Facing Investor Downgrades, IQHQ Confronts Challenging Market

Life sciences developer and operator IQHQ is facing increasing financial challenges as its creditors place additional pressures on the San Diego-based company in a tough lab leasing environment. 

Six registered funds with $707M allocated to IQHQ marked down their positions in the second half of 2025, an indicator of sliding values for the many lab megadevelopments launched in a frenzy in 2022 and 2023.

IQHQ, one of the largest privately held lab developers in the country, with an operational portfolio of 3.6M SF, has secured investments from some major names, including Bluerock and T. Rowe Price, and in January 2025 landed $900M in rescue financing from a group that reportedly included Morgan Stanley and CenterSquare Investment Management.

A member of IQHQ leadership, who declined to be quoted because of disclosure sensitivity, strongly disputed the idea that the company is in distress.

Bluerock is IQHQ’s largest shareholder and has exposure to the developer in excess of $700M as part of its $3.6B Bluerock Total Income+ Real Estate Fund, according to a report from banking market intelligence platform Atrium. Bluerock marked down the fund’s shares by 4.4% to $6.28 in the second half of 2025.

Highland Opportunities and Income Fund and NexPoint Real Estate Strategies Fund made a 23% markdown to $7.72. Newer investors in IQHQ have marked their shares even lower. T. Rowe Price placed its common equity in IQHQ at $4.92 per unit, while an Altegris fund marked it at $2.26.

Bluerock’s fund has struggled considerably since it was listed on the NYSE last December and lost roughly 40% of its value on the first day of trading. According to analyst Leyla Kunimoto, after nine straight quarters of negative returns, “the fund is shrinking, and investors are still stacked in a redemption queue.” 

In June 2025, 22% of investors in the fund tendered shares for repurchase, yet the fund only repurchased a quarter of those requests. 

Bluerock also made a pair of payment-in-kind loans to IQHQ: a $160M loan at 13.5% maturing in December 2027 and an $86M loan at 14% maturing in August 2028. IQHQ isn’t paying interest on these loans, which Atrium calculates adds another $8M or $9M in accrued interest every quarter. Bluerock declined to comment for this story.

Life sciences properties are sliding in value after two years of constricted leasing on the heels of a wave of new construction that hit the market beginning in 2024. Cap rates for lab properties ballooned from their 2022 trough of 4.4% to 6.6% in 2025, according to PwC. 

Major developments built in the last five years have struggled, including Sterling Bay’s developments in Chicago, and development sites have been selling for fractions of the prices they commanded during the boom in 2021 and 2022.

The IQHQ executive argued that the firm has plenty of runway, has signed important leases, and is making the best of a bad market that has already shown signs of a turnaround. An internal presentation shared with Bisnow argues that “gross demand is better than popular perception.” 

The lab leasing market nationwide has struggled for roughly two years, causing vacancies to reach 30% in prime life sciences markets like San Diego and Boston. A slight increase in leasing began to form at the end of 2025, around the same time landlords started offering major concessions for new tenants. 

The company’s Class-A lab assets, many lacking anchor tenants, are well-positioned and will be sought after by a growing array of potential tenants, including life sciences, artificial intelligence, defense, and material sciences firms, the company executive said. 

IQHQ declined to comment further. 

IQHQ was founded in San Diego in 2019 by experienced industry players, including Alan Gold and Tracy Murphy, with the aim of becoming a big player in the life sciences real estate sector. It quickly established footholds in major markets in the U.S. and UK, breaking ground on showy megadevelopments during the pandemic boom years, only to have them enter the market during the current sustained supply glut. 

Since the $900M raise in early 2025 to buoy IQHQ through a difficult lab leasing market — at which time the firm was confident it would be announcing more Research and Development District leases later in the year — the company has signed a handful of lab tenants, including a 235K SF lease for AI biotech startup Lila Sciences at its Alewife property in Boston last October. 

Last November, IQHQ paused its 960K SF Fenway Center Development in Boston, which would span a deck above the Massachusetts Turnpike, and has paused a number of other Boston-area projects. At the same time, J.F. White Contracting Co. sued IQHQ, claiming it was owed more than $27M for its work on the Fenway Center development.

In addition to its investments, the company is under debt pressure.

IQHQ found additional support in August 2025 from Innovative Industrial Properties Inc. The cannabis-focused REIT committed $270M to IQHQ via a $100M revolving credit facility and $170M in preferred stock purchases. The preferred equity ranks senior to all common equity "at a material discount to replacement cost of the underlying assets." 

The debt from Innovative Industrial Properties is senior to all other creditors.

“When your rescue lender is a cannabis REIT and the coupon is 16.5%, the equity is under severe pressure,” the Atrium report says.

But the biggest monkey on IQHQ’s back has been its 1.7M SF Research and Development District, or RaDD, campus in downtown San Diego, which makes up more than half of its operating portfolio. 

The property opened in 2024 and has announced only one life sciences tenant: the Craig J. Venter Institute, which signed on last June. Other retail tenants have joined, including Equinox health club.

While there has recently been a small spike in demand for lab space in the San Diego market, with about 10 companies seeking somewhere near 35K SF to 50K SF, the market remains stuck in a supply glut, according to JLL Vice Chairman Grant Schoneman. 

There is no large-scale tenant seeking the type of sizable lease that would make a dent in the vacancy at RaDD, he said. Challenges finding tenants for RaDD led to Citibank downgrading Bank OZK in 2024, due to its significant construction loan with IQHQ.

“Getting deals downtown is difficult because tenants just have so many options,” Schoneman said. “We're still in this supply-demand imbalance.”

Vacancy in San Diego’s life sciences market rose more than 60% year-over-year, hitting 28.6% with more than 3M SF added to an already overbuilt market, according to a Q4 Savills report. 

IQHQ believes better days are around the corner for RaDD. 

“We anticipate an uptick in RaDD life science demand once legacy core San Diego submarket supply is exhausted, and subsequently expect RaDD to capture a 33% share thereafter — effectively competing with smaller submarkets despite its higher quality,” the company wrote in its internal presentation. 

IQHQ has a $915M construction loan for RaDD from Bank OZK, which has been trying to extricate itself from the life sciences sector. The loan was initially scheduled to mature this year, but IQHQ received a two-year extension.

“We have one credit with IQHQ, which is the senior secured loan on their San Diego RaDD project,” Bank OZK Chief Communications Officer Michelle Rossow said. “All IQHQ equity is, of course, subordinate in priority to our senior secured loan, so it is not appropriate for us to comment on any valuation adjustments by any equity participants.”