California-based Alexandria Real Estate Equities reportedly has emerged as the front-runner to acquire Technology Square in Cambridge.
In a head-to-head competition that fomented nearly two dozen offers and a blockbuster price said to approach $600 million, Alexandria Real Estate Equities has emerged the front-runner to acquire Technology Square in Cambridge, industry sources have told Banker & Tradesman. The seven-building portfolio is owned by the Massachusetts Institute of Technology, which is expected to retain a minority position in the complex going forward.
“They are in control [of the deal],” one source familiar with the negotiations claimed last week of Alexandria, a California-based real estate investment trust that specializes in the life sciences market. Developed originally by Beacon Capital Partners in the 1990s before being sold to MIT five years ago for $279 million, Technology Square features more than 1 million square feet of office and laboratory space, with the tenant roster including such prominent firms as Dyax Corp., Novartis AG and Forrester Research Inc.
Calls to Alexandria were not returned by Banker & Tradesman’s press deadline, while brokers handling the negotiations at Cushman & Wakefield of Massachusetts declined comment. C&W Capital Markets Group chief Robert E. Griffin Jr. would only acknowledge “a lot of activity” on the opportunity, adding that a final agreement is expected to be in place over the near term.
“It’s a hot, hot property,” Griffin said of Technology Square, which is situated in the heart of East Cambridge, the city’s most prominent commercial district and an international haven for life sciences and high-tech companies. Situated between Binney and Portland streets, Technology Square offers parking for 1,600 vehicles and a host of retail and restaurant amenities.
‘Mind-Boggling’
There were 23 bids submitted in all for Technology Square, Griffin said, but he declined to identify any of the prospects or provide details regarding the seemingly intense competition. According to one source, more than half of the bidders submitted a price exceeding $530 million, of which 10 were over $550 million. And while the $600 million milestone might not quite be achieved, the source maintained that the sales figure will approach that rate, remarkable given that most observers had anticipated a price in the $500 million range when the property first went on the block.
“It’s mind-boggling,” one source opined of the stratospheric pricing, while another source maintained that Alexandria was not alone in its ardor, with at least one other buyer said to have approached the REIT’s apparently winning offer.
Sources identified that prospect as BioMed Realty Trust, which last year made news when it acquired another Cambridge laboratory/office portfolio from developer David Clem in a trade that seems eerily similar to the Technology Square transaction. Also involving seven buildings, a parking garage and 1.1 million-square-feet of laboratory focused commercial space, San Diego-based BioMed paid $531 million and an 8.7 percent capitalization rate for that complex. As with Technology Square, Clem’s Lyme Portfolio is also located in East Cambridge and features several prominent tenants, serving as the headquarters for Genzyme Corp. and other top life sciences companies.
Also said to have been in the hunt for Technology Square were Boston Properties, a locally owned real estate investment trust, and Forest City Enterprises, which in partnership with MIT developed the sprawling University Park mixed-use complex in Cambridge’s nearby Central Square. That park is also a prime spot for life sciences companies, which has emerged as Cambridge’s most promising growth industry in the past decade.
With C&W having conducted some of the region’s largest commercial property transfers in recent years, including the just-completed sale of One Federal St. in Boston for $514 million, Griffin concurred that Technology Square generated a high number of bids for a deal that large. Traditionally, getting into double figures could be a challenge for such an offering, but Griffin said Technology Square “is a unique asset” that met the criteria of many well-financed investors. The quality of the real estate, location in the heart of East Cambridge and a promising future for laboratory demand in the submarket all contributed to the impressive response, maintained Griffin. Whatever the catalysts, it appears the competition will generate a substantial gain for MIT when the sale is completed.
As for the names being bandied about in the Technology Square bidding roster, Griffin refused to offer any indication of who might emerge victorious, but sources tracking the deal insisted that Alexandria has the inside edge, and one claimed the property could be under agreement to the REIT as early as this week. “I’m confident they have won [the bidding war],” the source said of Alexandria, adding, “It’s absolutely theirs for the taking.”
