Cambridge Mixed-Use Life Sciences Property Gets $175M in Financing
- Dec 02, 2010
December 2, 2010
By Barbra Murray, Contributing Editor
Securing a $175 million financing deal, despite the loosening up of the credit markets, is still no simple feat, but the Beal Cos. L.L.P. and Rockwood Capital Corp. have done just that. KBS Real Estate Investment Trust II provided the partners with the sizable first mortgage loan that will be used to refinance the 665,000-square-foot One Kendall Square mixed-use life sciences property in Cambridge, Mass.
One Kendall Square sits across from the Massachusetts Institute of Technology in Cambridge’s Kendall Square neighborhood, just three miles outside of Boston. Originally developed as the Boston Woven Hose & Rubber Co. in the late 1800s, the Class A property consists of nine restored historic structures encompassing office space, laboratory accommodations and restaurant and retail space, including a nine-screen theater and such services as a daycare center. Additionally, the property offers a parking facility with 1,500 spaces.
Since taking over ownership of One Kendall Square from Lincoln Property Company and J.E. Robert Companies in a $210.5 million deal in 2006, Beal and Rockwood have invested approximately $16 million in upgrades in the complex. Today, the property is 85 percent leased and the life sciences tenant roster features big and small, old and new and local and international names including Harvard Medical School, Helicos BioSciences, Idenix Pharmaceuticals, Quanterix and Foundation Medicine, which signed a new lease for 22,700 square feet during the third quarter.
One major factor is driving leasing activity at One Kendall Square and in the life sciences market in general. “Primarily, it is the improvement in the appetite of venture capital companies to fund new life sciences companies; the market had been shut down in 2008 and 2009,” a source familiar with the property and the Boston-Cambridge market told CPE. The reported average occupancy levels, however, do not to the market justice.
Recorded average occupancy levels in the market, however, do not exactly give the real picture. “The 15.5 percent lab vacancy rate remains deceptively high as much of the available inventory consists of older Class B and obsolete space,” commercial real estate services firm Colliers Meredith & Grew concludes in a third-quarter report. “The vacancy rate for Class A existing lab space in move-in condition is only 3.7 percent.” Rents serve as a solid indicator. As per the report, “asking rents for Class A biotech-ready shell space in Kendall Square are creeping back toward levels quoted in 2007, and range from $60 to $74 per square-foot, triple net.”
KBS did not respond to requests for comment by deadline, but it is likely that the property’s desirability, the market’s promising demand and the sponsorship inspired the decision to provide One Kendall Square’s owners with such substantial financing.