South African real estate investment trust (Reit) Equites Property Fund has, through its wholly-owned subsidiary Equites International, concluded an agreement with Hermes Parcelnet to develop a R1.8-billion (£85-million) distribution centre in a prime location in the UK.

The property is expected to be 31 570 m² in size and will be situated on an overall land area of 18.5 ha, which translates into a low site coverage ratio of 16%. The facility will provide the tenant with a newly built, high-specification steel portal frame distribution warehouse with 163 dock-level loading doors and four level-access loading doors.

Hermes, an associate of Germany-based Hermes Europe, specialises in parcel delivery and courier services – delivering more than 240-million parcels a year on behalf of 40% of the UK’s top 100 retailers, including Next Directory, ASOS, Tesco, John Lewis, Debenhams and Arcadia Group.

The property is in the well-established Hoyland Common in South Yorkshire, which affords good road links and is strategically located immediately adjacent to the J36 and M1 road networks providing access to the national motorway network.

The development will also serve as the latest “super-hub” for Hermes and will handle 1.3-million parcels a day, which, according to Equites, makes it the largest of its kind in Europe and could create more than 1 300 jobs.

The agreement provides that Equites Newlands Group (ENGL) – a company in which Equites International owns 60% of the shares with Newlands Property Development owning the remaining 40% – will act as the developer of the property.

Upon completion, the modern distribution facility will be wholly-owned by Equites and will be let to Hermes on a 20-year, triple net, fully repairing and insuring lease. The lease will afford Equites with more than R80-million in yearly rental income, thereby boosting the Reit's predictable cash flow profile.

Further, vehicles powered by compressed natural gas will be based at the hub and there will be provision for electric cars, which is in line with Equites’ focus on environmental, social and corporate governance initiatives.

Equites CEO Andrea Taverna-Turisan says the development agreement is an exciting opportunity for Equites, as it is the first signed development deal to arise from the company’s strategic partnership with Newlands and is consistent with Equites’ UK investment strategy of curating a high-quality logistics portfolio, which promotes strong total returns in the medium- to long-term.