Pension and Annuity Assets Can Lead to Biotech Growth and City Regeneration
The authors see life sciences as the ideal place to put retirement cash.
“Biotech research facilities” might not be the first phrase the average saver or retirement fund manager associates with the word “pension.” But patient capital invested in such assets can (and does) play a big role in meeting the long-term liabilities of pension payouts, and the growth trajectory of the U.S. life sciences industry, taken alongside the need for companies in this space to avail themselves of an appropriate real estate footprint, becomes a key player in this virtuous cycle.
In creating that real estate footprint, it’s a big country and there’s much room to expand out of the usual geographic suspects, Boston, New York and San Francisco, into other cities that are ripe for urban reinvestment and regeneration and looking for new industries to attract, often after their industrial centers have shifted elsewhere.
We’re seeing this right now, for example, in cities like Syracuse, New York, where four Micron semiconductor fabrication plants are going up, or outside of Columbus, Ohio, where Intel is investing some $20 billion in two microchip fabs.
These geographies and countless others like them had previously been relegated to secondary and tertiary places, underinvested, yet with the potential for high quality of life and place-based amenities, as well as the existing “bones” of historic buildings for adaptive reuse.
Where Asset Managers Fit In
We expect to see much growth in science and technology, and the mission of companies like ours is to make this possible.
This past year, Legal & General Capital formed a partnership with U.S.-based real estate developer and biotech specialist Ancora to create a real estate platform dedicated to driving science and technology growth in partnership with anchor institutions in cities across the United States. Our biotech real estate investments will be underpinned by long-term retail annuities, or life insurance and pension premiums we acquire through our pension risk transfer business and other holdings.
Over the course of the last decade, we’ve used this business model in 11 cities in the United Kingdom, through a partnership with Bruntwood SciTech, a similar biotech realty specialist.
Through an initial seed capital investment of $500 million, Ancora L&G will be capitalized to deliver $4 billion of existing biotech real asset pipeline in the United States.
Smaller Markets Can Play
Rather than adding more commoditized product in overbuilt locations — take Boston, which has absorbed 1 million square feet of biotech property and has 6 million more in the pipeline — our end key locations are places like Fort Wayne, Atlanta, Providence and New Haven.
These smaller cities, as affordable alternatives to the big three, all have the advantage of adjacency to a major university, academic health center, or research institution, which fuels long-term growth, innovation, and community-building.
Currently Ancora L&G is delivering the first phase of a project in Fort Wayne, Indiana, called Electric Works, a mixed-use urban reinvestment project on the site of a 1 million-square-foot former General Electric industrial campus. It’s the first project of its kind in the Midwest.
Electric Works is a leveling-up regeneration initiative that will bring more prosperity — in the form of jobs, housing, and tech space and infrastructure — to the entire region.
The biotech portions of the project include a healthtech innovation center, primary care facility and pharmacy, co-working space and work-ready suites, and Amp Lab, a new, STEM-rich, immersive public education model for nearly 400 Fort Wayne high school students.
The capital funding for Ancora’s pipeline of projects in Atlanta, Providence and New Haven, among others — is coming from the reallocation of pension funds that we manage, along with long-time life insurance premium assets and other retirement annuities under our management.
Society’s Capital, Society’s Benefit
For the last 10 years, Legal & General has been investing in urban regeneration through a multi-pronged, long-term approach we call inclusive capitalism — in simplest terms, investing society’s capital for society’s benefit.
In the United Kingdom, we have developed a number of mechanisms to help this model succeed on the investment level.
Through collaboration among various arms of our business as well as with local governments and communities, we have seen our investments fan out on a societal scale.
It’s an effective model that we have now begun to deploy in U.S. cities where development of real, vital, and technologically modern town centers has stagnated. We’re working on delivering completely integrated ecosystems within these towns and cities.
Our investments can also tackle social issues, such as the affordable housing crisis, health inequality and underdevelopment of towns and cities.
We work with local partners, communities and authorities to understand the challenges faced and, over time, completely transform a city, building jobs, economic growth, and quality of life in those areas.
Right now, there are macroeconomic headwinds, but there are also a lot of tailwinds, in addition to the masses of capital that’s currently looking for quality investments.
The federal government is making some strategic investments through vehicles like the CHIPS and Science Act, which is fundamental to growth in the sectors that we prioritize, and the Bipartisan Infrastructure Law, which is allowing growth in secondary and tertiary places.
We see a number of opportunities emerging in communities that have previously been overlooked — and we intend to be at the forefront of this regenerative transformation effort.
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