New York-based Spear Street Capital has sold a majority share in a Philadelphia life science campus to a Saudia investor for $225 million.
JLL Capital Markets closed the recapitalization of Arborcrest Corporate Campus to Saudi Arabia-based Sidra Capital in a sign of the growing trend of Middle Eastern investors taking a harder look at life sciences assets.
“The past several months have demonstrated how critical the life sciences industry is to our economy,” said Audrey Symes, Research Director, JLL Healthcare and Life Sciences. “There is a significant increase in general overseas interest in life sciences investment, especially because the U.S. is the clear leader in the industry.”
Spear Street Capital has retained a 10-percent ownership stake in the five-building, 855,600 s/f suburban office campus whose life sciences and biotech tenancy includes Signant Health, Pharmaceutical Research Association, Abington Memorial and several tenants that support healthcare administration functions.
Spear Street acquired the property for $143 million in 2016 and retained JLL as leasing and managing agent.
According to Hani Baothman, chairman of Sidra, demographic changes and the limited capacity for working remotely led Sidra to aggressively pursue life sciences assets, as COVID-19 has brought this sector into renewed focus, and these longer-term trends are driving and will continue to drive growth.
Sidra’s investment strategy is to identify recession-resistant assets, and the firm generally remains sector agnostic, focusing more on recognizing and then investing into long-term trends. To diversify, they are looking at the life science industry, which was growing rapidly before the pandemic.
“It is a sector we identified due to its defensive nature especially when space is being used by pharmaceutical and biotech companies for research development and even manufacturing,” Baothman said. “Our overall strategy is to invest in defensive commercial real estate and non-cyclical real estate tenants, regardless of where we are in the market cycle.”
The healthcare and life sciences industry has been front and center throughout the year, as the pharmaceutical and biomedical industry is focused on creating effective COVID-19 vaccine and therapeutics to treat the virus. With a spotlight on this industry, commercial real estate investors are showing a growing interest in assets with strong life sciences and biotech tenancy, given the industry’s stability throughout the pandemic and strong outlook into 2021.
According to JLL Research’s 2020 Life Sciences Real Estate Outlook, life sciences real estate capital markets are well positioned for relative outperformance in 2020. Transactions are occurring at pre-COVID pricing in many of the top clusters. The sector is increasingly attractive to Middle Eastern-based investors who have invested $389.2 million in the sector year-to-date, which includes the Arborcrest transaction, following two years of low activity, including zero investment dollars into life sciences properties in 2018.
According to JLL, the Arborcrest sale is the largest suburban Philadelphia life science trade during COVID. It also ranks as the sixth-largest suburban sale in a primary or secondary U.S. market.
JLL’s Capital Markets team leading the transaction included Managing Director Claudio Sgobba and Senior Managing Director Doug Rodio.
“Arborcrest fits Sidra’s unique and targeted investment strategy,” Sgobba said. “It is our pleasure to serve the Sidra and Spear Street teams. Understanding a client’s strategy allows us to present the best investment opportunities specifically for their requirements.”
“Sidra’s commitment to placing capital in Greater Philadelphia with a proven partner like Spear Street further cements JLL’s thesis that the Philadelphia region is near the top of the target list of geography for many of the most discerning cross border investors today,” Rodio added.
Sidra Capital was founded in 2009 and headquartered in Jeddah, Saudi Arabia – with offices in Riyadh, London, Dubai and soon in Singapore.