Silverstein, Cantor Fitzgerald Buy Massive Life Sciences Development In Philly
Two powerhouses of New York real estate have bought into Philadelphia’s booming life sciences market in a big way.
A joint venture of Silverstein Properties and Cantor Fitzgerald has purchased a majority ownership stake in 3.0 University Place, the forthcoming lab and office hub that was being developed by University Place Associates. Silverstein and UPA will be equal partners in developing the property, UPA said in a press release on Wednesday.
The Silverstein/Cantor Fitzgerald JV paid $56M for 90% ownership of 3.0 University Place. University Place Associates, which will retain the final 10% piece of ownership, marketed the equity investment opportunity through JLL Capital Markets Managing Director Brett Segal. Once word got out about the opportunity, at least 25 different institutional investors expressed interest, UPA President Anthony Maher told Bisnow.
“This is so much more than just Cantor and Silverstein bringing capital [to our project],” UPA CEO Scott Mazo said. “There’s a network of investors who want to have access to this thriving life science corridor.”
Like much of University City's business core, the building is within a qualified opportunity zone. The growth of the neighborhood and the asset class are added security for the JV, which was formed in 2019 to invest as much as $1.8B in opportunity zones. Opportunity zones are designed to drive development in underinvested areas, but the project's proximity to the city's business core and the popularity of its asset class lend credence to the most common criticism of the program: that it has primarily benefited investors and projects that don't need tax breaks.
Located just to the west of the University of Pennsylvania at 4101 Market St., 3.0 University Place is slated to contain 250K SF of leasable space split between eight floors, with just under 50K SF already leased to the Wistar Institute and to Ben Franklin Technology Partners. UPA and Silverstein will look to break ground in early 2021, but doing so would depend on receiving more commitments in the form of further pre-leasing or a construction loan, Maher said.
Wistar will take over 19K SF on the third floor, which will also have a green roof and event area, while Ben Franklin Technology Partners will operate a life sciences incubator on its 29K SF that makes up the entire fourth floor.
The fourth through eighth floors of 3.0 University Place will have identical floor plates just shy of 30K SF. Floors six through eight remain available to lease for hybrid lab and office space, while the fifth floor is reserved for pre-built “growth pods” meant to house startups in their first steps beyond an incubator, whether they come from Ben Franklin Technology Partners’ operation or not. The 39K SF second floor will contain manufacturing equipment designed to comply with Current Good Manufacturing Practices.
On the ground floor, the building has already inked Fulton Bank to a 2.5K SF lease. Current plans for the remainder of the 33K SF set aside for retail include a potential food hall, restaurants and cafés. If 3.0 University Place can break ground relatively on time, UPA predicts being able to open by the end of 2022.
Of all the suitors that lined up to buy into 3.0 University Place, Silverstein brought the most impressive track record as a development partner, Mazo said. Beyond its signature project of Lower Manhattan's World Trade Center, Silverstein has already delivered on a life sciences project as part of a joint venture with Taconic Investment Partners on Manhattan's East Side, across the East River from Cornell Tech's Roosevelt Island campus.
“That makes us feel really confident. We already felt confident, but this development is complex and we’re trying to execute perfectly,” Mazo said. “Now it’s down to execution, and these are the people that executed the World Trade Center.”
UPA also was excited by what it learned of Silverstein as a landlord, Mazo said. Silverstein Head of Acquisitions Jeff Grasso has said the company is viewing tenants as its partners amid the coronavirus pandemic, and Mazo spoke glowingly of hearing that Silverstein Chairman Larry Silverstein has eaten breakfast with tenants every day for years to get to know them better.
“I was floored,” Mazo said. “We feel like we're getting the best of the best.”
Silverstein is a new but potent player in the Philadelphia market. Early last year, it broke the record for the most expensive single-property transaction in Philly history when it paid $451M for the trophy office building at 1735 Market St., otherwise known as the BNY Mellon Center, with 3.0 University Place being its second local acquisition.
“It’s a city that has many attributes of New York,” Larry Silverstein told the Philadelphia Business Journal. “It’s an attractive city and a cosmopolitan city with lots of activity that mirrors New York. Having an opportunity to actively participate in the dynamism of Philadelphia, I find very exciting. Given a chance to do in Philadelphia what we are doing in New York, I like to take advantage of that.”
CORRECTION, DEC. 9, 12:15 P.M. ET: A previous version of this article stated an inaccurate valuation of 3.0 University Place and mislabeled the third floor green roof. This article has been updated.