Newmark’s Boston Capital Markets Group recently announced that it had completed the sale of Charles Park in Cambridge, Mass., on behalf of the sellers — a joint venture controlled by The Davis Companies and Principal Real Estate Investors. The two-building office complex with associated parking garage sold for $815 million and is now in the hands of Alexandria Real Estate Equities (AREE), which plans to complete the property transition into life sciences and R&D office space.

Alexandria Venture Investments — the strategic venture capital platform of AREE — was recently recognized as the #1 most active corporate investor in biopharma by new deal volume for the fifth consecutive year, according to Silicon Valley Bank’s latest “Healthcare Investments and Exits” annual report. But, while AREE holds a significant footprint in the lab sector of the Boston office market, the purchase of the Charles Park complex marks somewhat of a novelty for the company’s investment strategy. Specifically, AREE has, thus far predominantly invested in and developed ground-up laboratory and life sciences property, as opposed to office-to-lab conversions.

One Charles Park, at 1 Charles Park in East Cambridge, Mass., incorporates nearly 110,000 square feet of LEED Gold-certified class A Boston office space.

Charles Park Sold for Nearly Half as Much Only One Year Prior

Although embarking on such a significant makeover project is more demanding than purpose-built lab space, the surge in demand for biotech facilities in the region certainly inspires top-dollar investment confidence — and, the Charles Park sale is just the latest example of significant markups on the market: The Davis Companies and Principal Real Estate Investors purchased ownership stakes in the complex roughly one year ago through a recapitalization that valued the property at around $468 million at the time — almost half of what Alexandria Real Estate Equities paid for the property in the most recent transaction.

“The success of the Charles Park investment is the result of yet another in a series of successful collaborations between Davis and Principal Real Estate Investors,” said Cappy Daume, head of asset management for Davis. “By pairing our team’s creative development vision and execution capabilities with Principal’s deep resources, focus and flexibility, we have been able to position Charles Park as a Class A life science opportunity — in what is inarguably the country’s best life science submarket — that will deliver well in advance of most of the oncoming competitive pipeline.”

Two Charles Park, at 1 Rogers Street in East Cambridge, Mass., encompasses roughly 252,300 square feet of LEED Gold-certified class A Boston office space.

Biotech Space Demand Pushes Tech Tenant Relocations from Kendall Square Submarket

The short supply of office space for lease in Boston to meet the demand of life sciences firms is further driving relocations of successful tech tenants. For instance, Charles Park anchor tenant Pegasystems Inc. had been leasing more than half of the space in the building since 2012, with rights to stay beyond 2030. However, Davis worked with the company on a relocation that would be well-suited to Pegasystems’ new, more flexible work policy. As a result, the tech firm agreed to leave its lease several years early and move operations to a new office development in Waltham.

“By working closely with Pegasystems on a solution that enabled them to right-size their own corporate footprint, we were able to quickly move toward clearing the path for redevelopment of the asset,” said Michael Cantalupa, chief development officer at Davis. “We look forward to working collaboratively with Alexandria to complete the transformation of this asset.”

According to a 2021 securities filing, Alexandria expects the redevelopment project to be ready for initial occupancy as early as 2023 and offer a total of 400,000 rentable square feet of technical office and laboratory space. Furthermore, AREE also expects to pursue additional entitlement opportunities for future development of additional office and laboratory space at the property.

“Charles Park is well-positioned along Kendall Square’s rapidly expanding First Street corridor with immediately recognizable architecture highlighted by its distinctive, horseshoe-shaped façade,” said Newmark Vice Chairman, Edward Maher. “The asset is further surrounded by an unmatched laboratory and technology mecca in the life science epicenter of the world.”

Indeed, Charles Park is located between the 168-acre campus of the Massachusetts Institute of Technology, Massachusetts General Hospital, and the brand-new Cambridge Crossing mixed-use development, as well as two high-volume MBTA subway stations.

“The prospects for scientific discovery over the next decade are just incredibly promising,” said Davis Chief Executive, Jonathan Davis. “Boston is so fortunate to be at the forefront of that.”

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