Oxford Properties, Novaxia’s French Life Science JV Buys its First Asset

IPE Real Assets reports Oxford Properties, Novaxia’s French life science JV buys first asset:

A newly partnership between Oxford Properties and French urban developer Novaxia has acquired a 21,000sqft life sciences campus in Paris as its first asset.

The partnership, announced in May this year, has completed the acquisition of the Biocitech life sciences campus for an undisclosed sum. 

Biocitech, located in the Romainville submarket of Paris, comprises lab, office and specialist storage space across seven buildings. Oxford Properties and Novaxia plan to substantially invest in and reposition the Biocitech site.

Pierre Leocadio, SVP and head of European investment at Oxford Properties, said: “Building a global life science business of scale represents one our highest conviction investment strategies.

“This acquisition presents us with an exciting opportunity to enter the Paris life sciences market, which is underpinned by high occupier demand yet an acute undersupply of space.”

Leocadio said Oxford Properties use its “early mover advantage and leverage our global experience” from across North America and the UK to create life sciences real estate solutions in the French market.

Back in May, Oxford Properties and Novaxia teamed up to invest around €1bn to acquire and develop life sciences buildings across France.

Joachim Azan, founding president of Novaxia, said: “With the acquisition of Biocitech, we are taking a first step in creating places that represent the entire life sciences value chain (research laboratories, incubators, accelerators and production plants).

“Real estate will thus be the starting point for scientific innovation so that France retains its best researchers, its best companies and strengthens its scientific sovereignty. With Oxford, we are at the beginning of a partnership, which plans to make further acquisitions.”

Aude Landy-Berkowitz, managing director of Novaxia’s development arm, said: “The development of life sciences requires real estate that meets the technical needs and uses of a community. In France, there is a shortage of suitable buildings. The requirements are multiple and specific in terms of water, air, height or safety.

”We will develop real estate that is complementary and synergistic, adaptable with enclosed as well as shared spaces in the service of research and innovation and suitable to small start-ups as well as large companies. With Biocitech, we are creating new campuses open to cities and residents, just like those in Amsterdam, Oxford or Boston.”

Oxford Properties put out a press release stating it partnered with Novaxia for its first French life sciences acquisition:

PARIS

Oxford Properties Group (“Oxford”), a leading global real estate investor, asset manager and business builder, and Novaxia, a premier French urban developer, (“the Partnership”) has completed the acquisition of the Biocitech life sciences campus in Paris, France. The deal marks the first acquisition of the Partnership, announced in May this year, to invest approximately €1 billion to acquire and develop life sciences buildings across France. Biocitech, located in the Romainville submarket of Paris, comprises 21,000 square metres of lab, office and specialist storage space across seven buildings and enjoys a rich history as a life sciences hub. The campus is leased to 17 occupants including Galapagos, Mutabilis and Nextdot. Two-thirds of the occupiers are mature companies with the remaining third start-ups, creating a scientific community with endeavours across biotechnology, biopharmaceuticals, bioinformatics, the provision of scientific and technological services as well as medical devices and equipment. 

 “Building a global life science business of scale represents one our highest conviction investment strategies,” commented Pierre Leocadio, Senior Vice President and Head of European Investment at Oxford Properties. “This acquisition presents us with an exciting opportunity to enter the Paris life sciences market, which is underpinned by high occupier demand yet an acute undersupply of space. At Biocitech, we aim to create a premier campus that serves the entire life and product cycle of biotech firms which is an increasingly important sector in France. “We will use our early mover advantage and leverage our global experience from across North America and the United Kingdom to create compelling life sciences real estate solutions in the French market. We look forward to working with our local partner, Novaxia, on the first project of our partnership to help biotech firms research, develop and then manufacture the life-changing therapeutics of tomorrow.”

Oxford and Novaxia have plans to substantially invest in and reposition the Biocitech site. The project plans to create close synergies between occupiers and to optimize opportunities for internal and external collaboration. To better serve Biocitech’s occupiers, work will be undertaken in the short term to improve the laboratory space and reduce energy consumption. The Bioctech site combines both income producing properties with future development potential to expand the campus to meet the strong demand in the Paris region for cutting-edge for life sciences facilities while offering new and accessible services for the city.

Joachim Azan, Founding President of Novaxia, commented, "With the acquisition of Biocitech, we are taking a first step in creating places that represent the entire life sciences value chain (research laboratories, incubators, accelerators and production plants). Real estate will thus be the starting point for scientific innovation so that France retains its best researchers, its best companies and strengthens its scientific sovereignty. With Oxford, we are at the beginning of a partnership, which plans to make further acquisitions," explains Joachim Azan, Founding President of Novaxia. 

Aude Landy-Berkowitz, Managing Director of Novaxia Development added, "The development of life sciences requires real estate that meets the technical needs and uses of a community. In France there is a shortage of suitable buildings. The requirements are multiple and specific in terms of water, air, height or safety. We will develop real estate that is complementary and synergistic, adaptable with enclosed as well as shared spaces in the service of research and innovation and suitable to small start-ups as well as large companies. With Biocitech, we are creating new campuses open to cities and residents, just like those in Amsterdam, Oxford or Boston.”

With its global experience in life sciences, Oxford Properties will complement Novaxia's local knowledge. Since 2017, Oxford Properties has developed extensive life sciences experience through credit and equity investments as well as the development of laboratories and GMP facilities. Oxford now operates across the top 10 U.S. life sciences markets as well as in London and Cambridge in the UK. The acquisition of Biocitech is in line with Oxford’s objective to invest in the French market and build a market leading global life science business of scale. Novaxia has built up an in-house team of experts in life sciences real estate and will work closely with the Oxford Properties team on a daily basis.

Go back to read an earlier comment of mine which I posted in mid-May on Oxford's strategic partnership with Novaxia to invest €1bn in the French life sciences market over the next few years.

In particular, it is worth noting the following:

This strategic partnership has so many elements of success outlined in the press releases:

• Historically, France has been at the forefront of R&D in the fields of medicine and pharmaceuticals
• It is already a key hub for developing biotech and medtech innovations
• The country, however, lacks dedicated life sciences properties which address the needs of growing and innovative life sciences companies.
• This strategic partnership with Novaxia will enable Oxford Properties to develop a large scale, dedicated life sciences portfolio in France. 
• The French government is increasingly making targeted investments to support life science ‘clusters’ with existing universities, research institutes, clinical hospitals and sources of private capital:
  
• The France Recovery plan targets the deployment of €6 billion in support of France’s healthcare system
• While the France 2030 plan earmarks €7.5 billion for the health sector, including the production of biopharmaceuticals
• Alongside Novaxia, Oxford Properties will become a leader in life sciences real estate investment in France. 

Like I said, read the press release carefully, all the key elements of success are there.

I like life-sciences properties because they're not as cyclical as other real estate (VC flows play a role but it's not just that) and have strong secular headwinds sustaining them, and these were there before the pandemic hit (the pandemic obviously accelerated the trend). 

Add to this that the French government is committing billions to support the health sector, including the production of biopharmaceuticals, and you begin to understand why Oxford Properties and Novaxia are definitely on the right track here.

The partnership has completed the acquisition of the Biocitech life sciences campus for an undisclosed sum. 

I don't know much about Biocitech but I did read that back in 2015, Galapagos signed a long-term lease for one-third of the park's space:

Romainville, France, June 2, 2015 - BIOCITECH, the city complex for healthcare and biotechnology companies and Galapagos (Euronext & NASDAQ: GLPG), the Belgian biotech specialized in therapeutics based on novel, proprietary targets, today announce that Galapagos' French subsidiary is moving into the fully refurbished Galien building. This is the result of a long-term lease covering 5,800 square meters, almost one-third of the space in the complex. The financial terms of the agreement were not disclosed.
 
This agreement comes at a time when few other European biotech companies are securing building space in France. BIOCITECH aims to secure a mix of different sized companies on site, with one-third large biotech, one-third mid-size businesses (up to 50 staff) and one-third start-ups.
 
Galapagos, which arrived in Romainville in 2006, aims to centralize its BIOCITECH city complex activities in a single building, relocating its 130 staff from their three current BIOCITECH sites into the refurbished Galien building. To meet the company's specific needs, BIOCITECH overhauled the Galien building and upgraded its complete range of equipment. The work was completed in less than a year, showing BIOCITECH's expertise and fast response in tailoring premises to the needs of growing businesses. Galapagos will benefit from a wide range of adapted services from chemistry and biology laboratories (including P2) to pre-clinical facilities and offices.
 
"This move shows our trust in BIOCITECH's ability to foster growth and innovation," said Pierre Deprez, Galapagos discovery site head. "This fully refurbished building with one floor dedicated to chemistry and two floors dedicated to biology fulfills Galapagos' needs well. All colleagues working in the same building will enhance team interactions. This new building is a fantastic tool to support Galapagos' drug discovery effort."
 
"We value the contribution of our team in France," added Onno Van de Stolpe, CEO of Galapagos. "We are pleased to gain access to a high quality and effective new research environment for our R&D efforts in Romainville." 
 
"We are delighted to invest in a series of upgrades on the Galien building. The long-term commitment shown by Galapagos will help us to strengthen the range of our services within the park. It also helps to secure the long-term future of the park," said Jean-François Boussard, president of BIOCITECH. "The new lease validates our business model in terms of pricing; it also shows how we proactively respond to the needs of our residents."

Also, in September, Savills UK put out research highlighting Paris life science:

In France, venture capital funding into the life science sector reached €1.17bn in 2021, the highest level amongst all continental European countries.

Life science fundamentals remain positive

Record levels of venture capital raised for the sector in 2021

The Covid-19 pandemic has propelled the life science sector in Paris into the spotlight. Ageing populations, increased demand for personalised medicine, digital health, drug discovery and growing public and private healthcare spend are further stimulating growth in life science companies. In France, scientific and technical economic output has grown by 2.1% per annum over the past five years, at a faster rate than GDP (1.6%). However, with a severe undersupply of suitable laboratory real estate, where will these companies base their operations in Paris?

Savills Research observes that venture capital (VC) funding into European life sciences has grown by 24% per annum over the last five years, reaching €10bn in 2021, with drug discovery and biotechnology raising the most capital.

France is one of the key locations in Europe seeing significant growth in the number of life science companies and has recorded growth in VC funding in established locations such as Paris, Toulouse and Lyon, reaching €1.17bn in 2021, the highest level amongst all continental European countries.

The Île-de-France (IDF) region attracts the highest proportion of life science VC investment in France, which stood at just over €659m in 2021, reflecting a compound annual growth rate (CAGR) of 44% between 2016 and 2021. Savills calculates that every €1bn of VC investment creates 46,000 sq m of life science real estate demand. This concentration of VC investment in the region indicates the potential to stimulate circa 50,000 sq m of new demand from the life science sector by end 2023.

"We are now observing larger capital raises in later-stage funding rounds – a common trend before companies may seek to IPO on the stock market"

Georgia Ferris, Analyst, European Research

We expect the overall level of investment to be lower in 2022 given rising global interest rates and investor caution, but there is still a significant amount of capital that will kick-start and grow life science companies in the near future. For example, DNA Script, a biotech company based 4.5 km from the centre of Paris, raised €169m in 2021, where funds will be used to accelerate the expansion of talent and resources, which will involve the hiring of over 100 personnel, creating new real estate requirements. We are now observing larger capital raises in later-stage funding rounds – a common trend before companies may seek to IPO on the stock market.

Why is Paris an attractive life science location?

Paris is one of continental Europe’s foremost life science clusters and is home to major healthcare companies and public/private partnerships which support the growth of the ecosystem as a whole. The cluster dynamics are strong with a good combination of Academia, Industry (Investment) and Government support, and life science companies want to be part of this attractive ‘Triple Helix’.

The concentration of talent in these clusters is vital for maintaining and growing future real estate demand. Teaching hospitals and universities are a major draw for global occupiers, as long as government funding and incentives appear attractive.

There are five leading life science universities based in the Paris area. European scientists appear to be cheaper on the global stage, and the salaries of those located in Paris come in below average. Paris is already home to many of the leading global pharma companies, which supports this evolving ecosystem.

Sanofi’s flagship global headquarters is situated in central Paris, and it has recently launched a new accelerator to drive innovation through the use of digital, data and artificial intelligence. Given the relatively small geographical size of Paris from a continental European perspective, the city can be considered as a single cluster with key hubs.

Key hubs

Paris’s major innovation-focused urban development zone

Paris-Saclay is a research-intensive science and innovation cluster which is home to Paris-Saclay University and the Polytechnic Institute of Paris. Key occupiers include IUT d’Orsay, Université Paris-Saclay, Danone, Safran, Oracle and GSK, alongside many other large corporate research facilities, SMEs and incubator hubs. Paris-Saclay is the largest life science campus in Paris.

The Campus Urbain is one of the largest innovation-intensive development projects in Europe. The Campus currently comprises approximately 872,000 sq m of existing real estate across the University and major large corporations.

The Campus Urbain comprises the Servier and BioLabs incubator (1,850 sq m), the redevelopment of the former Danone R&D centre and the construction of the Paris-Saclay hospital (45,000 sq m).

Office rent: €140–€225 per sq m per annum

A biocluster with a deep-rooted history

Genopole is France's leading biocluster for cutting-edge projects in biotechnology. It hosts the Genoscope Centre, initiator of the first decoding of the human genome, as well as many labs and platforms housing advanced technological equipment. The Genopole Ecosystem contains 600 scientists, one university, two IT schools, 25 R&D platforms, one hospital and 80 organisations. Key occupiers include Illumina, Integragen, Algama, Algentech, Anova-Plus and Glowee.

Genopole’s office and lab buildings occupy 115,000 sq m over five campuses. For start-ups, a 2,500 sq m incubator is available with offices, shared equipment and laboratories for biotech research.

We understand that Genopole is delivering a new laboratory and incubator building of c.5,000 sq m which will be delivered in 2024.

Office rent: €180–€200 per sq m per annum

Innovation real estate anchored by Galapagos

Biocitech is a legacy asset in north-east Paris which was the former base of Sofrapen and Sanofi Laboratories.

Biocitech comprises 20,000 sq m of existing real estate, of which 7,077 sq m is anchored by Galapagos, and the remainder occupied by tenants including Mutabilis, Nexdot, Oroxcell and PrimaDiag.

Biocitech also includes c.35,000 sq m of developable land, which has been earmarked for uses including life sciences and datacentres. Given the current massing on site, we assume between 90,000–100,000 sq m of GLA could be constructed on-site.

Office rent: €175–€210 per sq m per annum

France’s Oncology Research and Treatment Hub

Cancer Campus is regarded as the first European Cancer Centre and ranked number five in the world. It includes the cancer-research institute, Gustave Roussy Institute (IGR), but also welcomes various healthtech companies. The Gustave Roussy Cancer Institute is a leading oncology hospital in Europe and one of the top five specialised hospitals globally. Key occupiers include Sanofi, Nanobiotix, Cellvax, AISA Therapeutics, QuantaMatrix, NeoNeuro and Endotact.

As part of the wider Campus Grand Parc scheme, the cluster will deliver 150,000 sq m of scientific and commercial space with a further 20,000 sq m of education facilities for the health sector, 30,000 sq m of retail and amenities, and 3,300 residential units.

Office rent: €220–€290 per sq m per annum 

 

Paris-Saclay focus

The Paris-Saclay cluster covers more than 5,000 hectares and is known as one of Europe’s leading research campuses. The cluster attracts a range of STEM occupiers from across the science, technology and innovation industries. The primary geographical focus of Paris-Saclay is located around the educational institutions, which are located on the Campus Urbain of Gif-sur-Yvette, Orsay and Palaiseau. The wider cluster, defined under the Opération d’Intérêt National (OIN), stretches up towards Versailles and Saint-Quentin-en-Yvelines cluster. Intel, the world's second largest semiconductor manufacturer, is setting up its European research and development centre in Paris-Saclay which will be operational from 2024 and will eventually employ over 1,000 people.

The growing attractiveness of Paris-Saclay can be linked to the growing momentum of leading international occupiers moving to the cluster, but more importantly, public transport connectivity will be significantly improved by the extension of Line 18 as part of the Grand-Paris project, Europe’s biggest infrastructure project. Grand-Paris will add 200 km to Paris's metro network, which is expected to cost €38 billion. When fully delivered in 2028, Line 18 will serve as a key transport link between Orly, Massy and Versailles, going through the heart of Saclay’s Campus Urbain, cutting transport times by more than 30 minutes in some cases.

Paris rental tone

Laboratory space is often built-to-suit and owner-occupied in distinct locations such as Campus Urbain or Genopole, and it is therefore challenging to obtain detailed occupational evidence and lease information from occupiers.

This trend is similar in the UK, however, more transparency is emerging in key clusters, especially the Golden Triangle of Cambridge, Oxford and London. It is becoming clear when analysing the more established UK clusters that there is a premium being paid for lab-enabled buildings in key life science locations. Based on our analysis of the aforementioned clusters, Savills research shows that in Paris, the average premium for lab-enabled space is circa 18% when compared with top rents for office space in the vicinity.

However, fully fitted serviced laboratories achieve rents at an average premium of 22% above lab-enabled space, although much of this depends on the fitout and technology provided for the occupier. The limited supply of laboratories and intense competition from international lab occupiers seeking to enter Paris is expected to push strong rental growth over the coming year.

Outlook

Paris demonstrates positive trends, including strong VC investment growth in life science businesses, positive governmental support and a wide talent base. In France, scientific and technical economic output is forecast to grow by a further 2.19% per annum over the next five years, signalling a strong economic outlook for investment in the sector. The same forecast figures for the UK and Germany are 2.15% and 1.58%, respectively. Moreover, France records relatively low inflation compared to other large life science destinations.

From a real estate perspective, Paris is severely undersupplied in terms of quality lab-enabled real estate, with strong forecast occupational requirements set to absorb any near-term pipeline. Paris comprises four key clusters, with the Campus Urbain being the primary innovation cluster in proximity to the capital. Savills anticipates that existing and emerging occupiers in the science and technology sectors will be attracted to Paris’s life science clusters to grow their operations and advance their discovery efforts, providing an opportunity for new development of multi-tenanted laboratory premises.

As you can read above, despite the rise in interest rates, the fundamentals for Paris life science properties remain very strong and Paris is severely undersupplied in terms of quality lab-enabled real estate, with strong forecast occupational requirements set to absorb any near-term pipeline.

I'm sharing this research to explain why Oxford Properties JV with Novaxia to invest €1bn in the French life sciences market over the next few years is a very smart strategic decision. 

Oxford is really ramping up its life science properties all over the world in key hubs.

Last month, I discussed how it expanded its San Diego life science presence with the purchase and lease back of the Ionis campus. 

This life science platform has grown very nicely and will continue to grow as secular tailwinds support its growth.

Lastly, since I'm discussing life science properties, make sure you do your flu shot and Covid booster.

I got the flu yesterday and it really wiped me out (first time I got the flu in over 20 years and I rarely get the flu shot). This flu season is bad, the symptoms are the same but it's much worse than other times.

Alright, that's my public health announcement, stay safe, everybody is getting sick these days (flu or Covid).

Update: Turns out I had COVID, was testing negative for first two days which were miserable, gets better once the fever breaks.

Below, a webinar from Choose Paris Region where you will get insights on the development of buildings to welcome Life Sciences projects in the Paris Region.