SciTech sector developer secures landmark £185m green funding deal

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  • Bruntwood SciTech agrees £60m development loan for its flagship Circle Square development in Manchester
  • £125m investment loan secured across its 1.7m sq ft portfolio of specialist science and tech sector assets
  • A commitment to invest £3.5m in green-linked capex, in addition to achieving several other environmental goals, will see the developer secure a discount on its cost of funding
  • Lloyds Bank Commercial Banking Real Estate and Housing leads arrangement of a four-bank club alongside Santander, NatWest and HSBC (25% each)

The UK’s only dedicated SciTech sector developer, Bruntwood SciTech, has agreed an £185m funding deal to support its sustainable development and growth in one of the largest real estate debt transactions to take place outside of London this year.

Bruntwood SciTech, a 50/50 joint venture between property company Bruntwood and Legal & General, will use £60m of the funding to develop 400,000 sq ft of specialist workspace across buildings 2, 3 and 4 of its Circle Square city centre neighbourhood - itself a joint venture between Bruntwood SciTech and Vita Group.

Exceptional new facilities

Located in Manchester’s emerging innovation district close to its universities, Circle Square will provide 1,700 new homes, 1.2m sq ft of workspace and more than 100,000 sq ft of retail and leisure space. Global technology company Hewlett Packard Enterprise is anchoring No. 1 Circle Square.

Lloyds Bank Real Estate and Housing was lead bank, agent, facility agent, Green Loan coordinator and hedging coordinator for the four-bank club. Lloyds Bank, Santander, NatWest and HSBC took equal 25% shares in the combined £185m facility.

Under the conditions of the new financing agreement, Bruntwood SciTech will secure a discount on its cost of funding if it achieves a BREEAM Excellent rating for the three new buildings on their expected completion in 2021, in addition to agreeing so-called ‘Green Memorandums of Understanding’ with occupiers in which they agree support on-going environmental best practice in the use of the facilities.

Sustainably-linked improvements

The remaining £125m tranche of the funding package will be used as an investment loan to refinance the remainder of Bruntwood SciTech’s specialist property portfolio. The assets include the UK’s largest bioscience campus, Alderley Park, Cheshire, the country’s largest dedicated digital technology campus, Innovation Birmingham, and Platform, a leading home for tech businesses in Leeds.

Bruntwood SciTech will secure a further discount by agreeing to fulfil bespoke Green Covenants as part of Lloyds Bank’s Green Lending Initiative. The developer has committed to delivering an investment of £3.5m into sustainably-linked improvements across its estate, covering things such as Combined Heat and Power, storage batteries and small-scale renewable energy.

"Our assets are powering the future of the UK’s knowledge economy, helping to create thriving innovation clusters, like Circle Square, and supporting new breakthroughs in bioscience and the tech industry."

Kate Lawlor, finance director, Bruntwood SciTech

Kate Lawlor said: We’ve seen significant demand for our specialist workspaces and labs from start-ups and scale-ups to leading global companies.

"This new funding agreement gives us the platform to accelerate our growth sustainably, providing our occupiers with access to facilities tailored to their specific needs that have minimal impact on our environment."

"We're excited by what Bruntwood SciTech is doing across its key sites in the North West, Leeds and Birmingham, creating the conditions that the modern economy needs to flourish. New investment, jobs and potentially life-changing innovations will all flow from its communities."

Rob Marriott, associate director, Lloyds Bank Real Estate and Housing

Rob Marriott added, “By using our Green Lending Initiative, we're able to help Bruntwood SciTech achieve its vision while supporting its sustainable investment in the future of the UK."

Green growth aspirations

The wider Bruntwood group has a Gold Low Carbon accreditation, which it will now aim to secure across the Bruntwood SciTech estate as well as setting on-going targets for the reduction in energy intensity of its buildings.

The new deal effectively refinances a £50m green loan provided by Lloyds Bank to Bruntwood’s Manchester Science Partnerships, now part of Bruntwood SciTech, agreed in December 2018.

Lloyds Bank Commercial Banking’s £1bn Green Lending Initiative was first launched in 2016 and was followed in 2018 by the bank’s £2bn Clean Growth Finance. Earlier this year, it became the first UK business bank to offer customers access to a digital app powered by an algorithm that allows them to identify and make energy-efficient investments in their buildings.

Squire Patton Boggs acted on behalf of the lenders, Addleshaw Goddard for Bruntwood SciTech with CBRE providing valuations.

All lending is subject to status.

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