London-based Legal & General Capital (LGC) has entered the US market for the first time, forming a 50:50 partnership with US-based real estate developer Ancora to target the life sciences real estate sector.
LGC is investing an initial $500 million of an overall $4 billion in seed capital to form Ancora L&G, LLC.
Operating under the name Ancora, the business’ geographic focus will sit predominantly within emerging regional markets in the US where early-mover advantages are available, the companies said.
“While the US is the world’s largest commercial real estate market, the lab real estate market in particular is one of the smallest sectors among other commercial U.S. asset classes,” Sir Nigel Wilson, chief executive of Legal & General Group, said in prepared remarks.
“This lack of scale creates high barriers to entry for investors and has made it particularly challenging for tenants to grow due to scarcity of supply.”
Upward Momentum to Continue: LendLease
Ancora will have plenty of company.
“Investors are attracted to this growth area due to strong rents and anticipated growth in most parts of the country,”Stephen Li, Partner, Cox, Castle & Nicholson, tells GlobeSt.com. “Lab space, in particular, is generally limited, so investors are partnering with developers to deploy capital for development and redevelopment opportunities. In fact, many of our clients are entering into programmatic joint ventures to acquire, develop and own life science projects across the country.”
Another example of a fund targeting the life sciences space is the joint venture launched in February between Lendlease and Ivanhoé Cambridge.
“The life science sector has experienced a steady uptick in capital investment, reaching a multi-year high in 2021,” Philip Lamere, portfolio manager at Lendlease, tells GlobeSt.com.
“While capital investment in 2022 is unlikely to reach the same peak, Lendlease believes the momentum behind the life science sector will continue its upward trend, which is why Lendlease launched a joint venture in February with Ivanhoé Cambridge.”
That fund is designed to identify opportunities for life science development and redevelopment.
JLL IPT Says Demographics ‘Extremely Positive’
Allan Swaringen, president & CEO of JLL Income Property Trust, an institutionally managed daily NAV REIT with more than $6.5 billion in portfolio assets, tells GlobeSt.com that his firm has viewed life sciences and healthcare-oriented real estate as a winning property sector for some time.
“That trend has only been accelerated as the pandemic has widened the gap between in-favor and out-of-favor property types,” Swaringen said.
“The underlying fundamentals for this sector in particular have attracted us to make it a focus in our portfolio. For instance, there is limited supply of these assets in the market, and oftentimes they require specialized buildouts paid for, at least in part, by the tenant. This combination tends to mean tenants are ‘stickier,’ creating long-term, stable NOI for these properties with rents that are typically significantly higher than what you’d get for industrial or office on a per square foot basis.
“Additionally, the demographics are extremely positive for life sciences and healthcare oriented real estate. With America’s population aging and the need for outpatient healthcare and medical research growing, this property type appears to have a long runway for continued accretive investment.
Mark Goodman & Associates Has a New Build
Mark Goodman, the principal of Mark Goodman & Associates, Inc. (MGA), a real estate firm with over 40 years of development, investment and construction management experience, is constructing a 16-story, 503,000-square-foot life sciences facility that will be the first purpose-built lab and research and development building in Chicago.
It is designed by and for scientists to specifically accommodate the rapidly growing life sciences and biotechnology industry.
“Covid-19, in particular, magnified the hurdles scientists face in getting new medical treatments to people who need them and highlighted efficient methodologies to help overcome those hurdles,” Goodman said.
“When a breakthrough therapy is discovered in a lab, there is a need to ramp up approvals and production quickly. The number of FDA studies relative to this is increasing. Therefore, having readily available space that can accommodate the rigorous requirements of biotech is an undeniably crucial need and there simply isn’t enough of it in the market now.
“Investment in life sciences will continue to grow exponentially, as breakthroughs in research are happening every day. Scientists just cracked the last 8% of the human genome, which will open up entirely new areas of study in modern medical treatments. There is a long runway and the opportunities for new discoveries are limitless.”
