DivcoWest Refinances New Boston Lab and Office Buildings With $1.2B Loan

The two buildings at 350 Water Street and 450 Water Street are just a portion of the larger, master-planned Cambridge Crossing life sciences mixed-use development in Boston

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A collection of four lenders have come together to originate a $1.23 billion loan to refinance developer DivcoWest’s 350 Water Street and 450 Water Street, two newly built life sciences and office buildings located adjacent to each other in Cambridge, Mass.

Deutsche Bank, Bank of America, JPMorgan Chase and 3650 REIT teamed up on the 15-year commercial mortgage-backed securities (CMBS) loan, according to data from Fitch Ratings, which analyzed the transaction. The deal is in line to close on Nov. 9. 

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The loan retires about $618 million of existing debt, and allows DivcoWest and its partners to recoup almost $452 million in equity. It also covered closing costs and more than $149 million in upfront reserves, according to Fitch. 

The two properties, which together span more than 915,000 square feet, are fully leased to information technology company Aventis through 2036, contingent on a lease termination option that the tenant will have in 2035. Aventis’ parent company Sanofi — a French pharmaceutical company and one of the largest such firms in the world — has guaranteed each lease up to a total amount of $400 million, per Fitch. Sanofi plans to plant a flag at the two properties to serve as its research headquarters on the continent; the company will integrate 3,000 employees at the location, who will relocate from locations across the Boston area.

The buildings at 350 Water and 450 Water — called Cambridge Crossing II — are still under construction, with remaining tenant buildout and base building work estimated to run about $395 million, the bulk of which will go toward the lab space, according to Fitch. Sanofi will deploy almost $182 million of its own money toward the remaining construction work on its space.  

The two properties in Cambridge Crossing II and another Sanofi property in Lyon, France will make up the firm’s mRNA Center of Excellence, which was conceived earlier this year to spearhead research, development and distribution of mRNA vaccines. Sanofi has announced that it plans to invest $476 million each year over the next five years to fund the work at the two sites

Sanofi’s two properties are just a small part of DivcoWest’s massive, master-planned project Cambridge Crossing in the submarket of East Cambridge. Altogether, once DivcoWest finishes the project, it will sport about 2.1 million square feet of life sciences and tech-geared space, 2.4 million square feet of housing and 100,000 square feet of supplemental retail. So far, around 2.5 million square feet has been erected, and other companies such as Philips and Bristol Myers Squibb have signed on for space. The 12-story 350 Water Street and the nine-story 450 Water Street topped out in January

While DivcoWest has spearheaded the development, it holds only a 5 percent interest in its joint venture partnership with California State Teachers’ Retirement System (CalSTRS) and the Teacher Retirement System of Texas (TRS) on Cambridge Crossing. CalSTRS and TRS each hold a 475 percent stake in the JV, per Fitch.

Mack Burke can be reached at mburke@commercialobserver.com.