Tritax Big Box (BBOX) has raised £350m to fund two new data centres in Greater London after securing 235MW of grid connection agreements to power them.
Launching the fund raise after the market closed last night, the £4.6bn real estate investment trust said the new developments would be “materially accretive” to earnings. However, the issue is dilutive, priced at an 11.8% discount to net tangible assets (NTA), or net asset value (NAV), and requires shareholder approval to complete.
Nevertheless, a total of 206,198,116 new shares were quickly placed by the company’s brokers with existing institutional shareholders and other investors. At 164p, below yesterday’s closing price of 173.3p and NTA per share of 185.9p at 30 June, that cost over £338m.
By contrast, private investors subscribed just £10.6m for 6,445,323 new shares through RetailBook, reflecting the short opportunity.
The company’s existing shares slid 3.6%, or 6.2p, to 165.5p when trading resumed this morning.
The total issued, 213,414,634, increases BBOX’s share capital by 7.9%. Blackstone, the US alternative asset manager which owns an 8.6% stake through Trot Holdings after selling the REIT a £1bn logistics portfolio last October, was scaled back to £3m after committing £30m.
Chief executive Colin Godfrey said the additional grid connection agreements nearly doubled the group’s pipeline of secured power to 507MW and would enable the delivery of the two new data centres by 2030-31. This is on top of the Manor Farm data centre development near Heathrow, for which it gained planning permission last month.
“These new schemes have the potential to add £50m-60m of incremental rent at an attractive 9-11% yield on cost and £300-400m of capital profits in aggregate, reflecting a development profit on cost of over 50%.
“With such an acute shortage of power in the Greater London Availability Zones, we expect to see significant occupational interest in these schemes.”
He said the share issue provided the funding to unlock BBOX’s enlarged data centre pipeline and pursue other logistics acquisition and development opportunities. That gave the group confidence to increase its adjusted earnings per share growth target to “approximately 65% by 2030/31, from approximately 50% by 2030” over the 2024 level of 8.05p.
The company issued its half-year results with the fund raise. These showed EPS per share, excluding development income, rose 7% to 4.41p from 4.12p a year ago.
Our view
James Carthew, head of investment company research at QuotedData, said: “It is great to see BBOX meet its funding objective and gain some support from retail investors. One interesting aspect to the announcement is the board’s decision to dilute the Blackstone-managed Trot Holdings stake by giving it a tenth of the shares it asked for and a lot less than its pro-rata proportion of the share issue. Given that the issue was dilutive to NAV, this has the potential to trigger a row. The short timeframe for the fund raise will also have made it impossible for most retail investors to participate, that means they have also been diluted. I think BBOX could have done better.”
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