Brookfield’s £300m Harwell loan paves way for life sciences growth

The Canadian manager secured financing from a consortium of lenders to develop a further 440,000 sq ft on its Harwell campus in Oxford.

The £300 million (€350 million) loan sourced this month by Canadian manager Brookfield and its UK government partners for the Harwell Science and Innovation Campus in Oxford is one of the largest UK property financing deals so far this year – and one of the most significant in the country’s fast growing life sciences real estate sector to date.

The loan was secured by the campus public-private partnership, a joint venture between Brookfield, the UK’s Science and Technology Facilities Council and the United Kingdom Atomic Energy Authority. It was provided by a consortium of lenders comprising Germany’s Deutsche Bank, French bank BNP Paribas and Paris-headquartered manager AXA IM – Alts, and is designed to fund a major expansion of the campus, including new laboratory, advanced manufacturing, and office space.

Speaking to Real Estate Capital Europe, Dominic Williamson, managing director at Brookfield’s real estate group, said the facility will be used to develop 440,000 square feet of space at Harwell, which Brookfield owns as part of a 50/50 joint venture with the Science and Technology Facilities Council (STFC) and the United Kingdom Atomic Energy Authority (UKAEA). The new space will include Tech Foundry, a 220,000-square-foot advanced manufacturing facility, and Motherlabs, serviced laboratories designed for start-up and scaling science organisations.

Despite uncertainty in the real estate financing market, and the specialised nature of the life sciences sector, Williamson said lender appetite for the transaction proved to be strong. It is understood that, as of April, Brookfield had received as many as 15 term sheets from lenders looking to finance the deal.

“Harwell has generated a lot of investor interest, but also credit interest as well. It would be fair to say the level of interest we had in providing this facility was deep,” he commented.

“It is a combination of an investment and development facility, in a sector that people show a lot of interest in. The terms we achieved for this financing are very competitive.”

Brookfield, which has a wide range of lending relationships in Europe, has closed previous financing deals with each of the consortium members, suggesting the sponsor’s track record played a part in it securing the financing. But Williamson explained debt providers are increasingly willing to back the best quality life sciences real estate.

“The reason lenders are interested likely mirrors why we are interested from an equity perspective. What we’ve been able to create here is one of the largest science and innovation businesses in the UK, and we have more than 300 organisations in that particular segment which we are looking to grow significantly over the course of the next few years. And we are able to deliver a yield on costs that is incredibly favourable.

“It really all comes down to the level of occupational demand that we have seen across the space. That’s really what drives our thesis in the sector.”

Brookfield acquired a 50 percent stake in the campus in 2020 from UK property company U+I. The remaining stake is owned by the UK government. The deal marked its entry into the UK life sciences sector, following several years of investing in the sector in North America.

“It wasn’t an area of the real estate market that really existed at scale in the UK and Europe. So, we wanted to actively analyse how the occupational demand was going to emerge in Europe,” Williamson explained.

Although science and technology schemes like Harwell require an element of build-to-suit development, Williamson said an element of flexibility is also important. “We provide a range of facilities, from incubators to R&D space and advanced manufacturing buildings. There is always an element of speculative development, but we are constantly engaging with our customers, and are delivering flexible space that can be adapted to suit their needs.”

In 2022, Harwell became part of the Advanced Research Clusters (ARC) network. ARC is an alliance of innovation campuses funded by Brookfield in the UK and Europe.

Cluster effect

The clustering effect remains important for the sector, Williamson added. “In the US, we have seen the clustering effect around Cambridge, Massachusetts, and other areas. What we are trying to achieve with Harwell is, first creating the physical real estate, because there was just not enough of it, and second, creating a community where people can share ideas and connect talent networks – which is what we are doing with ARC.

“That’s something we hope to grow elsewhere in the UK and potentially in continental Europe over time. The US is clearly a much more established market, and the UK is the second-most established market. There are active opportunities we are tracking in Europe as well.”

Williamson explained that the covid-19 pandemic emphasised the need for life science assets in the developing of vaccinations. In March, Moderna, the biotechnology company which in December 2022 signed a 10-year deal with the UK government to produce a homegrown supply of covid jabs, agreed to occupy a 145,000-square-foot innovation and technology hub at Harwell. The lab has the capacity to produce 250 million vaccines.

Harwell is also home to the UK’s first national satellite testing facility, which has had over £100 million of government investment, and is open to all commercial space organisations.

Brookfield currently has 1.6 million square feet of existing life science space and has scope to further develop this to around 2.3 million square feet.