TIAA-CREF Moves into New Boston Neighborhood
- Aug 12, 2015
By Gail Kalinoski, Contributing Editor
TIAA-CREF is boosting its Boston area holdings, making its first purchase in the Cambridge submarket and its first in the city’s booming life science sector with the planned acquisition of a 70 percent stake in 225 Binney St. from Alexandria Real Estate Equities, Inc.
The stake for the property in Alexandria Center at Kendall Square will be sold for $190.1 million, according to Alexandria Real Estate Equities’ recent second-quarter earnings report filed with the U.S. Securities and Exchange Commission. It is expected to close in the fourth quarter. The Boston Globe reports that price would make the deal one of the biggest in the Boston region by square footage so far this year, noting it would value the 305,000-square-foot property at $271.6 million, or $889 per square foot.
The LEED Gold-certified building was constructed in 2013 by Alexandria Real Estate Equities, which is the largest and leading office REIT focused on science and technology campuses throughout the United States. It is fully leased by Biogen, a multinational biotechnology company which uses the Cambridge property as its global headquarters. 225 Binney St. consists of the recently constructed six-story Class A office building and two renovated historic brick-and-beam buildings.
“This investment offers a majority interest in a well-located Class A office asset that is 100 percent net leased on a long-term basis to a high-quality tenant,” Sam Flood, senior director of acquisitions for TIAA-CREF Global Real Estate, said in a prepared statement. “It also offers us new exposure to the Cambridge submarket and to the life science office submarket, both of which have very healthy fundamentals.”
Flood told Commercial Property Executive that TIAA-CREF, the nation’s largest manager of U.S. institutional tax-exempt real estate assets with more than $58 billion under management, has 16 direct equity investments across the metro Boston area, including office, retail, industrial and multi-family properties. The assets, which include 40 Broad St. and 33 Arch St. downtown, One Boston Place, 99 High St., 501 Boylston in the Back Bay and 51 Sleeper in the Seaport district, total more than 5 million square feet, he said.
“We remain interested in continuing to expand both our Boston and Cambridge portfolio,” Flood told CPE. “Assuming the right investments present themselves going forward, the intents is to expand the relationship with ARE as well.”
Peter Moglia, CIO for Alexandria, called TIAA-CREF a “great long-term partner” and also noted in a prepared statement that the REIT was “looking forward to working with TIAA-CREF on this joint venture and hopefully on future investments together.”
Moglia added, “We believe that this deal is a testament to our high-quality asset base and management team. This opportunity allows us to monetize one of our core assets and invest the capital into our highly leased value-creation pipeline.”
The sale of the stake in 225 Binney St. is Alexandria’s first joint venture at Alexandria Center at Kendall Square, the REIT’s 11-acre, 1.6 million-square-foot science and technology campus in the Cambridge Kendall Square innovation cluster.
Last month, Alexandria announced Bristol-Myers Squibb would be the anchor tenant in the 431,500-square-foot research and development center to be built at 100 Binney St. The biopharmaceutical giant will be taking 208,000 square feet in the newest building to be constructed at Alexandria Center at Kendall Square. Construction started this summer and is expected to be completed by fourth quarter 2017.
Following the acquisition of the 70 percent stake in 225 Binney St., the TIAA Real Estate Account, a TIAA insurance separate account, will hold the property.
Combined with $28 billion in assets under management through London-based TIAA Henderson Real Estate, TIAA-CREF Global Real Estate and TH Real Estate have over $86 billion assets worldwide.
UBS Investment Bank acted as exclusive financial advisor to Alexandria Real Estate Equities in the 225 Binney St. deal.
Alexandria has collaborative science and technology campuses in urban clusters with a total market capitalization of $10.7 million as of June 30, and an asset base of 31.1 million square feet. That includes 18.8 million square feet of operating and current value-creation projects and an additional 12.3 million square feet of development projects. Besides Boston, Alexandria has a dominant market presence in San Francisco, New York City, San Diego, Seattle, Maryland and the Research Triangle Park. Also this summer, the REIT broke ground on the 12-story, 287,000-square-foot Alexandria Center at 400 Dexter Ave., North, in Seattle, where Juno Therapeutics signed on to be the main tenant.