Oxford Properties Expands its Life Sciences Platform into the UK
Oxford Properties Group has 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.
The Toronto-based global investor, asset manager and developer paid $77.2 million Cdn to buy 310 Cambridge Science Park, in the city of Cambridge, from the Local Authorities’ Property Fund. The off-market transaction means Oxford has deployed in excess of $1.7 billion in capital into the life sciences sector so far in 2021, with its previous acquisitions in the U.S. and Canada.
“Since our first life sciences investment in 2017 this sector has been one of Oxford’s key global conviction calls,” said Jo McNamara, Oxford’s executive vice-president, Europe and Asia-Pacific, in the announcement Friday morning.
“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.
“As this capital is deployed, occupier requirements increase, leading to the availability of little to no space in key global hubs such as the Cambridge Science Park or Kendall Square in Boston, which provide tenants with highly desirable networking and talent pooling ecosystems.”
About 310 Cambridge Science Park
The Cambridge building includes approximately 59,000 square feet of laboratory and office space, with around half fitted out as high specification wet labs. It is currently leased to Astra Zeneca until November 2023, when that firm will relocate to a new headquarters.
Founded in 1970, the Cambridge Science Park is a 152-acre campus at the northern edge of Cambridge with approximately 1.9 million square feet of office, lab and R&D space. It contains 130 occupiers spanning life sciences, pharmaceuticals, technology and engineering.
The complex is currently 100 per cent leased. It benefits from strong road connections provided by the A14 and public transport including the guided busway, a light transport system that connects the campus with the city centre, Cambridge North train station and surrounding villages.
“Cambridge Science Park is the most established life sciences campus in the U.K. and is the perfect location for Oxford to expand its platform into Europe,” said Abby Shapiro, senior vice-president, head of office, retail and life sciences at Oxford, in the release.
“The Cambridge market demonstrates strong demand fundamentals yet suffers from a lack of good quality supply. Unit 310 is of an incredibly high quality and provides a near-term opportunity to crystallize reversionary income on high-standard lab specifications and bring rents up to market levels.
“This ability to tap into the significant demand for laboratory space in the area will enable us to create extra value.”
Oxford accelerates life sciences investments
The transaction comes as Oxford accelerates its life sciences expansion strategy. Oxford currently has a $1.4 billion life sciences portfolio in North America, representing over a million square feet of existing properties. It also has a development pipeline of over two million square feet.
Oxford intends to deploy approximately $2.1 billion in European life sciences over the next five years, as part of its goal to build a $14- to $20-billion global life sciences business.
“Oxford’s initial European focus will be on the U.K., where we are actively seeking opportunities in the ‘Golden Triangle’ and the Greater London area,” Shapiro explained in the release.
“The momentum driving the life sciences sector in the U.K. is supported by the research and start-ups emanating from some of the world’s most prestigious medical universities, the focused funding of the U.K. government and increased levels of venture capital activity.
“Given the relative low levels of existing supply, Oxford will look to utilize our world-class development expertise to help provide the critically needed lab infrastructure required to allow innovative biotech firms to deliver the life-saving therapeutics of tomorrow.”
Other recent Oxford life sciences deals include last month’s acquisition of Foundry31 in the San Francisco Bay Area and the acquisition of Boren Lofts in Seattle.
“As we have grown our platform in North America over the past few years, we have seen the sector evolve and mature and we are now beginning to see the same pattern emerging in Europe,” McNamara said in the announcement.
“We intend to use the learnings and expertise we have built up in the U.S. to fulfil our ambition to replicate that success in Europe.”
Oxford Properties put out a press release on this deal:
Oxford Properties Group (“Oxford”), a leading global real estate investor, asset manager and business builder, has extended its global life sciences platform with the acquisition of 310 Cambridge Science Park, United Kingdom, its first investment in the sector in Europe. Since its first investment in the sector in 2017, building a substantial and dedicated life sciences business has been one of Oxford’s highest conviction investment strategies. This £45 million off-market transaction from the Local Authorities’ Property Fund represents the seventh life sciences asset Oxford has acquired since the start of 2021 that, when accounting for new development opportunities at these properties, accounts for over US$1.3 billion in deployed capital.
The transaction comes as part of an acceleration of Oxford’s established life sciences strategy. Oxford currently has a US$1.1 billion (£0.8 billion) life sciences portfolio in North America, representing over 1 million sq. ft. of high-quality, existing properties, in addition to a development pipeline in excess of 2 million sq. ft. Oxford intends to deploy approximately £1.2 billion in European life sciences over the next five years, as part of its goal to build an US$10-15 billion (£7-11 billion) global life sciences business over time. Oxford’s initial European focus will be on opportunities within the UK, with eventual expansion into other core territories across Europe.
In line with its broader investment strategy, Oxford can access life sciences focused real estate through multiple entry points including direct property acquisitions and developments, investments in platforms and via debt, having previously lent to private equity investors including mezzanine financing for the US$8 billion privatisation of a life sciences real estate firm.
310 Cambridge Science Park provides approximately 59,000 sq. ft. of fully fitted laboratory space and ancillary office accommodation, with around half fitted out as high specification wet labs. The asset is fully let to Astra Zeneca until November 2023, who are then relocating to a new headquarters.
Founded in 1970, Cambridge Science Park is a 152-acre campus located at the northern edge of the City of Cambridge and provides approximately 1.9 million sq. ft. of office, lab and R&D space to 130 occupiers spanning life sciences, pharmaceuticals, technology and engineering. Demonstrating the attractiveness and strength of the demand for the campus, it is currently 100% let. The science park benefits from strong road connections provided by the A14 and public transport including the guided busway, a light transport system that connects the campus with the city centre, Cambridge North train station and surrounding villages.
Recent Oxford life sciences deals include last month’s US$173 million acquisition of Foundry31 in the San Francisco Bay Area and the US$119 million acquisition of Boren Lofts in Seattle.
Jo McNamara, Executive Vice President, Europe and Asia-Pacific at Oxford Properties, commented: “Since our first life sciences investment in 2017 this sector has been one of Oxford’s key global conviction calls. 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. As this capital is deployed, occupier requirements increase, leading to the availability of little to no space in key global hubs such as the Cambridge Science Park or Kendall Square in Boston, which provide tenants with highly desirable networking and talent pooling ecosystems.”
“As we have grown our platform in North America over the past few years, we have seen the sector evolve and mature and we are now beginning to see the same pattern emerging in Europe. We intend to use the learnings and expertise we have built up in the US to fulfil our ambition to replicate that success in Europe.”
Abby Shapiro, Senior Vice President, Head of Office, Retail & Life Sciences at Oxford Properties, added, “Cambridge Science Park is the most established life sciences campus in the UK and is the perfect location for Oxford to expand its platform into Europe. The Cambridge market demonstrates strong demand fundamentals yet suffers from a lack of good quality supply. Unit 310 is of an incredibly high quality and provides a near-term opportunity to crystalise reversionary income on high-standard lab specifications and bring rents up to market levels. This ability to tap into the significant demand for laboratory space in the area will enable us to create extra value.”
“Oxford’s initial European focus will be on the UK, where we are actively seeking opportunities in the ‘Golden Triangle’ and the Greater London area. The momentum driving the life sciences sector in the UK is supported by the research and start-ups emanating from some of the world’s most prestigious medical universities, the focused funding of the UK government and increased levels of venture capital activity. Given the relative low levels of existing supply, Oxford will look to utilise our world-class development expertise to help provide the critically needed lab infrastructure required to allow innovative biotech firms to deliver the life-saving therapeutics of tomorrow.”
Oxford Properties was advised by Creative Places and CCLA was advised by Cluttons.
Interestingly, Oxford Properties provides a case study on why it's focusing its attention on life sciences properties:
Growing a meaningfully sized life sciences business is one of Oxford’s top strategic priorities. Positive secular demographic and economic trends, coupled with the exciting convergence of technology and science, support our high conviction in this sector. Oxford believes we can add critically needed new real estate infrastructure that helps leading life sciences, pharmaceutical and biotech companies research, develop and ultimately manufacture the life-saving therapies of tomorrow.
Prior to launching our own end-to-end platform, we built experience deploying capital on significant life sciences real estate transactions, thereby gaining great visibility to existing portfolios and a real understanding of sector financials. In early 2021, we purchased six life sciences assets, three in Boston and three on the West Coast, approximating 1 million square feet of both operational buildings and developable area. We plan to invest significant additional funds in these assets, creating new biotech space and enhancing existing facility experiences.
The speed and scale of these transactions demonstrate how we choose to do business, leveraging our global expertise and hard-earned reputation to secure sectoral experience and partnerships.
These transactions grow our presence in three key global life sciences markets and complement our existing portfolio of assets and significant development pipeline in the sector. Most importantly, they afford us a solid foundation to continue to grow from, as we seek to scale this part of our business in 2021 and beyond.
The details
We began the effort strategically, gaining a foundational understanding of the unique asset class over a multi-year period. We acquired an existing lab building in Boston, 645 Summer Street, through a local partnership. This gave us the opportunity to work hands-on in the design, leasing, and management of an innovation space, learning the unique skills required for supporting this nuanced asset class. In parallel, we have immersed ourselves in the requirements of ground-up development, positioning a well-located Boston site for research and development and lab uses.
Early in 2021, we leveraged our growing expertise to move into this innovative asset class at scale. Within the first quarter of the year, we acquired six distinct life sciences properties across core, value-add and development opportunities in the Greater San Francisco, Seattle and Boston areas. These properties gave us appreciable market share in three key global life sciences clusters while offering opportunity to do what we do best: provide value. We announced these portfolio updates in tandem with a commitment to invest additional funds into the projects, ultimately accounting for over $1B in deployed capital in the sector.
Our West Coast acquisitions demonstrate the strength of local partnerships in advancing Oxford’s work. We acquired the Public Market Emeryville in partnership with City Center Realty Partners, a San Francisco-based real estate developer and investor with great area market expertise. Located within the established life sciences cluster of Emeryville, just outside of San Francisco, the 148,000 square foot mixed-use project includes lab and office space in addition to food and retail. The site also includes land parcels that have the potential to be developed to add new purpose-built lab product – an important capability in a market that currently features almost zero availability for that space. Oxford and CCRP are excited to work together with the community on the potential for this campus, which will continue to be served by the very popular Public Market food hall. Oxford and CCRP will also partner on an expansion and conversion project at Foundry31, another mixed-use site in the Berkeley/Emeryville corridor of San Francisco’s East Bay. Presently leased to food technology companies, the 400,000 square foot existing building offers an additional 216,000 square feet on which the teams will collaborate to create new lab and life sciences offerings.
Our Boston life sciences portfolio is equally distinctive: it encompasses end-to-end innovation offerings, allowing us to serve organizations of all maturities across their evolving lifecycles. We are completing spec builds at the 150,000 square foot 645 Summer Street lab building which perfectly meet the needs of newer biotech customers such as Ikena and Monte Rosa. We manage 33 New York Avenue, a 114,000 square foot state-of-the-art biomanufacturing facility, which accommodates Replimune Group Inc and CRISPR Therapeutics in their sophisticated production efforts. And we’ve begun to explore value-add work at the 150,000 square foot research lab at 1 & 5 Mountain Road, presently leased in their entirety to a global healthcare leader, Sanofi.
The takeaway
The life sciences industry is propelling critical, life-saving work. Unique real estate infrastructure serving the full lifecycle of these customers is required to advance their efforts – and Oxford has the capabilities to provide as few others might. Our global platform and scale enable us to support this innovative group with the required flexibility, optionality, and nuanced expertise. Simply put, we can move in step with the pace of discoveries.
Our journey into this mission-driven asset class has just begun; we continue to explore other emerging North American markets and European opportunities as we work to realize our global strategy.
Clearly Oxford Properties has a sophisticated end-to-end life sciences platform which is growing fast, leveraging off their global expertise and reputation to secure sectoral experience and partnerships.
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.
There's also a reason why life-sciences properties are geographically clustered in cities like Boston, San Francisco, San Diego and London, you need to be around world-class universities which attract top students and scientists that then go on to work in the private sector.
Founded in 1970, the Cambridge Science Park is a 152-acre campus at the northern edge of Cambridge with approximately 1.9 million square feet of office, lab and R&D space. It contains 130 occupiers spanning life sciences, pharmaceuticals, technology and engineering.
Not surprisingly, this science park is fully leased and that brings me to another point, real estate diversification across sectors and geographies is increasingly more important in a post-COVID world.
What else do I like about this deal? Like student housing, life sciences properties aren't cyclical, they are relatively recession proof offering stable income throughout all economic cycles.
It doesn't mean there are no risks. I gather a strong venture capital cycle will increase demand for these properties whereas as VC bust can impact them in a negative way but overall, these properties offer stable cash flows and they are increasing in value as demand for them grows.
As Abby Shapiro, senior vice-president, head of office, retail and life sciences at Oxford, explains:
“The Cambridge market demonstrates strong demand fundamentals yet suffers from a lack of good quality supply. Unit 310 is of an incredibly high quality and provides a near-term opportunity to crystallize reversionary income on high-standard lab specifications and bring rents up to market levels. This ability to tap into the significant demand for laboratory space in the area will enable us to create extra value.”
Anyway, I did note Oxford intends to deploy approximately $2.1 billion in European life sciences over the next five years, as part of its goal to build a $14- to $20-billion global life sciences business, and the focus in Europe will be in the UK where they are actively seeking opportunities in the ‘Golden Triangle’ and the Greater London area.
Oxford Properties isn't the only real estate subsidiary focusing on life sciences but in my opinion, it has one of the more sophisticated platforms targeting this sector.
There are others, however. Back in March, I discussed how Ivanhoé Cambridge, CDPQ's large real estate subsidiary, teamed up with Lendlease to build a world-class life science project in Boston Landing.
And other large Canadian pensions are investing in this sector too, although it's not as targeted or concentrated in life sciences per se (see PSP's deal with Aviva to invest up to £250 million in commercial property in Cambridge, UK).
Still, this is a great sector with strong structural tailwinds and I see it becoming an increasingly important part of many institutional real estate portfolios diversifying into all sorts of sectors post-pandemic, not just logistics and multifamily.
Below, watch a cool promotional video on the Cambridge Science Park, a great asset which OMERS now owns through its real estate subsidiary.
Update: BISNOW reports the need for speed is driving life sciences lab conversion boo:
Life sciences investment jumped 36% nationally in 2020, hitting a record $29.9B despite the pandemic. “Life science space demand is significantly outpacing supply, and conversion projects offer a solution for tenants whose timeline is more immediate.” Tycho Suter, VP of Investments here at Oxford
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