​TIAA expands life-sciences office strategy into San Diego

TIAA Global Asset Management has invested $256m (€233m) in life-sciences real estate in San Diego.

It has acquired a 45% interest in 10290 Campus Pointe Drive, a life sciences office building, from Alexandria Real Estate Equities.

It is a 305,000 sqft redevelopment project in San Diego, currently 100% leased to global pharmaceutical company Eli Lilly & Company.

Another joint venture has seen TIAA take a 45% interest in 10300 Campus Point Drive from Alexandria. The 450,000sqft building is leased to Celgene Corporation, Eli Lilly & Company and The Regents of the University of California.

“We have made recent acquisitions in the life sciences sector,” said Michael Boss, a director in the West Coast real estate acquisitions team at TIAA told IPE Real Estate.

“It’s a top-performing market for life sciences, and is also an extremely strong overall office market.”

TIAA began investing in life science property with Alexandria in August 2015, with a 70% joint venture participation in the headquarters of multinational biotechnology company Biogen, located in the life science innovation hub of Cambridge, Massachusetts.

TIAA has so far invested in five life science properties, all with Alexandria.

With a market capitalisation of more than $11bn, Alexandria, is the largest office REIT focused on collaborative science and technology campuses in urban innovation clusters.

Earlier this year, TIAA invested $262m in joint venture interests in two life science buildings owned by Alexandria in San Francisco. Both were 100% leased.

Investing in the life science sector marks a new approach for TIAA, the nation’s largest manager of US institutional tax-exempt real estate assets.

“We typically don’t invest with real estate operating companies, but, we believe Alexandria is a best-in-class company for the life sciences industry,” says Boss.

Alexandria was founded in 1994 to pursue a strategy based on the concept that life science companies are most successful when located near life science clusters adjacent to world-class academic and medical institutions.

Such a tight focus on a sector can benefit investors, said Susan Persin, senior director of research at Trepp.

“Specialty REITs benefit more from factors that affect specific businesses than from traditional supply and demand fundamentals of the real estate market,” she said.

“On the whole, specialty REITs are posting hefty dividend yields and most have reported robust price appreciation this year.”

Demographic trends in the US bode well for life sciences and biotech lab property, said Boss.

“The population is ageing, people are going to be living longer and more companies are taking advantage of this factor,” he said.

“There also is very limited supply of new life science properties in many markets.”