Blackstone Mortgage Trust Lends $491M on Future Boston-Area Life Sciences Property
Blackstone (BX) Mortgage Trust (BXMT) has provided a $491 million loan to Davis Companies and Principal for the acquisition and conversion of Charles Park One & Two in Cambridge, Mass., into a life sciences campus, Commercial Observer has learned.
The two-building office complex, located in the core lab cluster in East Cambridge, just over the border from Boston, totals 405,000 square feet and includes a 656-space parking garage. The property is near life sciences and technology hub Kendall Square, public transportation like the region’s Red Line, and academic institutions MIT and Harvard University.
With this round of financing — which works out at roughly 65 percent loan-to-cost — Davis Companies and Principal will now convert the property into a Class A, multi-tenant lab facility.
Principal has owned the asset since 2004. The firm sold a stake in the building to Davis, but remains in the deal.
“At Blackstone Real Estate, we are big believers in the life sciences space and the Boston/Cambridge market,” BXMT President Katie Keenan told CO. “We are thrilled to partner with such strong, experienced sponsors in Davis Companies and Principal as they execute on their business plan for this compelling, life sciences real estate opportunity.”
The buildings’ bones are well suited for lab use, with high ceiling heights; good floor loads; extensive roof space; and a unique, park-like environment surrounding the buildings.
The life sciences market has appeared to be pandemic-proof real estate, with investment in the sector continuing to grow and attract investor attention. Investment and development in the sector has boomed, as biotech companies and pharmaceutical startups have received renewed interest from venture capitalists and investment firms amid a race for COVID therapeutics and vaccines.
As a result, firms who made strides prior to COVID darkening U.S. shores are now significantly ahead of the curve, while new investors and owners considering the conversion of office assets into life sciences use are busy playing catch-up.
In New York City, leasing for the life sciences sector more than doubled between 2019 to 2020, reaching its highest level in nearly a decade, a report from CBRE found. The Boston area, which has a larger and more competitive life sciences market, has near zero vacancy, with supply struggling to keep up with demand.
Blackstone is a seasoned and high conviction investor in the office life sciences space, and especially in the Boston/Cambridge market, due to the cluster of world-leading academic institutions, as well as pharmaceutical and biotechnology companies.
The private equity giant owns more than $12 billion of real estate in the Boston area, roughly 90 percent of which is concentrated in life sciences.
In December 2020, Blackstone Property Partners Life Sciences announced it was acquiring a 2.3 million-square-foot portfolio of lab office buildings from a Brookfield Asset Management fund for $3.45 billion. Roughly 90 percent of that portfolio is concentrated in Cambridge, and the transaction made Blackstone the largest, life sciences office owner in the Cambridge area.
Davis Companies is also no stranger to the space, with a long-standing history of life sciences and lab development. In 2019, the firm redeveloped and sold 35 Cambridge Park Drive in Cambridge for $333 million, after reaching 100 percent occupancy within five months of the issuance of its certificate of occupancy.
Principal officials did not immediately return a request for comment.