REAL ESTATE - Pramerica Real Estate Investors has formed a joint venture with BioMed Realty Trust to invest in life science properties across the United States. The first transaction for the relationship involves three assets that are located in Cambridge, Mass.
These properties are being acquired from affiliates of Lyme Timber Company. There is an existing property that is 100% leased. There is a second property that is now under construction. It was 50% pre-leased prior to it being started. These two assets total around 600,000 s.f. (55.7418 m2). There is a parcel of land that can support the development of another 266,000 s.f.
Pramerica has made an initial equity commitment to this transaction of $70m (€51.7m). When all of the assets are completed, the real estate manager will have invested $270m into the transaction. Pramerica will be holding an 80% ownership stake in these properties. The other 20% is held by BioMed Realty.
Pramerica made this investment for its commingled fund, Prudential Property Investment Separate Account II (PRISA II). The fund now has total net assets of $4.2bn. It has an enhanced return investment strategy.
Roger Pratt is a senior portfolio manager with Pramerica. He said, "Life science and bio medical properties have good demographics. Tenants in this industry are growing. This is being driven by all of the baby boomers looking for miracle drugs to serve their medical needs. This kind of real estate will not be over built, as it’s very expensive to build. It can cost around $1,000 a s.f. to build a property. It’s also hard to get approvals to build new projects."
Pramerica will make the life or bio science property type a subset of office buildings for PRISA II. It figures that this kind of real estate will be able to produce a 100 basis point spread over the typical returns for office buildings.
Pramerica will not limit its JV with BioMed Realty to the one transaction. There will be future deals for the relationship. There has not been a specific amount of capital allocated for the venture. Deals will be considered one at a time. Most of them will have an ownership split of 80% to Pramerica and 20% to BioMed Realty.
The deals for the relationship could be either buying existing properties or investing equity into new developments. Pratt sees that there are two major markets for life sciences real estate. He said, "The two biggest markets for this property type are Cambridge area near Boston and the San Francisco Bay Area. These regions have biggest existing operations."
Pramerica will consider assets in other locations. These would include Seattle, Raleigh-Durham, N.C., Southern Maryland-Washington, D.C. near the National Institute of Health and San Diego.