OTPP's Big Joint Venture To Develop UK's Oxford North

Today, OTPP's real estate subsidiary, Cadillac Fairview, entered into a joint venture with Thomas White Oxford and Stanhope to deliver Oxford North: 

Thomas White Oxford Ltd, the development company of St John’s College, has agreed a 50:50 joint venture partnership with Canadian-based Cadillac Fairview, the real estate arm of Ontario Teachers’ Pension Plan, with developer Stanhope PLC, to deliver Oxford North, Oxford, UK, the £700 million new global innovation district.

A new company, Oxford North Ventures LLP, has been formed as a joint venture, 50% owned by Thomas White Oxford and 50% by Cadillac Fairview and Stanhope. Stanhope has also been appointed as development manager.

The board of Oxford North Ventures LLP, (the ‘joint venture’) will consist of Bernard Taylor, chairman and William Donger, chief executive officer of Thomas White Oxford, Jenny Hammarlund, managing director, head of Europe, of Cadillac Fairview; and David Camp, chief executive of Stanhope.

The joint venture will invest almost £700 million to deliver 939,000 sq ft (87,300 sq m) of laboratory and workspace to enable life-enhancing discovery, along with amenities, infrastructure and social value during the next several years, which will boost the economy by circa £150 million in GVA per annum.

In March 2021, outline consent was granted by Oxford City Council for the overall 64-acre masterplan and detailed consent for the first phase of new laboratories and workspace, which will total 170,000 sq ft (15,793 sq m), with a link road and Central Park. Future labs and workspace phases across Central and Eastside will be delivered by the joint venture.

Oxford North’s Central Park, the Red Hall and first laboratory buildings

Enabling infrastructure works started in August 2021. These works have already created more than 200 construction jobs. Delivered in tandem will be new, landscaped, open spaces as public spaces.

Oxford North will include 480 much-needed new homes, of which a minimum of 35% will be affordable. Thomas White Oxford has already entered into an agreement with Hill Group to deliver circa 318 new homes, the first public park and new streets on Canalside, to the south of the A40.

Bernard Taylor, chairman, Thomas White Oxford Ltd, said: “Following two years of careful work, we have selected our JV partners. I am thrilled to have Cadillac Fairview as our partner because of their long-established record of involvement in high quality property development and, as the property arm of Ontario Teachers’ Pension Plan, they have a very long-term investment perspective whose philosophy is well aligned with that of Thomas White Oxford and our 100% shareholder, St John’s College, Oxford.

“I am also delighted to have Stanhope as our partner and development manager. They are one of the leading and highest quality placemakers in the UK and their chief executive, David Camp, will personally lead the development team, bringing his exceptional experience in the life sciences sector and track record for delivering sustainable new exciting places on time and on budget.

“Oxford North will have a very positive impact on people’s lives. For us, it is about investing responsibly in society and seeking a return for all on that investment so that Oxford North is recognised as a ‘must go to’ home for science and innovation within a wonderful new district with an exemplar approach to sustainable and low carbon development.”

William Donger, chief executive officer, Thomas White Oxford Ltd, said: “We warmly welcome our new development partners to deliver in a timely way one of the world’s most significant innovation districts. Demand for lab and science translation space in Oxford is at record levels with restricted supply. Conversations with pioneering science and technology companies seeking such space have already started.

“This also means that we can continue to maximise opportunities for local people with school and college engagement, provide construction apprenticeships for school leavers and graduates and upskill those people looking to be part of this exciting industry. Together, we are committed to delivering a new sustainable place for Oxford for those who live, work, learn, visit and play here.”

Jenny Hammarlund, managing director, head of Europe, Cadillac Fairview said: “As we grow our investment portfolio across Europe, the life sciences sector is a strategic focus for Cadillac Fairview. We are extremely pleased to be investing in the UK with two strong and like-minded partners, Stanhope and Thomas White Oxford. Through this globally ambitious project, we will foster relationships with the UK’s world leading life sciences sector, including educational institutions, hospitals, the research community, and the commercial ecosystem, while building a sustainable community where innovation can thrive.”

The project is the second joint venture between Cadillac Fairview and Stanhope, which follows Cadillac Fairview’s acquisition of White City Place in 2021, which Stanhope continues to asset manage.

David Camp, chief executive, Stanhope PLC added: “Oxford is a world-leading destination for life sciences and medical research, so it is a privilege for us to have formed this partnership with Thomas White Oxford and Cadillac Fairview to create what will become the city’s premier life sciences and innovation district. Stanhope has over 25 years’ experience creating places and fostering communities in the UK and this has allowed us to develop a blueprint for sustainable development which is of paramount importance for all involved in this exciting project. As development manager we are committed to ensuring that Oxford North delivers the highest quality public open space and buildings, and has a positive impact for all.”

View Oxford North’s new website, including its new 360-degree immersive cinemagraphs, and find out more about the project: www.oxfordnorth.com.

Construction on the Oxford North complex began in August 2021 when the BBC reported this:

Infrastructure work for a £500m development set to bring up to 4,500 new jobs and 480 new homes is set to start next week.

Oxford North will be built by Thomas White Oxford (TWO), which is owned by St John's College, on land near the A34, A40 and the A44.

It says it will be the city's "new life sciences district".

TWO said enabling works, including landscaping and preparations for a new link road, are set to start on Monday.

The project was given the go-ahead by Oxford City Council in late 2019 and £10m from the government's Housing Infrastructure Fund will be spent on it.

William Donger, a director of TWO, said: "Oxford continues to see exceptional demand for R&D lab and office space from companies of many different sizes from across the globe looking for their front door to be in Oxford." 

He added: "We are delivering a world-leading sustainable place to provide much-needed new homes, to facilitate jobs and enable life-enhancing discoveries which will deliver connectivity and growth while transforming lives and the city."

It's still early days but there's no doubt in my mind this will be an excellent joint venture for Cadillac Fairview and its partners, Thomas White Oxford and Stanhope.   

The new joint venture announced today is valued at £700 million or CAD $1.17 billion.

Demand for high quality life sciences properties is exploding around the world and Oxford North promises to be a world class innovation district:

Oxford North is the city’s new innovation district. It starts with people, their ideas and ambitions. We’re here to celebrate and enable them; providing a place for people who want to make their mark on the world.

It’s why we connect academia and commerce, invention and investment providing a sustainable place to work, live, learn and socialise.

Always a catalyst for innovation and growth, Oxford North will be a thriving and vibrant new district with innovation and sustainability at its heart.

It’s a unique home and workplace for scientists, technologists, and inventors, transforming lives and enhancing one of the world’s greatest cities.

It started with Oxford City Council, along with Oxfordshire County Council as highways authority. Their vision was to transform the area into a home for a thriving science and technology community.

Thomas White Oxford, the development company of St John’s College, is also heavily committed to creating such a place. Not just to facilitate life-enhancing science and technology discoveries, but to be a new district of Oxford. A place where people want to live, work, visit and learn. Somewhere which benefits everyone and delivers social value.

Oxford North has been designed by a world-leading team of masterplanners, architects, and specialist consultants, ensuring it connects and enhances the local area with open spaces, public art, events and culture.

At the heart of this project has always been the clear vision that Oxford North is the place people choose to excel in life and work, to be an exciting new place for science, but above all, for Oxford.

Connecting academia and industry, the Board is committed to delivering an extraordinary new sustainable place for Oxford.

Now, this is an important deal for Cadillac Fairview, OTPP's real estate subsidiary for a few reasons:
  • First, it's an excellent and sizable deal in a fast-growing area of real estate -- life sciences properties -- which is less cyclical and in extremely high demand.
  • Second, it's part of a bigger strategic shift at Cadillac Fairview to invest more assets outside Canada.
  • Third, it's Cadillac Fairview's first major venture in life sciences properties
  • Lastly, Cadillac Fairview is developing these assets along with its partners so there's more control and better returns.

Recall, when I covered OTPP's 2020 results last year,  I pointed out that 85% of Cadillac Fairview's assets are in Canada (mostly Retail and Offices), and this represents a heavy home and sector concentration relative to other large Canadian pensions which are more diversified in their real estate holdings (geographically and by sector)

Ziad Hindo, CIO of OTPP who sits on Cadillac Fairview's board of directors told me back then that 

"CF is building up capabilities internationally (London to cover Europe and Singapore to cover Asia). They have just hired heads of Europe. They have also identified strong local partners to deploy capital with."
I've been tracking a few deals and I have seen a concerted effort to shift more assets abroad and in various sectors.

For example, I covered OTPP's $400 million bold new property venture in Asia-Pacific with Hines investing in a multi-sector, open-ended, diversified vehicle targeting top-tier markets in Japan, Australia, South Korea, Singapore and China. The fund will invest in logistics, office, living, retail and select niche sectors targeting core plus returns.

It's important to note this diversification of Cadillac Fairview's assets will take time but it is happening.

It's a matter of finding the right partners to scale into the right deals in the right platform.

This is why I like this Oxford North deal, it's huge and a really great asset to own over the long run.

Something else to think about.

Cadillac Fairview owns premiere assets in Canada and I'm confident these assets bounced back nicely last year and will continue to perform well in the future.

But make no mistake, the diversification process -- geographic and by sector -- is definitely happening and it will continue in the future.

Another example is the Long Harbour deal with PSP Investments:

Long Harbour is a residential specialist real estate investment, development and management firm in the UK, and has a proven track record of AUM growth across three investment programs; Secured Income, Multifamily and Opportunistic. In 2021, Cadillac Fairview joined Long Harbour and Public Sector Pension Investment Board in a £1.5bn joint venture platform. The platform is focused on multifamily development and is expected to back around eight schemes. The schemes will be around 150 units to 600 units each and will be managed by Way of Life, Long Harbor’s in-house residential management business.

I covered this build to rent platform deal here.

There are plenty of others and I invite my readers to dig deeper into Cadillac Fairview's investments.

What else? Learn more about Cadillac Fairview's regional team and contact them if you're looking for a solid long-term partner to develop a real estate asset:

Now, other large Canadian investment managers have recently announced deals of their own in life sciences properties.

Ivanhoé Cambridge, CDPQ's real estate subsidiary, recently announced it will invest with Stockland in life sciences and technology precinct at M_Park in Sydney:
Ivanhoé Cambridge, a leading international investor, today announced that it has entered into an agreement with Stockland, one of the largest diversified property groups in Australia, to acquire a 49% interest in the M_Park Trust (TMPT).

Ivanhoé Cambridge will initially invest on a fund-through basis in TMPT, which is focused on the delivery of the [62,500sqm] M_Park Stage One in Macquarie Park, the third largest office market in Greater Sydney and a major innovation hub. This stage is currently under construction, with practical completion expected in FY24. It comprises three commercial buildings with combined NLA of [37,146 sqm] along with a 25,487sqm data centre.

This initial stage is currently [62%] pre-leased to tenants including Johnson & Johnson Family of Companies, WiSE Medical and a multinational data centre operator.

Ivanhoé Cambridge will have the opportunity through its stake in TMPT to invest alongside Stockland in future stages of the project, being an adjacent four-hectare site, that has the potential to accommodate a further 95k sqm of NLA across six additional buildings5.

Ivanhoé Cambridge Co-Head of Asia Pacific, George Agethen said: “M_Park provides our portfolio with meaningful exposure and diversification to both knowledge-based workplaces and data centres and illustrates the continuation of our commitment to investing in Australia. Backed by high-credit tenants, the investment offers a resilient income profile with promising growth potential.”

CEO and Managing Director of Stockland, Tarun Gupta, said “The formation of the partnership at M_Park delivers on our strategy to expand our third-party capital platform and accelerate the delivery of our $9.1bn Commercial Property development pipeline. We are pleased to welcome Ivanhoé Cambridge to our platform and look forward to working with them to create one of Australia’s leading life sciences and technology precincts.”

TMPT demonstrates exceptional ESG performance with a clear pathway to carbon neutrality. Upon completion, three of the four buildings will be fully powered by renewables, and will target to achieve 5-Star NABERS Energy Ratings, 4-Star NABERS Water Ratings and 5 to 6 Star Green Star Ratings.

To encourage the achievement of sustainability goals, Ivanhoé Cambridge has introduced a sustainability-linked promote (“green promote”) that is tied to ESG targets to ensure alignment of interest over sustainability KPIs, incentivizing outperformance against base case sustainability goals.

“To achieve this monumental transition to a low-carbon economy we need to align the economic interests of all players in the value chain. As such, we look forward to the new strategic partnership with Stockland and we salute its market-leading ESG credentials and commitments”, adds George Agethen.

The transaction is expected to settle in in mid-2022. Completion of the transaction remains subject to approval by the Foreign Investment Review Board.

And Oxford Properties, OMERS' real estate subsidiary, recently announced it will enter San Diego's life science market with US$464 million acquisition of 13-building portfolio:

Supporting its strategy to help deliver the much needed and highly technical real estate infrastructure to companies creating the life-sciences of tomorrow, Oxford Properties Group (“Oxford”) today announced the acquisition of a nine-asset, 13-building life sciences portfolio in San Diego’s Sorrento Mesa and Sorrento Valley. Oxford, a leading global real estate investor, asset manager and business builder, acquired the 650,000 sq ft portfolio for $464 million.

The announcement marks Oxford’s entrance into the San Diego market, building on its already robust life sciences portfolio and growing West Coast presence with previously announced assets in the Bay Area and Seattle. The portfolio, together with recently acquired development lands, provides Oxford a diverse and high-quality life science offering in a market which it has high long-term conviction.

As a result of this transaction, Oxford’s North American established life science portfolio is now present across nine key markets. It has a development pipeline comprising significant scalability of new, specialized product across R&D, incubator and GMP facilities. The firm’s substantial growth in its life science business since 2017, now includes over US$2 billion of acquisitions in North America in the past 12 months.

“Our team continues to create sustained, yet highly-targeted growth against one of our highest conviction global investment strategies to build a dedicated life science business of scale,” said Chad Remis, Executive Vice President, North America at Oxford. “Today’s acquisition adds high quality, income producing assets to our growing portfolio and perfectly complements the beginning of our development pipeline in San Diego. Life Science portfolios of this size rarely trade, so it presents a unique opportunity to add immediate scale in a globally-significant life science market that is characterised by high barriers to entry.”

The acquired portfolio is 98% leased with 12 of the 13 buildings centrally located within San Diego’s Sorrento Valley and Sorrento Mesa, two of the most sought-after life science markets in North America. The portfolio consists largely of one-to-two story buildings with a 60/40 life sciences-to-office ratio, modern MEP systems and ample tenant parking.

Sorrento Valley and Sorrento Mesa have emerged as epicentres of growth within San Diego’s life science ecosystem which in 2021 recorded over 4 million sq ft of leasing volume, an all-time high, and 80% higher than 2020 (which was a record year on its own.). As a result of record high demand and limited vacancy, asking rents in San Diego’s life science market have recorded a 34% increase.

San Diego has defined itself as one of the most important life science markets globally. Nearly 40% of its population holds a bachelor’s degree or higher, rapidly outpacing the national average of 28%, and its universities graduate more STEM talent than any other region in the US. Its ecosystem is anchored by renowned research institutions and non-profits including San Diego State University, UC San Diego (‘USCD’), Scripps Research and the Sandford Burnham Prebys Medical Discovery Institute. There are 760 UCSD-affiliated start-ups alone, which generate approximately US$16.5 billion in annual revenue and employ more than 100,000 professionals, of which 74,000 are based in San Diego.

“The San Diego life science market is supported by a strong STEM presence, a highly-skilled labour force as well as world-renowned research and academic institutions. Together, it creates a highly innovative ecosystem that captures research funding, venture capital and business growth to the region,” said Tycho Suter, Vice President of Investments at Oxford. “The acquired portfolio gives us a meaningful presence in a market where we have high conviction. Furthermore, with over a third of the portfolio’s leases set to expire in the next two years, it provides Oxford the opportunity to utilize our active asset management capabilities to create value via targeted upgrades to lab space, improving the customer experience and offering that these buildings have in the marketplace.”

Warples - Sorrento Mesa CA
Oxford Properties bought these assets from private equity giant Blackstone and it isn’t alone in targeting San Diego life sciences properties:
Longfellow Real Estate Partners, a privately held developer headquartered in Boston, had no assets in the region three years ago. Today, it has 1.26 million square feet of local life science space and 90 acres of land in the region, which it assembled at a cost of $842 million.

Biotech and other life sciences firms pulled in a record amount of venture capital in 2021, with $32.5 billion raised nationwide, according to CBRE. Biotech research jobs rose 10.8 percent last year, while lab vacancy rates fell in the top 12 U.S. life sciences markets.

Biotech won't be pulling in record amounts of venture capital forever, it will cool down but these assets will remain in high demand because there aren’t enough of them. 

This is why it makes more sense for pension funds with a long investment horizon to develop platforms targeting this sector.

Anyway, let me wrap it up by stating Cadillac Fairview took a big first big step with this joint venture, investing in the UK's life sciences property market, but it will prove very successful over the long run and I expect more deals to come down the road.

Just keep in mind what William Donger, CEO of Thomas White Oxford, said: "Demand for lab and science translation space in Oxford is at record levels with restricted supply."

I also note what Bernard Taylor, chairman, Thomas White Oxford, said: “Following two years of careful work, we have selected our JV partners. I am thrilled to have Cadillac Fairview as our partner because of their long-established record of involvement in high quality property development and, as the property arm of Ontario Teachers’ Pension Plan, they have a very long-term investment perspective whose philosophy is well aligned with that of Thomas White Oxford and our 100% shareholder, St John’s College, Oxford."

Hopefully this will turn out to be one of many more deals in life sciences properties for Cadillac Fairview. 

Below, see how Oxford's new global life sciences district at Oxford North will look at night time in this short animation. There's not much there but it's just getting underway!

Second, life sciences real estate is red hot. CNBC's Diana Olick reports on the interest in the sector.