Family Office Real Estate

The Next Gen of two family offices launch property group focused on science parks and sustainable offices

A new generation of real estate entrepreneurs in the UK has won the backing of their family offices to create a £100 million business called Gen Two involved in the creation of life science parks and sustainable office space.

Ariel Levy, a former Rothschild investment banker, put together deals worth £50 million in Israel and the UK for his family office before joining forces with Daniel Sterling who started his career at agents Allsop & Co before running a family real estate portfolio.

We’re happy to take smaller lot sizes and piece things together. As a family business, we don’t need a quick turnaround. We can hold assets, and create a cluster

Levy says: “Gen Two came about through a combination of working together, and going to school together. And our wives are second cousins.  Our family offices have been very discreet, to protect our family members, although we have created brands for different projects.” 

Gen Two has come out of the shadows in a bid to find new opportunities and co-ownership deals. It is a classic example of the way Next Gen entrepreneurs are prepared to raise their profile to set up businesses of their own. 

Their families have traditionally tackled residential and commercial work but life science deals are Levy and Sterling’s top priority at Gen Two:  “Life sciences is a sector where we believe there’s a long trajectory. We are starting to see a big increase in capital allocated to the sector, compared to what we have seen.”

Levy accepts that a lot of early moves have been made by big players like British Land, Longfellow and Tishman Speyer, but they are disinterested in niche opportunities, leaving the field open to smaller companies like Gen Two. 

Sterling says: “There aren’t many people our size getting involved in life sciences. We’ve spent the last year building the right professional teams around us, so when the right project comes up we can hit the ground running.”

Levy adds: “We’re happy to take smaller lot sizes and piece things together. As a family business, we don’t need a quick turnaround. We can hold assets, and create a cluster.” 

Gen Two has been working hard to understand the sector, knowing this is the only way to unlock opportunities.  It has joined the UK Science Park Association to get more deeply involved.

Finding the right sites is the current challenge. Sterling says: “We want to build a community, where companies can grow, or contract, in a nice environment.”  

Gen Two has looked at one site in Cambridge where 30,000 sq ft of space can be split into 3,000 sq ft incubators, plus amenity and conference centres, with residential property on hand. 

Levy believes residential space, plus facilities like nurseries, will be important to the development of a life science cluster, bearing in mind the need to attract educated people who like to live locally. All of which harks back to the 19thCentury when UK companies like Cadbury developed residential space to house workers near their factory. 

Break clauses can exist on long leases for larger occupants. But Levy points out that their premises tend to be custom built, with special equipment, which tends to anchor tenants to their premises. Yields of 4-5% are not far adrift from commercial space, but vary widely, with a few deals hitting 2%. Pricing is tough because sales of fully-developed premises are rare.

Levy believes relationships with tenants can evolve into a partnership, where Gen Two could help them with their financial needs, including long-term equity funding opportunities which could produce co-ownership deals.

Elsewhere, Sterling says Gen Two is interested in straight residential deals but currently sees better opportunities in sustainable offices in suburban districts which comply with increasingly stiff ESG requirements. 

Mike Prew, managing director at Jefferies sees a potential supply crunch that larger property companies are failing to answer. He said in November: “The supply of green buildings falls well short of growing requirements for environmentally acceptable buildings.”

The company’s first office purchase comprises a site near London’s Oval cricket ground, South London, which used to be HQ for the Musician Union. A 14,000 sq ft listed refurbishment will include a dramatic improvement in its green footprint. And Levy is in no doubt that life science parks will need to be future-proofed as well.

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