Suburban office/life sciences assets get boost from Middle Eastern investments
Trend demonstrated in the recent $225M JLL-brokered recapitalization of Arborcrest Corporate Campus near Philadelphia to Saudi Arabia-based Sidra Capital
PHILADELPHIA, December 2, 2020 – JLL Capital Markets announced today that it has closed the $225 million recapitalization of Arborcrest Corporate Campus to Saudi Arabia-based Sidra Capital (Sidra). The sale of the five-building, 855,600-square-foot suburban office campus with a significant life sciences and biotech tenancy in the suburban Philadelphia community of Blue Bell, Pennsylvania, demonstrates a growing trend of Middle Eastern investors taking a harder look at life sciences assets.
JLL arranged the transaction between Spear Street Capital and Sidra, which acquired a 90-percent stake in the campus. Spear Street Capital has retained a 10-percent ownership stake in the asset.
Completed in two phases in 2015 and 2019, Arborcrest’s healthcare, life sciences and biotech tenancy, which was crucial to Sidra’s interest, includes Signant Health, a leader in clinical trials; Pharmaceutical Research Association, a clinical research organization; and Abington Memorial, an outpatient healthcare facility; along with several tenants that support healthcare administration functions.
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.
“The past several months have demonstrated how critical the life sciences industry is to our economy,” says 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.”
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.
Source: JLL Research, Real Capital Analytics (transactions over $5 million, excludes refinances)
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.
JLL Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm's in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether investment sales advisory, debt placement, equity placement or a recapitalization. The firm has more than 3,700 Capital Markets specialists worldwide with offices in nearly 50 countries.
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JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of over 92,000 as of September 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.
About Sidra Capital
Sidra Capital was founded in 2009 and headquartered in Jeddah, Saudi Arabia – with offices in Riyadh, London, Dubai and soon in Singapore. Licensed and regulated by the Saudi Arabian Capital Market Authority, Sidra Capital is a Shariah-compliant asset manager that focuses on alternative asset classes mainly global income generating real estate and private finance.
About Spear Street Capital
Spear Street Capital is an owner and operator of distinctive office properties located in the United States, Canada and Europe. The company focuses on assets and portfolios greater than $25 million in total value, targeting well-conceived and located properties that can succeed through creative leasing efforts, physical improvements, entitlement changes or realization of adaptive re-use strategies. Properties may be located in both primary and secondary markets provided they possess, or can attain, superior appeal to quality tenants.