A Watertown landlord has agreed to pay its biopharmaceutical tenant $2M to vacate its headquarters by the end of the year as long as the landlord completes a new lease deal, public filings show.
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Commercial eye medicine developer Kala Pharmaceuticals entered an agreement with landlord Clarion Partners to vacate its 66K SF space at 490 Arsenal Way four years early, according to Securities and Exchange Commission filings. The mutual agreement is pending Clarion Partners’ new lease agreement with C4 Therapeutics, a biotechnology tenant at the same building. Clarion Partners will also return Kala's $2M security deposit alongside the termination payment if the agreement holds.
In an eight-year lease signed with then-landlord Boylston Properties in 2018, Kala agreed to pay $53 per SF in the lease’s first year, a rate that would have increased to $65.19 per SF by 2026, according to the original agreement. Lab asking rents in Watertown and the adjacent West Cambridge neighborhood have skyrocketed since and currently sit at nearly $93 per SF, according to CBRE research.
Representatives for Clarion Partners and Kala broker JLL declined to comment Thursday, while other parties in the agreement, including broker Cushman & Wakefield for Clarion Partners, didn’t respond to requests for comment.
Kala, whose employees have been primarily remote for more than a year and a half, decided to downsize its corporate office to save $6M per year through 2026, Kala Chief Financial Officer Mary Reumuth said during a Q3 earnings call reported by Seeking Alpha. The biopharma this week acquired ocular disease biotherapy firm Combangio for $16M, and the lease termination will help offset the cost, Reumuth said.
The company said it secured a limited amount of office space to serve as its headquarters beginning in January at 1167 Massachusetts Ave. in Arlington, which is a Workbar coworking space. Kala also said it plans to outsource its lab activities until it reacquires its own dedicated space.
Clarion Partners bought the 185K LINX building and the adjacent 480 Arsenal St. for $157M in 2018. C4, which currently occupies 45K SF in a lease set to expire in 2028, did not disclose future lease plans in its Q3 earnings report.
The move isn’t the first time a life sciences tenant and a landlord have agreed to terminate a lease early without penalty. In May, BioMed Realty Trust allowed Cyclerion Therapeutics to terminate a 57K SF lease without penalty at 301 Binney St. in Kendall Square, letting $53M in future rent payments go.
BioMed secured a new tenant and is likely commanding higher rents than Cylcerion’s $90 per SF at the time of signing its lease two years ago; Kendall Square rents average over $100 per SF and another 301 Binney St. tenant is paying $135 per SF.
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