There’s not much of a story to tell,” laughs Paul ffolkes Davis, bursar of Cambridge University’s Trinity Hall College. That is something of an understatement for a college that has just handed over development of 130,000 sq ft of space slap bang in the middle of what is probably the city’s most prestigious address – Cambridge Science Park.
TThis is the first time Davis has talked to the property press. In fact, it is probably one of the few times Davis has spoken to the press at all. More at home in the hallowed halls of the college, Cambridge’s college bursars are not known for their attention-seeking ways. But that is far from saying Davis is disconnected from the real world. Having started his working life as an investment banker in New York, his career in international capital markets lasted for 26 years until he became bursar of one of Cambridge’s oldest colleges in 2004.
In the spring of this year, the college selected Development Securities to bring forward three plots of land on the park. What will confuse outsiders is that this land sits right in the middle of the park, most of which is owned by the similarly named, but very different, Trinity College.
Trinity College has been working on development of its part of the park (see box below) for more than 40 years and boasts 1.6m sq ft of space. It has its own plans to redevelop some of the more middle-aged buildings, including speculatively developing 55,000 sq ft on the park.
Any development by Trinity Hall will go head-to-head with this. Yet, in typical down-to-earth Davis fashion, he says: “I don’t think of [the science park site] as interesting; nothing much will happen unless we are able to secure a prelet.”
He adds, matter of factly: “I haven’t got any money. I can borrow it, but I’d rather borrow money for other things.”
The property industry would disagree with Davis. Speak to local agents and they are very interested in how development might progress, how it will fit with the existing science park and when things might kick off.
The difference for the 662-year-old college is that it has held the land for longer than any “normal” developer could or would ever dream of. So why appoint developers now? Davis says that, under advice from its agents Carter Jonas and Savills, the feeling is that now is the time to develop. “We are at the bottom [of the cycle] and we need to start preparing to develop these three plots.”
DevSec will drive the process forward and Trinity Hall will be responsible for financing it. But the ever-prudent Davis is keen to point out a few home truths on this matter. He will not be using the college name. He says: “I do have access to borrowing on the college name but this will be on the project name.”
Nor will the college be using its own investment bank, Cambridge & Counties, of which Davis is chairman. “It’s not the sort of thing it would lend on, it’s too big,” he says. But with trademark prudence, Davis says: “We’ve got no screaming need to develop it; Development Securities might be in more of a hurry.”
Granta Park
Cool as a cucumber. That is the only way to describe Kent Griffin, president of BioMed Realty and new owner of Cambridge’s Granta Park
He is laid-back about the company’s recent £127m purchase of Granta Park. He is chilled about plans for its future, and he plays down gossip that the US REIT might be about to do a deal with TWI for its development land on the park, which has piqued most of the property industry’s interest. Friendly and outgoing, with an easy-to-get-along-with manner, the San Diego-based head is the very definition of Cali-cool.
In June, the US REIT reached an agreement to buy the 472,000 sq ft science park. It was one of the largest regional deals ever concluded. Many in the industry, including those who put rival bids together for the park, say BioMed came out of nowhere. And, as such, it did. Although BioMed Realty is a big name inn the US, it’s unheard of across the pond (see analyst box). The acquisition is itss first, not just in the UK but outside the US. “It’s notable for us, and very important,” Griffin says. “But it’s still a very modest size when looked at through our total investment portfolio. But let’s not detract from the fact this was a big deal for everyone.”
The strategy for now is more of the same. Griffin says the firm is the very definition of a long-term investor, saying it will hold Granta Park indefinitely. Ultimately, it will put some of its own people on the ground and a decision on who will win the lucrative agency deal is set to be announced.
Its first challenge is widely seen as keeping the tenants on the park happy, although US connections to big-name pharmaceuticals back home will help it here. But many say that if it wants to see real value it needs to find a way to get its hands on TWI land – 27 acres of development land. Former owner MEPC had formed a joint venture for the development of this land. “I can’t believe the new buyers won’t try to do a tie-up with TWI,” says one local agent. “If you were BioMed, you wouldn’t want the threat that TWI could build and attract new occupiers on that land, you wouldn’t want the competition,” he says, adding: “Its coolness is probably more about it not being able to engage with TWI.”
Griffin is sanguine. With almost a shrug of the shoulders in his voice he says: “I think it’s a possibility for the future; today our job is to satisfy the existing tenants on the park.
“We are co-operating and collaborating with TWI on operating the park, but I wouldn’t want to jump to add anything beyond that.”
The deal went right to the wire and, Griffin says, in hindsight, coverage about the price paid for the park might have been overblown. “There was significant interest in trying to undermine our deal. The competition was very aggressive and there was a perception that we were paying a much higher price than we did ultimately.”
What is Biomed Realty Trust?
Bill Pekowitz is Standard Life Investment’s Boston-based investment analyst for the Americas in its Global Listed Real Estate Team
BioMed Realty Trust is the owner of a 13m sq ft, high-quality portfolio of life science buildings, valued around $4.2bn (£2.6bn) as of 30 June 2012. Historically, the company has focused its investments in seven core US life-science markets – Boston, San Francisco, Maryland, San Diego, New York/Northern New Jersey, Pennsylvania and Seattle.
Since going public in 2004, the firm has relied on a series of major transactions to expand its portfolio and push into key strategic life-science markets.
With the exception of its entrée into the San Francisco Bay area, most of its initial investments focused on portfolios with high occupancy and little lease up risk.
Once the company establishes a presence in a market, it will initiate some development activity, leveraging its existing portfolio to meet the expansion needs of tenants.
The acquisition of Granta Park, which boosts BioMed’s portfolio by around 4%, represents its first foray into international markets.
Before announcing this transaction, BioMed had not articulated a plan for international expansion or identified Cambridge in the UK as a target market.
That said, the company has attempted to limit the risks associated with the move by targeting a well-established, fully occupied location in a developed market.
In addition, the acquisition offers expansion possibilities through new development once BioMed establishes a presence in the UK market and a better understanding of market dynamics.
Development Securities
Development Securities director David Enticknap, who is in charge of the Cambridge project, echoes Trinity Hall’s reserve about the development of the three plots on Cambridge
Science Park.
“I wouldn’t be advising spec at the moment,” he says. “If the world changes then we will think about it.” Instead, DevSec has been looking at the existing masterplan and raising
the density in line with south Cambridgeshire and government policy.
An outline planning application will be submitted this side of Christmas for all three plots.
Having analysed the sites, Enticknap says two of the plots could be linked together to offer 80,000 sq ft. At present, remaining flexible is the key
to trying to bag a deal.
Who DevSec might be talking to has raised a few questions in the local property market. Some point out the fact that the developer already owns Cambourne Business Park.
Enticknap says: “There is a potential for conflict, but we have an understanding with Trinity Hall and it is comfortable with the arrangements.
“We have appointed the same agents on both schemes so there is full transparency. “I don’t think there will actually be a conflict as they are different offers; Cambourne Business Park focuses on traditional office use, whilst Cambridge Science Park attracts research and development occupiers.”
