San Diego-based IQHQ, a life sciences developer that made bold bets during the recent biotech boom, has run into more stumbling blocks as it tries to lease a pair of megaprojects coming online during a historic lab space glut.
The multifamily REIT Aimco downgraded its investment in IQHQ, according to an Aug. 7 Securities and Exchange Commission filing. The REIT invested $50M in the privately held life sciences firm in 2020, and in a second-quarter filing, it reported it took a $47M impairment charge on that investment.
The filing says the company “determined that our investment in IQHQ was impaired after consideration of factors, including adverse capital market conditions, increased real estate development costs, and IQHQ's financial condition.”
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Aimco declined to comment on this story, but it isn’t alone in noticing IQHQ’s struggles. A pair of massive developments, the completed 8-acre oceanfront Research and Development District in San Diego and the soon-to-open Spur in South San Francisco, hadn't signed life sciences tenants as of May and haven’t publicly announced any signed leases.
A 12-member panel of real estate and industry experts convened by The San Diego Union-Tribune unanimously agreed IQHQ should pivot and look at more traditional office tenants for the RaDD space.
San Diego’s life sciences real estate market has a 17.7% vacancy rate, according to CBRE data, with no recent leasing in the downtown submarket, where RaDD is located, and nearly 2.4M SF under construction. Leasing volume in the second quarter reached just 204K SF.
“We are excited about our districts’ leasing momentum, and we will make some announcements soon,” an IQHQ spokesperson said in a written response to questions about leasing at RaDD and Spur.
IQHQ provided no further details.
Bisnow checked with the Ontario Teachers’ Pension Plan, which made two investments totaling $1.2B in IQHQ via its real estate subsidiary Cadillac Fairview, to see if it has taken an impairment charge or performed an evaluation of IQHQ’s finances similar to Aimco's. It declined to respond.
Bloomberg reported in late July that IQHQ hired PJT, a financial advisory firm, which an IQHQ spokesperson said was to advise the developer on capital raising.
“Financial advisers typically assist companies with raising equity or debt, asset sales or potential mergers,” Bloomberg reported.
PJT didn’t respond to attempts to learn more about its work on behalf of IQHQ.
IQHQ was founded in 2019 under the name Creative Science Properties with a team that included BioMed Realty Trust founder Alan Gold. It had raised $2.6B by 2021 to develop life sciences properties across the country. It made big bets in the three core markets of San Diego, Boston and the Bay Area.
IQHQ received a vote of confidence from Bank OZK, a construction lender for the RaDD project. Bank OZK provided a $915M loan for the RaDD project in 2022, initially set to mature in August 2026. News of RaDD’s struggles led Citigroup to downgrade Bank OZK on May 29, which led to a 14% slide in the bank’s stock price later that same day.
In its July 17 earnings report, Bank OZK said IQHQ has kept up payments on its floating-rate loan and contributed an additional $87M to finance the RaDD project.
The Bank OZK earnings report says “the sponsor and capital partners have continued to demonstrate their commitment to the project,” and IQHQ has “secured multiple retail leases and reports to be actively engaged in lease negotiations and discussions with life science and office prospects as well as additional retail prospects.”
Bank OZK, due to “anticipation of a longer than originally expected leasing cycle,” negotiated an additional two-year extension option on the loan and is “confident in the project based on the excellent location, high quality construction, experienced sponsorship and strong capital partners.”
