CPP Investments, Greystar Form $1.2B Life Science JV

July 9, 2021

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The partners will acquire and develop office and lab properties in key markets across the U.S.

Research laboratory. Image by ThisisEngineering RAEng via Unsplash

The life sciences sector welcomes a new powerhouse team as Canada Pension Plan Investment Board and Greystar Real Estate Partners LLC establish a new joint venture to capitalize on opportunities across the U.S.

Together, the Canadian fund manager and the Charleston, S.C.-based rental housing company will focus their efforts on developing projects in key life sciences clusters, beginning with an initial equity allocation of $1.2 billion.

Per terms of the joint venture agreement, Greystar will serve as developer of life sciences properties featuring Class A office and state-of-the-art lab space on behalf of the joint venture. The company will also manage the portfolio of developed assets.

In terms of target locations, the partners will not only build in core life sciences hubs but also in core markets where Greystar has a strong footprint. One such location is the Boston-Cambridge market—which is the leading life sciences cluster in the U.S., as well as the location of the joint venture’s inaugural project.

CPP Investments and Greystar have acquired the office and lab project known as 74M, which will take shape at 74 Middlesex Ave. in Somerville, Mass., a Boston suburb that’s just a few miles outside of Cambridge. The joint venture purchased the site from an entity of KEMS Corp. for $35.7 million, according to Middlesex County records. Upon completion, 74M will stand 18 stories and feature 468,000 square feet of prime office and research accommodations. The developer will also seek LEED Platinum certification for the project, according to Bill Shelton, a board member with the Union Square Neighborhood Council, during a council meeting on April 12.

Greystar plans to commence construction on 74M prior to year’s end. The developer will own a 10 percent interest in the completed building, while CPP Investments will hold the remaining 90 percent stake. The project marks Greystar’s first foray into the life sciences sector and CPP Investments’ expansion of its life sciences platform into the U.S. market.

Making its way to the top

Unlike multifamily in the years after the Great Recession and industrial amid the pandemic-induced e-commerce boom, the life sciences sector has never held court as the investment community’s favorite sector. However, this asset class has been steadily gaining ground in the sentiment rankings over the years, and the last 12 months have proven to be a boon of sorts.

“While some other commercial real estate sectors have faltered, investors continue to show an appetite for life science assets which are moving away from being a niche play to a recognized asset class. This interest pre-dates the spotlight on the sector created by COVID-19 and vaccine development,” according to a first quarter 2021 report by Colliers International.

Several other companies have united to invest in the life sciences real estate sector over the last 12 months. For example, in November 2020, Ventas Inc. and Singaporean sovereign wealth fund GIC established a joint venture that kicked off with the ownership of four university-based “research & innovation” development projects valued at a total cost of approximately $930 million.

November also brought the initial $1 billion closing of the Breakthrough Life Science Property Fund, joint venture partners Tishman Speyer and Bellco Capital’s investment vehicle for the development and acquisition of cutting-edge lab facilities.

According to research from Real Capital Analytics, as of June 10, 2021, there were 56 R&D assets under construction, valued at an estimated $11 billion.