Parallel Capital Partners has taken the opportunity to cash out big with the $112M sale of 12 Sorrento Valley buildings largely occupied by life science companies, while as the buyer, Boston-based Longfellow Real Estate Partners is betting big on the future of the San Diego life science industry.
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The 318K SF office and lab portfolio, known as the Inspire Portfolio, is 95% leased to a roster of 81 life science, tech and R&D tenants. Parallel Capital acquired the buildings in 2012 and eventually spent more than $10M for renovations and upgrades to attract tenants that wanted creative office and life science space.
The sale price represents a considerable profit for Parallel Capital, even considering its subsequent investment in the properties. The company bought the Inspire assets as part of a larger portfolio acquired from Collins Development Co. for about $63M.
That acquisition included the Sorrento Valley assets but also the 31K SF Herschel Building in La Jolla and the nine-building, 152K SF One Technology Place in Rancho Bernardo, both of which Parallel Capital sold in the mid-2010s. All told, Parallel Capital bought the Collins portfolio for $63.4M and sold it for $149.2M.
"If you're a yield-oriented investor with shorter-duration debt, now would be a pretty attractive time to seek an exit from a property in San Diego," Parallel Capital Partners CEO Matt Root said. "However, if you have a longer-term investment horizon, you can capitalize on the attractive debt markets and lock down your property and generate attractive cash-on-cash returns."
"There is a wall of capital — both debt and equity — chasing real estate today," he said. "As long as capital continues to flow to the investment class, prices will hold. When capital flows slow to real estate, prices will be impaired."
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As the buyer, Longfellow plans to continue the upgrades started by Parallel Capital. The company has significant tech and life science space holdings, but none in San Diego until now.
The acquisition increases Longfellow’s portfolio to more than 3M SF of tech and life science space owned and under management. Besides the new properties, its other holdings are in greater Boston, Philadelphia and North Carolina’s Research Triangle region.
"Our entrance here was the strategic next step in our growth as a leading life sciences developer," Longfellow Managing Director Jessica Brock said.
"We set our sights on San Diego for its prestigious reputation as a life sciences cluster, and we look forward to future growth on the West Coast,” she said.
The brokers for the 12-building deal were HFF's Nick Frasco, Nick Psyllos and Michael Leggett.
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