Brookfield Confirmed as 49% Buyer of Alexandria’s Menlo Gateway for $541.5MM

Alexandria Real Estate Equities, Menlo Gateway, Bohannon, Menlo Park, Heller Manus Architects,

Original story written Dec. 3, 2021; updated Jan. 24, 2022.

By Meghan Hall

It’s been a busy week for commercial real estate in the San Francisco Bay Area, and it looks like that momentum will continue to carry through the end of the year. Alexandria Real Estate, one of the largest life science developers in the region, intends to close soon on a deal to sell 49 percent of its share of Menlo Gateway, according to a recent filing. The total price of the transaction is $541.5 million.

The buyer was an entity affiliated with Brookfield Asset Management, according to sources with direct knowledge of the deal. In return for its stake, Alexandria is expected to receive $400,118,000, or about $1,430 per square foot. The remaining $141.3 million will be the assumption of Alexandria’s share of the debt by Brookfield.

Developed by Bohhannon and Alexandria, the development consists of three, eight-story buildings totaling 772,983  square feet. The buildings are located at 100 Independence Drive, and 125 and 135 Constitution Drive. Phase I–100 Independence Drive–totals 205,222 square feet. Phase II, which encompasses the latter two buildings, includes 250,000 square feet per building. The buildings are fully-leased to Meta. 

In 2017, Alexandria spent $78 million to acquire an 18 percent equity share in the development, according to previous reporting by The Registry. It spent $60 million to acquire that equity and another $18 million in debt for a total of $78 million. The company planned to achieve a 49-percent equity share in the development by the first quarter of 2019, when its total investment reached $430 million ($282 million for the equity and $148 million in debt). The debt portion was for non-recourse construction financing of phase two of the development.

The office buildings are designed by architecture firm Heller Manus Architects, a San Francisco-based architecture firm. The buildings feature floor-to-ceiling views of the San Francisco Bay and collaborative workspaces with an outdoor terrace. 

The campus also includes a 230-key hotel part of the Marriott Autograph Collection, a 68,519 square foot health club, more than 10,000 square feet of community facilities, a restaurant and three parking structures.

Alexandria’s sale of its stake is expected to close in mid-December. The buyer is unclear; this story will be updated as more information about the deal is confirmed. Alexandria is expected to achieve an internal rate of return of 11.3 percent and a value creation margin of 23 percent.

In recent months, Alexandria sold additional interests in two Mission Bay Assets to New York City-based Nuveen. The deals, which closed in October, saw Alexandria sell interest in both 409/499 Illinois Street and 1500 Owens for $274 million. In the spring of this year, Alexandria sold a 70 percent interest in 213 East Grand Ave. in South San Francisco for $301 million, or $1,429 per square foot. 

Up in Seattle, another rapidly emerging life sciences market, Alexandria struck a deal with Clarion Partners to acquire 70 percent of a South Lake Union life sciences portfolio located along Eastlake Ave. E. and Blaine Street. Alexandria paid $315 million in the deal. The Registry also reported that the cap rate on the sale was in the low 4 percent range, and the capital source that Clarion used on this transaction was the Clarion Lion Properties Fund, which is Clarion’s flagship core open-ended commingled fund.

Overall, Alexandria is one of the largest developers of life sciences assets in the country. Currently, the firm has more than 7.7 million square feet of space under construction, and near-term projects are about 80 percent leased.

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