Investment Completion: Commercial Property in Cambridge

News: Investment News | 13 April 2018

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Connection Capital clients add purpose-built R&D facility in thriving Cambridge biotech cluster to their portfolios

  • Opportunity for private investors to forward-fund 37,500 sq. ft. pre-let property

  • Located in dynamic Enterprise Zone designed to accommodate rapid expansion of Europe’s leading life sciences hub

Connection Capital, the specialist private client investment business, alongside its property partner Riverside Capital, has secured an opportunity for private investors to forward-fund a purpose-built R&D facility in Cambridge’s thriving biotech cluster.

The planned 37,500 square foot property is pre-let on a 25-year lease to Cambridge Nutritional Sciences Ltd, a leading developer and manufacturer of food intolerance tests whose products are distributed in over 75 countries. The company is a subsidiary of AIM-listed Omega Diagnostics Group plc.

The project was purchased for £8.75million and has a gross development value (GDV) of £9.7million on completion. The deal included a senior debt facility at a 60% loan to value (LTV).

The net initial yield will be 6.68% once the property is income-producing early next year, and Connection Capital is targeting a 6% annual distribution from that point. Rent reviews will be inflation-linked, subject to a 2% collar and a 5% cap.

The development is located on a 175-acre business park near Ely in one of five Cambridge Compass Enterprise Zones. These were created in 2016 to expand the city’s reach and accommodate the area’s fast growing life sciences and biotech sector, as it cements its position as Europe’s dominant economy in this field.

Ely is part of the ‘Cambridge Cluster’ – the largest cluster of life science activity outside of the US. Home to 93% of all publically-quoted bioscience companies in Europe, the cluster has become synonymous with cutting-edge R&D.

Strong demand for laboratory space in Cambridge has seen prime open plan laboratory rents rise by 17% since 2014. This upward pressure on top rents comes as the availability of office and R&D space in the city has fallen by 90% in the five years to 2017. Cambridge now has the highest top rents of any UK city except London.

Claire Madden, Managing Partner at Connection Capital comments, “Opportunities like this are few and far between for private investors.”

“The sought-after location and the robust outlook of the thriving life sciences sector were compelling factors for our clients, as were the long-dated income profile and attractive pricing: generating impressive yield with the opportunity to add value through forward funding.”

“Given the current backdrop of low interest rates, volatile markets and uncertainty caused by Brexit, demand from investors for alternative sources of inflation-linked assets looks set to remain strong for some time to come.”

Ashley Wilcox at Riverside Capital comments, “This is an opportunity with significant rental and capital growth prospects, so it’s another exciting investment prospect with huge potential to put before Connection Capital clients.”

Connection Capital clients were able to participate in tranches of £25,000.

Other commercial property investments made by Connection Capital, include property tenanted by Travelodge, DPD, Aldi, Premier Inn and Travis Perkins.