Bruntwood sells 29 city centre assets as part of £500m SciTech equity raise
Offices across four cities have been absorbed by the joint venture, while the Greater Manchester Pension Fund has become an equity partner, pumping in £150m into Bruntwood SciTech.
The pension fund’s investment, part of a £500m equity raise, is the result of the joint venture’s 18-month search for a third investor to join founding partners Legal & General and Bruntwood in the life sciences development business.
GMPF’s investment will pave the way for massive growth and pump prime a 3.6m sq ft pipeline of projects, which includes the £1.7bn ID Manchester innovation district.
In addition, the JV wants to increase the value of its life sciences and innovation portfolio from £1.5bn to £5bn by 2032.
“In GMPF we have found a partner who shares [our] mutual strategic vision, values, cultural alignment and passion for the key sectors of the UK economy which have the biggest potential for growth,” said Bruntwood chief executive Chris Oglesby.
“Bruntwood, Legal & General, and GMPF are each committed to creating thriving cities, are deeply rooted in the places in which we invest, and are focussed on the application of long-term, patient capital to support the UK’s economy, with a particular focus on its regional cities.”
As part of the equity raise, which Oglesby denies forms part of an exit strategy, Bruntwood has sold almost all of its city centre office assets to the SciTech joint venture. This includes long-held assets in Manchester, Leeds, Birmingham, and Liverpool valued in excess of £600m.
Bruntwood’s decision to transfer assets – some with debt attached and some without – instead of cash as part of the deal “comes as a response to the changing needs of innovation-led businesses post-pandemic”, the company said.
Going forward, SciTech’s plan is to use these assets to “leverage ecosystems on a city-wide basis instead of within defined innovation districts”.
Speaking to Place North West, Oglesby said his commitment to the company remains as strong as ever and that returns from the sale of assets to the JV would be reinvested to pay down existing debt.
In February, the company reported the value of its Bruntwood Works portfolio was £1bn.
Among the Manchester sites sold into the JV are Union, where Bruntwood has its head office, 111 Piccadilly, Pall Mall, and Alberton.
In Leeds, West Village and 14 King Street have also been transferred, while Liverpool’s Plaza and Birmingham’s Centre City are now SciTech assets.
Many of the assets sold have recently undergone multimillion-pound refurbishments as part of Bruntwood’s Pioneer programme.
Outside of SciTech, Bruntwood will retain a £360m portfolio that includes £260m of suburban office sites and £100m of town centre regeneration schemes in Trafford and Bury.
Legal & General has also pumped more money into the partnership – the balance of the £500m when GMPF’s cash and the value of Bruntwood’s assets are added together
While the amount was undisclosed, L&G’s cash injection “reinforces [the investor’s] commitment to and underlines our belief in the UK’s long-term role as a global tech powerhouse and scientific superpower,” according to Laura Mason, chief executive of Legal & General Capital.
As a result of the equity raise, there are now two SciTech vehicles: a property company that includes Bruntwood, L&G, and GMPF, and owns the assets, and an operating company, which handles the day-to-day running of the business and remains a 50:50 JV between the founding partners.
Oglesby would not disclose the split of the property company. However, he did say that the three partners all hold “significant” stakes.
This would mean that between them GMPF and L&G now have a majority stake in the company that owns much of the Bruntwood portfolio of buildings.
It is hoped Bruntwood SciTech’s new structure will kick a massive growth plan into life. The partnership has aspirations to more than triple the value of its portfolio in the next nine years, creating 2,600 “high growth jobs” along the way.
“GMPF’s investment, alongside the additional capital from Legal & General, and assets from Bruntwood will elevate the potential of Bruntwood SciTech even further,” Oglesby added.
“We will also be able to further support the delivery of strategic city visions and innovation strategies in the UK’s fastest-growing regional cities.”
The £500m equity injection will be spent on expanding and redeveloping existing science and technology campuses under the partnership’s ownership such as Alderley Park in Cheshire and ID Manchester.
A 3.6m sq ft pipeline of projects has already been identified.
As well as expanding what it already has, SciTech said it will also look to enter “additional R&D intensive regional cities” following the equity raise.
Kate Lawlor, chief executive of Bruntwood SciTech since 2021, said the GMPF deal is “one of the most significant transactions this year” despite a “challenging time” for UK real estate.
“This deal is about three organisations aligned in both their visions and commitment to investing for the long-term,” Lawlor said.
“The investment from GMPF demonstrates the strong impact and proposition Bruntwood SciTech has developed, and we are excited to bring in a like-minded third-party investor to support the key priority sectors for the UK in our mission to expand the portfolio further.”
Lawlor will remain in post within the new structure. Ciara Keeling, former chief executive of Bruntwood Works, has joined SciTech as chief operating officer.
The Works brand will be gradually wound up following the transfer of its assets to SciTech, resulting in what Bruntwood called a “small number” of job losses – less than 5% of the total headcount.
Digging into GMPF
Valued at £28bn, the Greater Manchester Pension Fund is the largest of 86 funds that make up the Local Government Pension Scheme in England and Wales.
Its investment in Bruntwood SciTech is the first time a local government pension scheme has made a direct and active investment into a UK’s science, tech, and innovation specialist property platform, according to the JV.
“We have long admired Bruntwood SciTech and seen its impact on our doorstep in Manchester,” said Cllr Gerald Cooney, chair of the GMPF.
“We’re investing from society for society by deploying our capital to benefit the UK’s regional economies for the long-term. We’re excited about how we can now help to bring forward Bruntwood SciTech’s pipeline of transformational, world-class developments.”
Through its new structure, Bruntwood SciTech has “enabled other UK local authority pension funds to co-invest efficiently and on an asset-by-asset basis”, according to the JV.
This means that other would-be investors wouldn’t have to go through the lengthy process GMPF endured if they wanted to invest in SciTech.
Discussions are already underway with a number of other major local authority-linked funds for additional capital investment, Bruntwood said.
Bruntwood and Legal & General were advised on the GMPF deal by Eastdil and GMPF by CBRE.
Colin Thomasson, head of capital markets at CBRE Manchester, said: “This represents a landmark, strategically significant transaction for our client, The Greater Manchester Pension Fund which will position Bruntwood SciTech to capitalise on the significant growth opportunities available to the platform and boost domestic innovation capacity.
“We are confident that this will be the start of a positive partnership for all parties, enabling Bruntwood SciTech to fulfil its growth strategy and help deliver on the strategic objectives of the company and the Fund.”
Legal and property advisors were Freshfields, Addleshaw Goddard, Eversheds, Mills & Reeve, JLL, Deloitte, Greenberg Traurig (GT Law), Grant Thornton and PWC.