Capitalizing on the tenant demand and dramatic rent growth in Greater Boston for lab/life-science facilities, Davis is targeting submarkets with demonstrated success in attracting life-sciences tenants and investments that provide an opportunity to deliver space on an accelerated basis.
East Cambridge is the Boston area’s most desirable life-science submarket (1% vacancy) due to the cluster of pharmaceutical and premier life-sciences companies and venture-capital firms, the presence of MIT, and the excellent public transportation access to Downtown Boston, Mass. General Hospital, and key labor markets via both the MBTA Red and Green transit lines.
Against this backdrop, we acquired Charles Park, a 370,972-square-foot, 82% leased, Class-A office building with 656-space parking garage adjacent to Kendall Square in East Cambridge, with a plan to convert the building to life-science use, thereby substantially increasing the rent potential and value of the property.
Execution
After being awarded the deal in November 2020 for $467.5 million, but before posting a nonrefundable deposit and closing on the purchase, we substantially de-risked the transaction over a 33-day period by:
Structuring a joint venture with the seller, through which they rolled 40% of sale proceeds into the future redevelopment venture;
Raising more than $100 million of co-investment capital from our investor base;
Reaching termination agreements with seven tenants (275,385 RSF) to vacate their spaces by Q3 2021, providing a path to convert more square footage into lab than originally underwritten; and
Securing a senior acquisition and construction loan of more than $300 million.
We worked closely with the City of Cambridge to accomplish an expedited permit review process, which enabled a speed-to-market strategy. Through the permitting effort, we also created a path for a future additional space above the parking garage.
Within six months of closing, we entered into a binding agreement to sell the property for $775 million to a large, publicly traded life science REIT. The sale closed in December 2021.
