proceeds from land sales provide a steady funding platform for the industrial and logistics development programme.

"We will retain more of our own prime grade A industrial and logistics directly developed properties and therefore expect to see our investment portfolio grow in coming years, reaching around £0.9bn by the end of 2029.

"We see this increased focus on Industrial & Logistics development as an opportunity to both maximise shareholder value, and position the business for longer term sustainable growth and returns as we create an industrial and logistics business of significance in the UK market and within our regions."

At 1433 BST, shares in Harworth Group were up 10.2% at 160.89p.

Reporting by Josh White for Sharecast.com.