The billion-euro sale of the High Tech Campus in Eindhoven to Singaporean sovereign wealth fund GIC has raised questions about the transfer of strategically important technological knowhow to a foreign state.
What at first sight looked like a ‘normal’ property deal between two real estate investment companies has turned out to be more complex – an issue of national strategic interest stirring debate at the highest level.
The announcement by Dutch billionaire-entrepreneur Marcel Boekhoorn over the summer that he was selling the High Tech Campus (HTC) in Eindhoven to a fund managed by Oaktree Capital Management grabbed headlines mainly because of the size of the deal and the asset type.
Although a price was never disclosed, the science park reportedly changed hands for around €1.1 bn, making it the largest single-asset property deal of the year in the Netherlands.
In terms of physical size, HTC is no small fry either: the campus comprises more than 40 buildings where 235 businesses are based, employing 12,000 people. It also has around 80,000 m² of undeveloped space.
And, being in the ‘hot’ science park sector, an emerging but in-demand asset class targeted by private and institutional investors alike, put the spotlight on the transaction even more. Initial yields for Dutch high tech centres have been falling in the past few years; last year, Brainport Industries Campus (BIC) in Eindhoven was sold to private UK property firm Capreon for a price reflecting a gross initial yield of 6%.
Ultimate beneficial owner
But there was more to the HTC deal. A couple of months after it was announced, research by PropertyEU’s Dutch sister publication PropertyNL uncovered a new dimension. It revealed that not Oaktree, but Singaporean sovereign wealth fund GIC was the ultimate beneficial owner (UBO) of the park. In effect, the US asset manager had acquired the campus on behalf of GIC, the latter being the majority investor in the Oaktree fund.
The news soon found its way to political circles in The Hague, where questions were raised about the deal in parliament. Who was ultimately in control of the strategically important science park and the technological innovation taking place there? Was it Singapore president Halimah Yacob? Was it the head of the country’s wealth fund? Did it mean the Dutch state, the municipality of Eindhoven, and Oaktree had effectively been sidelined? And what were the consequences for national security?
Reacting to calls for clarification, Dutch economic affairs minister Stef Blok said representatives of the buyers had contacted the agency which vets (foreign) investments to enquire about the legal framework and criteria which might be applicable to the HTC transaction. He noted that the deal constituted ‘a change in control over the real estate and real estate management’ of the property, but that there was no legal requirement for the sale to be vetted beforehand.
Crucial ecosystem
Blok went on to say that the new owner ‘does not have control over or access to sensitive technology’. However, he admitted that HTC could not be regarded as a ‘passive’ property investment of the kind seen in previous decades. ‘The High Tech Campus offers accommodation and services to a crucial ecosystem underpinning the innovation and development strength of the Dutch economy,’ he said.
Although the real estate itself did not count as ‘sensitive technology’ or ‘sensitive business information’, the minister promised to implement better screening of such deals in the future. A parliamentary motion to that effect was subsequently adopted. Blok backed up his arguments about the ‘non-critical’ nature of the HTC transaction by pointing out that Philips, the previous owner of the campus before selling it to Boekhoorn in 2012 and now its most important tenant, was not concerned either about any ‘leaking away’ of ‘crucial information’.
Interestingly, Philips had been willing to sell the HTC to GIC in 2012, according to those involved in the deal process at the time. The reason the wealth fund reportedly did not want to pay the price being asked by Boekhoorn was because investing such a large amount in a relatively small city such as Eindhoven did not fit in with its investment strategy. Following the HTC deal this summer, local and provincial authorities insist they want a say in future science park transactions. But Blok has said this is a matter for central government.
UK more protective
The political furore about the HTC deal in the Netherlands contrasts strongly with R&D transactions in other countries, which appear to be more protective of their life sciences sectors. In the UK, for example, GIC was allowed to buy no more than 40% of The Oxford Science Park in October as part of a strategic partnership with owner, Magdalen College Oxford. The Singapore fund reportedly paid around £160 mln (€188 mln) for the stake, valuing the park at €466 mln which does not even equate to half the value of the Eindhoven campus.
Traditionally proponents of a free market, when it comes to ‘sensitive’ health technology and innovation, the British are more cautious. Giving GIC no more than a minority stake is in line with the UK policy of retaining control over the ’golden triangle’ of the life sciences industry – the clusters formed by Oxford, Cambridge and London.
The Dutch laxity surrounding the HTC deal comes at a time when the Netherlands is also reeling from the loss of one its longstanding business icons – Royal Dutch Shell – to London. The energy giant announced in November that it was moving its headquarters to the UK capital, scrapping its dual share structure and dropping ‘Royal Dutch’ from its name. Shell’s impending departure has stoked the simmering debate about the Dutch business and tax climate.
