The lender on a completely vacant life sciences building that delivered two years ago has taken ownership of it and is pursuing a sale.
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The lab building at 808 Windsor St. in Somerville was transferred to lender Bank OZK through a deed-in-lieu-of-foreclosure on Sept. 29, according to deed records.
The 370K SF property was previously owned by a joint venture between Leggat McCall Properties, DLJ Real Estate Capital Partners and Deutsche Finance Group.
The ownership group had been in talks with a buyer to purchase the property for $330M, Bank OZK said in a July earnings statement, but those plans fell through.
In its October earnings release, Bank OZK said it had taken control of the property and had to write down its value by $37M. The lab building carried a value of $132M, 80% of its assessed value.
Leggat McCall responded to Bisnow's request for comment by providing a statement from Bank OZK that indicates they are still working together.
“808 Windsor is a high-quality asset with excellent long-term potential," Bank OZK Executive Managing Director Cliffton Hill said in the statement. "We have engaged Leggat McCall Properties to work with us on executing a business plan, including leasing, to ensure best-in-class operation and outcomes for the property."
A Bank OZK spokesperson confirmed the title transfer, saying the bank has engaged a property manager and is in "ongoing discussions with an interested purchaser."
In 2021, Bank OZK provided the development team with a $246M loan to build 808 Windsor. The project was completed in 2024.
In August, the Deutsche Finance Group fund that invested in the property, Deutsche Finance Investment Fund 17 — Club Deal Boston II, said it planned to file for insolvency due to the failure to find a buyer for the property and to get an extension on the loan, Bloomberg reported.
The Windsor Street property is part of a larger planned life sciences campus called Boynton Yards. The development team has also completed development of 101 South St., a purpose-built lab building that is 100% leased to Flagship Pioneering.
The planned 1.8M SF campus has three other phases that haven't broken ground yet: two lab projects and a 350-unit residential building.
In September, the Boynton Yards team filed a zoning text amendment request that would reduce the proposed commercial floor area from 75% to 60%, allowing more residential development on the campus.
"Market conditions have since changed considerably, with the life science sector experiencing a sustained downturn in leasing demand and elevated vacancy that has made it increasingly difficult to finance and deliver new lab space and likely will for the foreseeable future," the applicants wrote.
"At the same time, there is an acute regional and national housing shortage, and transit-served, underutilized sites like Boynton Yards, located immediately adjacent to the MBTA Green Line's Union Square Station, are ideal locations for additional housing production," the applicant added.
The development team was also planning to pursue another life sciences project — a 262K SF property at 15 McGrath Highway in Somerville — but due to the weakening fundamentals in the market, the team put a hold on the project in 2024.
The foreclosure comes as the local life sciences market continues to deal with a major oversupply of lab space. The submarket just north of Boston that includes Somerville has been hit particularly hard, with its vacancy rate surpassing 47% at the end of the third quarter, according to CBRE.
The building was part of a wave of lab projects that broke ground speculatively during the industry's pandemic-era boom period and then struggled to lease up after demand evaporated. Another one of those projects, a 469K SF building Greystar delivered in Somerville in 2024, landed its first tenant last month, signing a 105K SF lease with Mass General Brigham.
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