A major pharmaceutical firm could soon give up its rights to build a new, more than 160,000-square-foot research facility in Boston’s Longwood Medical Area (LMA).
Merck owns the rights to build a 166,000-square-foot lab building on a small parcel of land – a small parcel that nevertheless sits on the campus of Emmanuel College. That parcel, a modest 1.5 acres near the corner of Blackfan Circle and Blackfan Street, is part of what has become known as Emmanuel’s “endowment campus.”
That portion of Emmanuel’s land includes three such parcels. Merck Research Labs has already built a research tower on Parcel B. Parcel C is the proposed site of a Brigham and Women’s Hospital tower.
And then there’s Parcel A, currently leased to Merck on a ground lease created around the same time the college leased Parcel B to the drug company. But now Emmanuel has decided it wants to buy development rights back from Merck to reincorporate the site into its campus for possible future construction, according to several sources with knowledge of the situation.
The potential deal has some in the commercial real estate development community questioning the possible ramifications of such a swap – especially if Merck feels it is being pressured to sell its rights back to Emmanuel.
Merck officials did not return calls seeking comment for this story. Emmanuel College officials declined to comment.
‘Good Business Practice’
But according to industry executives familiar with the relationship between Emmanuel and Merck, Merck started out wanting to sell the building rights to the highest bidder, after deciding not to develop the site itself. So the big pharma firm hired Jones Lang LaSalle to start marketing the property to lab developers. But JLL never got the package off the assembly room floor, leading commercial real estate insiders to assume Emmanuel likely reserved the right to make the first offer, potentially through a legal mechanism built into Merck’s ground lease.
“If you’re Merck, you won’t sell it at a discount unless you have a motivating factor,” like the fact that Emmanuel is already Merck’s landlord at its existing research tower on Emmanuel’s campus, noted one biotech industry executive. “They don’t have to sell it to Emmanuel. But there’s a business relationship between Merck and Emmanuel that they’re trying to preserve. Emmanuel’s people are very aggressive business people. I’m sure they’ve made it clear to Merck that it would be in their interest to sell it back to [Emmanuel]. And either way, it’s good business practice to let Emmanuel have the first shot at it.”
A “discount price” would be anything less than $150 per square foot, the source noted. Another biotech insider said the market price could easily be as high as $200 per square foot. Merck paid roughly $100 per square foot when it purchased the rights for up to 166,000 square feet of potential development, according to sources familiar with the original purchase.
Instant Catalyst
The buying and selling of parcels on Emmanuel’s campus are part of the fundraising necessary for the school’s expansion plans. The deal with Brigham and Women’s to lease land for its own planned 360,000-square-foot lab building was the “catalyst” needed for Emmanuel to enter the process to buy back Parcel A from Merck, according to comments made by Sarah Welsh, vice president for government and community relations at Emmanuel, during an LMA forum in March. Banker & Tradesman obtained a summary of Welsh’s comments.
Now that Emmanuel has decided to put Parcel A back in the bank, it could mean a re-shuffling of campus priorities, said one observer that asked for anonymity. Emmanuel has not indicated what it might build on Parcel A, or when it might build it. However, the Boston Redevelopment Authority recently approved the college’s institutional master plan, which calls for the demolition of Julie Hall on Brookline Avenue and replacing it with a 17-story building. The new 220,000-square-foot Julie Hall would include 720 dorm beds, 20,000 square feet of academic space and 35,000 square feet of dining and student life space.
The IMP also includes plans for renovation and new construction at the existing Cardinal Cushing Library at the corner of The Fenway and Avenue Louis Pasteur. The existing building is approximately 51,800 square feet. Plans call for the demolition of 17,800 square feet of the existing building and renovations to the remaining 34,000 square feet. In addition, five new floors, representing up to 76,000 square feet, will be added.
