30   May,   2024

DTZ Investors Unlocks Exposure to Oxford Life Sciences Through Asset Sale

In 2011 DTZ Investors acquired the Northgate Quarter in the heart of Oxford city centre, a freehold interest with five high street retail units and a sold off long leasehold over the upper floors.  The upper floors were occupied by Debenhams, the long leasehold of which DTZ Investors subsequently acquired in 2015, taking full control of the site.  The property sits prominently on the corner of George Street and Magdalen Street, comprising 126,000 sq ft of modern construction behind a retained listed façade.  It is arranged over basement to fourth floor and is ready for immediate redevelopment, subject to planning.

The Crown Estate has completed a £33,000,000 purchase of the vacant Debenhams, taking a new 175-year leasehold interest with 7.5% gearing.  The freehold and retail block has been retained.  Savills acted for DTZ Investors.

This represents The Crown Estate’s first acquisition under a £1.5bn science and technology investment strategy which it has formed with two key stakeholders: (1) Pioneer Group, a leading life science developer/operator; and (2) Oxford Science Enterprises, a venture capital group with links to the University of Oxford which invests in start-up companies, and who will eventually tenant the building.  Development of a state-of-the-art science, technology and innovation facility is expected to be delivered and fully operational by 2027/2028.

DTZ Investors' long term business plan to assemble the site, pivot the building away from retail to higher value use, manage development risk and create new revenue from a title restructure all showcase our philosophy of astute stock selection and creative asset management.

The sale price represents a 45% capital uplift versus the purchase price whilst the property has delivered a 6.8% IRR (unlevered) over the hold period.  This reflects significant outperformance above the MSCI All Property index (2.8%) and MSCI Retail Units Big Towns index (-3.7%) over the same period.

Ahead of sale, DTZ Investors acted to support buyers and maximise value by preparing a comprehensive technical due diligence pack and securing a major 2mva power upgrade for the building.

Ben Haller, Director at DTZ Investors: “We are delighted to complete this leasehold sale to The Crown Estate.  It achieves our fund objective to gain exposure to rental growth and occupier demand in the UK’s life sciences sector whilst transferring development risk to a specialist counterparty.  We identified the potential for this unique building in the heart of Oxford to become a leading life sciences venue and our sale process sought a high-quality partner to both bring a scheme forward and then operate it.  The new venture between The Crown Estate, Pioneer and OSE delivers just that.  We are excited by the prospect of being aligned with this initiative and look forward to seeing the transformation”.