Alexandria Sued For $55M Over Cambridge Development Site Deal
The nation’s top life sciences developer has been accused of breaching its contract and improperly withholding tens of millions of dollars in an $80M Cambridge development deal.
An affiliate of Metropolitan Pipe & Supply Co., a plumbing supplier that sold its 303 Binney St. property to Alexandria Real Estate Equities in 2017, has filed suit against the California-based publicly traded company in Middlesex County Superior Court for breach of contract, dealing in bad faith and breach of fiduciary duty.
The site was formerly MetPipe’s main location, but it moved to Somerville after selling its property, where Alexandria is under construction on a 371K SF science and technology building. MetPipe executives Kevin and Austin Brown, under the business entity Canal Realty Trust, claim in the lawsuit that Alexandria owes them up to $55M after the REIT secured a special permit to add density to the site, per a condition in the sale agreement designating additional payments to Canal if the site got approved for more density.
The suit, filed in February, alleges Alexandria improperly calculated an additional payment as part of the 2017 agreement that hinged on parcel development rights. Alexandria, according to Brown, mischaracterized city linkage payments in excess of $65M last year to eliminate its obligation to pay Canal the additional purchase price.
“In short, Alexandria financed its additional development rights with the Additional Purchase Price otherwise due to Canal Realty Trust,” attorney Wayne Dennison of Brown Rudnick LLP wrote in the complaint.
Dennison and a representative for Alexandria declined to comment Tuesday.
The 2017 purchase agreement was for the three parcels at 303 Binney, spread across two Cambridge zoning districts that allowed a combined 209K SF of developable land. The agreement details an additional purchase price dependent on Alexandria’s successful rezoning of the site to allow for more developable square footage.
“If it was successful in its effort to increase the permitted zoning density, Alexandria would reap the benefits of enormously valuable additional development rights,” the suit states. “Accordingly, the parties negotiated an Additional Purchase Price provision that would require Alexandria to share the fruits of a beneficial rezoning with Canal Realty Trust.”
The project, now branded as 325 Binney St., was presented to Cambridge officials last August and granted rezoning in December, according to city documents. Canal claims Alexandria failed to pay the additional $55M purchase price, a figure determined by a per-SF formula in the agreement, by a Jan. 31 deadline.
Alexandria cited $65M in required city “linkage” fees which, per the 2017 agreement, were required to come out of Canal’s additional payment. Canal alleges at least five categories of bogus linkage fees, the largest among them being Alexandria’s $12.3M purchase of 135 Fulkerson St. and a $20M Boston Properties site, both tied to the relocation of an Eversource substation.
“Relocating the substation benefits the commercial interests of numerous other entities and persons, such as Eversource and BXP,” the suit reads. Canal alleges the move will pave the way for Cambridge to approve two BXP 400K SF commercial buildings.
Other costs Alexandria allegedly claimed as linkage fees include $3.3M in affordable housing contributions and $1.1M in community contributions. Legal teams for the parties as of last week sparred in filings over change of venue and length-of-response concerns, and a hearing and case judge are pending, according to Massachusetts Trial Court records.
Alexandria's Greater Boston portfolio includes 5.2M SF across 33 properties, including the nearly 8-acre One Kendall Square complex at the heart of the neighborhood. The 303 Binney St. property is Alexandria's largest under-construction Cambridge project, but the developer is increasingly active in other submarkets, with more recent lab plays in the Seaport, Watertown and Newton.