PSP Investments, NBIM and Longfellow Announce £1.5BN JV to Develop UK Life Science Properties
London, UK (18/10/2022) - Longfellow Real Estate Partners announced today it has exchanged agreements to enter into a partnership with the Public Sector Pension Investment Board (PSP Investments) and Norges Bank Investment Management (NBIM). The partnership between the three parties is expected to complete in November and is targeting a £1.5BN venture focused on investing in life science and innovation real estate across the UK, with a particular emphasis on the Golden Triangle markets of Cambridge, Oxford, and London.
The Golden Triangle has developed into one of the leading innovation clusters in the world, anchored by globally significant universities, research institutes and teaching hospitals, a high-quality talent pool, access to capital, and a broad range of exciting start-up, growth and blue chip companies.
Within the initial phase of the partnership, NBIM will join PSP Investments and Longfellow in the ownership of Capital Park Cambridge, which was acquired in May 2022. This 42-acre campus, located in Cambridge, UK, provides approximately 245,000 square feet of innovation-focused workspace that is home to a dozen companies from sectors including fintech, agtech and biotech, through to patent law and the NHS. Cambridge is a high-functioning ecosystem where research excellence, a deep base of skills and an open culture combine with a sophisticated investment environment, , and the UK’s most mature life science real estate market to create a dynamic environment for industry-academic-clinical collaboration and innovation.
“The joint venture with Norges Bank Investment Management and PSP Investments is evidence of the strength of Longfellow’s life science real estate platform and focus,” said Longfellow Real Estate Partners Co-Founder & CEO, Adam Sichol. “Together we see the opportunity to create thoughtful, world class space to support a range of occupiers across the UK’s life science and innovation ecosystems.”
Jayesh Patel, Head of UK Real Estate, Norges Bank Investment Management commented, “We look forward to working with Longfellow and PSP Investments over the long-term in the UK life science sector.”
“We are pleased to have reached agreement to welcome NBIM to the life sciences partnership with Longfellow,” said Stéphane Jalbert, Managing Director, Head of Asia-Pacific and Europe, Real Estate Investments, PSP Investments. “This venture will allow us to invest at scale in the fast-evolving life science sector, helping creating ecosystems where corporates, universities, and start-ups are forming clusters that enable knowledge sharing and innovation.”
About Norges Bank Investment Management
Norges Bank Investment Management is the asset management division of Norges Bank, the Norwegian central bank. As manager of the Government Pension Fund Global, its mission is to safeguard and build financial wealth for future generations in Norway. The fund is invested globally in equity, fixed income, real estate and renewable energy infrastructure. It had investments worth 11,657 billion kroner, or $1.2 trillion, as of 30 June 2022.About PSP Investments
PSP Investments is one of Canada’s largest pension investment managers with approximately C$230.5 billion of net assets as of March 31, 2022. It manages a diversified global portfolio of investments in public financial markets, private equity, real estate, infrastructure, natural resources and private debt. Established in 1999, PSP Investments manages net contributions to the pension funds of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montreal and offices in New York, London and Hong Kong. For more information, visit www.investpsp.com or follow PSP Investments on Twitter and LinkedIn.About Longfellow Real Estate Partners
Longfellow Real Estate Partners is a real estate investment company founded in Boston, Massachusetts in 2009. With over 200 employees in bio-innovation clusters across the US and UK, Longfellow partners with renowned universities and pioneering life sciences and technology companies to help bring visionary ideas to life. Driven by a passion to support those working to advance the human condition, Longfellow continues to grow and expand in the name of scientific progress. For more information, visit https://lfrep.com.
Longfellow Real Estate Partners put out the same press release here and NBIM put out its own short press release on this joint venture:
Norges Bank Investment Management has signed an agreement to acquire a 48.75 percent interest in a property which will be developed into a life sciences property, located at Capital Park in Cambridge. The investment will be made in joint venture with the Public Sector Pension Investment Board “PSP Investments” and Longfellow Real Estate Partners “Longfellow”.18 October 2022
The agreement was signed on 18 October 2022, with completion expected in November 2022.
Norges Bank Investment Management will pay £90.2 million for its 48.75 percent ownership interest, valuing the property at £185 million. The asset is unencumbered by debt, and no financing will be involved in the transaction.
The seller of the interest is PSP Investments.
PSP Investments will retain a 48.75 percent interest in the property, and Longfellow will own the remaining 2.5 percent interest. Longfellow will perform the asset management on the property on behalf of the joint venture.
The property currently comprises 242,000 square feet of office and ancillary space in a 42 acre campus.
This is a huge joint venture, one of the largest single commitments yet to the UK life sciences real estate market.
Let me begin with a little background. PSP Investments and Longfellow Real Estate Partners acquired Capital Park Cambridge, a life sciences campus in Cambridge for £170M back in May from Elliott Management and Oval Real Estate.
In June, PSP put out this press release announcing its first investment with Longfellow in Cambridge, UK:
Cambridge, UK (June 7, 2022) — Longfellow Real Estate Partners and the Public Sector Pension Investment Board (PSP Investments), one of Canada’s largest pension investment managers, have announced their first investment into life science and innovation real estate in the UK: Capital Park Cambridge.
Capital Park Cambridge is a 42-acre campus of approximately 250,000 square feet of innovation-focused workspace that is home to a dozen companies from sectors including tech, agtech and biotech, through to patent law and the NHS / Department of Health. The campus sits on Cambridge Road in close proximity to Cambridge Station, Cambridge Biomedical Campus, Arm’s HQ at Peterhouse Technology Park and the Cambridge International Technology Park development.
Building on a successful existing relationship in the United States, Longfellow and PSP Investments have a long-term investment strategy for Capital Park and intend to acquire additional assets in the UK with an initial focus on the Golden Triangle markets of Cambridge, Oxford, and London.
In addition to Cambridge, UK, Longfellow – one of the largest investors in innovation and life sciences’ real estate in the US – has offices and sizable portfolios in key innovation ecosystems including Boston-Cambridge (MA), New York City, San Diego, the San Francisco Bay Area, and the Research Triangle of North Carolina, with a total portfolio that spans approximately 15 million square feet and over $10 billion in total asset value.
“We are excited to have made our first acquisition in the UK,” said Longfellow Managing Director Alex Wright. “Cambridge is a key part of the UK’s future and through sustainably-focused, long-term investment strategies in campuses like Capital Park, we aim to contribute to the region’s innovation ecosystem.”
“The acquisition of Capital Park is an important milestone for Longfellow and PSP Investments. We are committed to growing our presence in the UK and providing space to serve an ecosystem of life science occupiers from small venture-backed companies through to mature companies and institutions,” said Longfellow Co-Founder & CEO Adam Sichol. “Science and innovation real estate is operationally intensive and Longfellow has a successful track record developing and operating these critical facilities. The combination of sustainable, state-of-the-art lab space with a mix of amenities is an important part of Longfellow’s investment approach in all of our cluster markets including the Golden Triangle.”
“We are pleased to extend our US relationship with Longfellow into the UK with this significant acquisition in Cambridge, in line with our global convictions in the life sciences sector,” said Stéphane Jalbert, Managing Director, Head of Asia-Pacific and Europe, Real Estate Investments, at PSP Investments. “Cambridge is a market that PSP Investments knows well from its current portfolio and, being one of Europe’s top innovation clusters, we look forward to continuing to support the growth of the life sciences industry in the UK, while delivering strong risk-adjusted returns.”
PSP built on its existing relationship with Longfellow Real Estate Partners which is a leading life-sciences real estate investment firm founded in Boston, Massachusetts in 2009:
Longfellow partners with leading universities, institutions and companies to deliver holistic real estate solutions for life sciences and technology organizations. We invest in and develop real estate assets to create transformational work environments. We also provide leasing, facilities and property management services for our tenant partners.
Longfellow At A Glance
- Vertically integrated real estate developer and manager
- Partner with research universities, scientific firms, and technology companies to help them grow, innovate and create
- Strategic capital allocation through a value-add real estate fund for institutional investors
- Over 90 professionals across Boston, North Carolina, San Diego and San Francisco offices
WHO WE WORK WITH
We partner with leading institutions across academia and industry. When you work with the best, you know what it takes to do great work. That's why Duke University has partnered with us multiple times. That’s why Pfizer, AstraZeneca, Life Technologies and Novan Therapeutics work with us.
Longfellow has an impressive portfolio of properties in key life sciences hubs in the United States.
And now it has partnered up with PSP and NBIM which manages the assets of Norway's Government Pension Fund Global, to invest in and develop innovative life science real estate in key UK markets in a mega joint venture:
The partnership between the three parties is expected to complete in November and is targeting a £1.5BN venture focused on investing in life science and innovation real estate across the UK, with a particular emphasis on the Golden Triangle markets of Cambridge, Oxford, and London.
“We are pleased to have reached agreement to welcome NBIM to the life sciences partnership with Longfellow,” said Stéphane Jalbert, Managing Director, Head of Asia-Pacific and Europe, Real Estate Investments, PSP Investments. “This venture will allow us to invest at scale in the fast-evolving life science sector, helping creating ecosystems where corporates, universities, and start-ups are forming clusters that enable knowledge sharing and innovation.”
For the record, NBIM only invests 2.5% of its total assets in Real Estate but because of its massive size, it is one of the biggest real estate investors in the world.
The Fund has a policy for unlisted real estate which you can view here. I note the following:
- The Fund shall seek to partner with well-known and respected investors with a local presence, long-term capital to deploy and a long-term investment horizon, whose interests are aligned with those of the Fund.
- The Fund shall select partners with good knowledge of the markets in which we invest, whose experience makes them well suited to manage the assets on behalf of the partnership.
It is worth noting NBIM has done joint ventures with Oxford Properties, OMERS' real estate subsidiary, most recently taking a 50% stake in Berlin's iconic Sony Center in a €677 million deal.
NBIM has done other joint ventures with Oxford (they own a couple of office buildings together in the US) and all their real estate partnerships are available online here.
It's a great partner to have especially for Canada's large pensions which have an alignment of interest and expertise in real estate investments.
You can learn more about NBIM's real estate management here:
We invest in office and retail properties in selected cities around the world, and in logistics properties that are part of global distribution networks.We concentrate our real estate investments in a limited number of major cities in Europe, the US and Asia: New York, Boston, Washington, San Francisco, London, Paris, Berlin and Tokyo. All have large and transparent real estate markets, are expected to see population and/or employment growth, and have potential for economic growth and increased trade. Our investments in these cities are mainly in office and retail properties of a high standard in prime locations.
Our investments in the logistics sector are spread across a wider geographical area. The properties are located close to key transport infrastructure and major population centres.
As far as life sciences, I read that last year, NBIM acquired a 41% interest in a life science property located at 50 and 60 Binney Street in the City of Cambridge in the Boston metropolitan area, in a new joint venture with an Alexandria Real Estate Equities, Inc. (“Alexandria”) a subsidiary and MetLife Investment Management. They formed a joint venture to recapitalize this property for $1.2 billion.
So, this isn't NBIM's first investment in life science properties but this joint venture with PSP and Longfellow investing in life science and innovation real estate across the UK, with a particular emphasis on the Golden Triangle markets of Cambridge, Oxford, and London, is going to give both funds significant exposure to a growing niche area of real estate in that country.
Recall, back in March, OTPP's real estate subsidiary, Cadillac Fairview, entered into a joint venture with Thomas White Oxford and Stanhope to deliver Oxford North. I covered that JV here.
And in June, 2021, OMERS's real estate subsidiary, Oxford Properties made its first life sciences acquisition in the United Kingdom as part of its plan to build a multi-billion-dollar portfolio in the sector. I covered this deal here and noted:
As Jo McNamara, Oxford’s executive vice-president, Europe and Asia-Pacific, explains:
"The sector is supported by several structural tailwinds including demographic changes and the convergence of science and technology. Advances in data analytics and AI are accelerating life-changing innovations across biotech, pharmaceuticals, nutrition and medical devices. As a result, both private and governmental funding for promising products and companies has markedly increased in recent years."Advances in AI, computing power, data analytics are accelerating life-changing innovations across biotech, all we have to do is look at how fast pharmaceuticals responded to the global pandemic to come up with several therapeutic vaccines.
The pace of innovation is simply remarkable but in order to deliver these results, these companies need to be renting particular real estate with labs and tailored needs.
All this to say life science properties are a growing niche sector in the portfolios of Canada's large pension funds and for good reasons.
PSP Investments and NBIM have a great partner in Longfellow to develop innovative life science real estate in key UK markets.
And if this joint venture goes well, which it will, these two big funds can work together on other joint ventures in the future.
I'd invite you to read more news from Longfellow Real Estate Partners here.
Lastly, I join all Canadians who mourn and send their condolences to the family of RCMP Const. Shaelyn Yang, 31, who was fatally stabbed on the job in Vancouver on Tuesday.
Const. Yang had been with the RCMP for three years. Described by her superiors Tuesday as a "kind and compassionate person," she had been working for the Burnaby detachment's mental health and homelessness outreach team.
PSP Investments manages the amounts transferred to it by the Government of Canada for the funding of benefits earned from April 1, 2000 by members of the public sector pension plans of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and, since March 1, 2007, the Reserve Force.
Below, NBIM Talk on the Fund's first 10 years of investing in real estate. The NBIM Talk was arranged on 4 June 2020 featuring former CEO Yngve Slyngstad and Karsten Kallevig, former CIO of Real Estate. Very interesting recap of the first 10 years.
Nicolai Tangen, NBIM's CEO, appointed Mie Caroline Holstad as the Chief Real Assets Officer, responsible for real assets operations (see second clip, an interview below). Smart lady, great interview, she covers a lot here.
Third, an interesting panel discussion from earlier this year on what opportunities London's growing life science sector create featuring experts in the field.
Lastly, the UK government's fiscal U-Turn has calmed markets, but the uncertainty of Liz Truss's premiership may cause further volatility, according to Invesco Asset Management's Ben Gutteridge. "The political noise can throw gilt yields, can throw the pound around a little bit in the short term," Gutteridge said on "Bloomberg Markets European Open."
Some UK hedge fund managers made a killing shorting the pound and gilts over this past month but for long-term investors, this just presents another opportunity to invest in great UK assets.
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