Every economic calamity is both uniquely horrible and devastatingly similar at the same time. 

The causes are as varied as you can get, from a runaway stock market in 1928 and the meltdown of the subprime mortgage market in 2008 to a pandemic in 2020, but the results are all too achingly familiar, from mass unemployment and hunger to deepening political disillusionment. 

And one trend common to bad times – whether it’s the Great Depression, the early 1990s funk, or the Great Recession of a decade ago – is the survival of the largest. 

Not to be confused with the distorted and twisted Darwinian survival of the fittest, survival of the largest is often more of a matter of pure heft, of stockpiles of cash and reserves in the hundreds of millions, or even billions of dollars. 

While the so-called “too big to fail” banks took all the heat back during the Great Recession, there were more than a few real estate companies and developers whose sheer size proved to be the ultimate failsafe. 

A repeat is very likely to be in the offing, with some of the biggest real estate players in the Boston area and around the country pounding their chests and proclaiming from the rooftops the prowess of their business models and the size of their cash reserves. 

$2B Cushions Rent Drops Well 

Just take Boston Properties and Alexandria Real Estate Investment Equities, which dominate the until recently booming office and lab markets in Greater Boston and in major cities across the country. 

Buoyed by some hefty cash stockpiles, the two giants, are talking a good game, brushing off concerns about the impact of the coronavirus disaster on the real estate markets and broadcasting their strong points. 

I got a kick out of recent interview of a top Boston Properties executive, who said he wasn’t worried about a demand for office space falling off a cliff in the wake of the virus. 

Why? Everyone he talks to wants to get back to their high-priced corporate digs! 

Well, I’m sure. But I wouldn’t take that one to the bank – at least when it comes to all the minions who toil in cubicles below the executive suite and have suddenly found working from home and jettisoning grueling commutes isn’t such a bad thing. 

A couple days later, Moody’s Analytics released a report forecasting a 12 percent drop in downtown Boston rents. 

Life sciences developer Alexandria Real Estate Equities, which owns the site once slated for GE’s Fort Point headquarters, is sitting on $4 billion in cash and credit. Image courtesy of Elkus Manfredi Architects

But when you are sitting atop “total liquidity” of $2.1 billion, as Boston Properties recently noted in its quarterly earnings report, I guess you can afford to sound bullish. 

Boston Properties has stashed way $661 million in cash and another $151 million in a 1031 exchange escrow, with another $1.25 billion available in an unsecured revolving credit facility. 

In addition, BXP, as its stock ticker is called, recently announced plans to raise $1.2 billion through the sale of senior, unsecured notes. 

$4B and No Bills Due 

But that’s apparently nothing compared to the stockpile amassed by Alexandria Real Estate Equities, the developer and owner of massive swaths of lab and research space near MIT in Cambridge and in other top bio hubs across the country. 

Alexandria says it now has $4 billion in liquidity, having just taken out an additional $750 million in an unsecured line of credit in April. Nor will any debt be coming due until 2023, the company notes. 

“Alexandria is among the industry leaders in total shareholder return, coming off a stellar first quarter, and demand for its essential lab/office real estate remains very strong,” notes a pitch sent my way by one of the biopharma real estate company’s publicists. 

What recession? 

Alexandria, as my friendly PR contact also noted, is the landlord for more than 60 different biopharma firms on the hunt for a COVID-19 vaccine or treatment, including Gilead and Moderna, both in the Boston area, and Pfizer. 

There also are bunch of honorable mentions as well in the size matters category. Privately held Blackstone, which owns a bunch of downtown Boston towers, had more than $16 billion in net assets at the end of February. 

Scott Van Voorhis

Two big, publicly traded apartment companies with buildings across the Boston area – AvalonBay and Equity Residential – have big cash stockpiles of their own, with Avalon having recently drawn down $750 million from its $1.75 billion credit line. 

Still, despite the happy talk coming from these real estate giants, there will soon be more than enough financial pain to go around as companies ditch office leases and agreements for new lab complexes go south. 

Yet unlike the millions of small businesses across the country who are faced with the possibility of extinction, the chances that Boston Properties, Alexandria, or any other corporate giant slipping beneath the waves, never to be heard from again, are exceedingly small. 

For when it comes to hard times, size – as in the size of your cash stockpile – definitely matters. 

Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.   

It’s Survival of the Biggest Following the Pandemic

by Scott Van Voorhis time to read: 4 min
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