By Jon Peterson
Newton, Mass.-based Diversified Healthcare Trust has purchased the 88,508 square foot life science property in Fremont known as Fremont Labs. The purchase price was $82 million, or roughly $926 per square foot, according to sources that track the sale of life science properties in the San Francisco Bay Area. The price achieve a current GAAP cap rate of 6.5 percent at closing, according to a statement from the company.
The seller of the property was Jadian Capital, which has offices in the East Coast in both Stamford, Conn. and New York City. The investment firm had owned the property since February of 2020 when it acquired the asset for $17.4 million, according to public records.
“We are excited to be growing our Life Science portfolio in the San Francisco Bay area, which is widely seen as the second largest Life Science market in the U.S. Given the current increases in interest rates and the corresponding negative effect it is having on commercial real estate values, we are also pleased that we are in the financial position to opportunistically acquire this attractive, well located and long term, fully leased Life Science property at an attractive valuation,” said Jennifer Francis, president and chief executive officer of DHC in a statement.
This acquisition brings DHC to four life science properties totaling approximately 327,000 square feet in the San Francisco Bay Area market, in addition to its joint venture investment in two properties located in the same market, the company stated.
Jadian worked on marketing the listing with the San Francisco office of JLL. Among those working on the sale were Adam Lasoff, managing director, Daniel Renz and Erik Hanson, both senior directors, and Will Connors, senior managing director.
Fremont Labs is positioned on a 4.7-acre site at 47071 Bayside Pkwy within the Central I-880 corridor of San Francisco, according to a statement from JLL. Given San Francisco’s rank as the second largest life sciences market in the U.S., the property is surrounded by major life sciences users, is within close proximity to a highly educated labor pool and is close to the world-class research institutions at San Jose State University, Stanford University and Santa Clara University, JLL summarized.
“Jadian and Graymark are the first investors in this market to successfully execute on a life science conversion and exit for core pricing,” said Adam Lasoff, managing director of JLL. “This is in part due to the strength of the Bay Area life sciences and biotech market, which is one of the strongest in the country.”
The sale of this property is another example of investors continuing their strong interest in single-tenant life science office properties in the San Francisco Bay Area. This property is 100 percent leased to Alamar BioSciences, which uses this space as its headquarters. It recently signed a 12-year lease to accommodate its corporate office and mission-critical lab functions.
Fremont Labs had benefited from $52.5 million, or $593 per square foot, of capital investment into the property. Completed work includes the build-out of chemistry, biology, and complex bioassay labs with airlocks, extensive HVAC and loading dock upgrades, installation of backup power, creation of open office floor plans and addition of a fitness center and cafeteria.
Alamar will spend its TI allowance on expanding the existing lab spaces by 10,000 square feet, which will notably have 21’ clear heights like the rest of the existing labs.
Freemont Labs is located at 47071 Bayside Parkway in Fremont. It covers 4.7 acres of land. It was first developed in 1991 and it has gone through several years of renovation since then. There is parking in the building for 275 spaces or 3.1 spaces per 1,000 square feet. The breakdown of the space in the property now is 56 percent office, 30 percent lab and 14 percent manufacturing/warehouse.
The San Francisco Bay Area continues to show strong fundamentals for life science product, according to data put together by JLL. There is a total of 37.7 million square feet of space in the region. Additional 4.4 million square feet of space is under construction with current demand for life science property types in excess of 5.6 million square feet. Vacancy for this asset class is sub-three percent.