Longfellow Real Estate is looking to expand its life science holdings in San Diego with the acquisition of an infill property. Acting through an affiliate, Longfellow has agreed to pay $315.4 million to PS Business Parks for the asset. The current owner expects to have net proceeds of $311 million.
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PS Business Parks anticipates roughly $50.5 million from the sale proceeds to qualify as a Section 1031 exchange for the Port America property it recently acquired in Dallas. The REIT also stated that if no other suitable exchanges are found for the remainder of the proceeds, these funds will be paid as a one-time special dividend. Based on preliminary estimations, the company expects this to be between $166 million and $183.5 million, or $4.75 to $5.25 per common share and unit.
The property, dubbed Lusk Business Park, sits on roughly 20.6 acres in the Sorrento Valley submarket. It currently offers both office and industrial space, totaling 370,000 square feet across nine buildings. The campus also includes retail and laboratory space. However, the main selling point of the property is that it includes 1.8 million square feet of zoned life science development.
Lusk Business Park is situated at 6150 – 6640 Lusk Blvd., about 4 miles off interstates 5 and 805. PS Business Parks owned the buildings since their construction, between 1985 and 1988. Some features include grade-level roll up doors, a fitness center, a conference center and a parking ratio of 4 spaces per 1,000 square feet.
Growing interest in life sciences
In recent months, Longfellow has increased its presence in the life science sector, making similar acquisitions in other key markets. In April, the investor paid $156 million for San Mateo Bay Center, in the Bay Area market, a property which it plans to convert to life science use. In June, Longfellow received $178 million in financing from Mesa West Capital for the same property.
In a recent report, Cushman & Wakefield identified San Diego as the third-largest center for biotechnology research activity, after Greater Boston and the San Francisco Bay Area. In the wake of the global health crisis, growth in the sector has boosted redevelopment and conversion activity, along with speculative projects.