Name: Matthew McDevitt, regional executive vice president, BioMed Realty Trust
The past few weeks have been very busy for BioMed Realty Trust. On April 13, the San Diego-based real estate investment trust celebrated the topping-off of its Center for Life Science | Boston, a 703,000-square-foot laboratory and office building under construction that is set for completion next year.
BioMed will spend $700 million on the center, including the $473 million it spent to buy the site from developer Lyme Properties.
A day before that event, President and CEO Alan Gold led BMR executives, officials from drug discovery company Regeneron, and local dignitaries in a ceremonial groundbreaking for a $145 million, three-building, 360,000-square-foot addition to The Landmark at Eastview, an R&D-office campus in Tarrytown, NY. The new space is set for completion in late 2009.
Regeneron will keep its headquarters and 450 jobs at the campus, for which the company will receive $9 million in combined economic incentives from New York state, Westchester County, and the town of Greenburgh. The company will lease 194,000 square feet of the new space, which comprises all of one building and part of a second, and retain 27,000 square feet of its existing space.
Three days before the groundbreaking, BMR announced that it formed a joint venture with Prudential Real Estate Investors that spent $507 million to buy sites in three states from affiliates of Lyme Timber. The deal included development parcels next to the University of Texas M.D. Anderson Cancer Center in Houston and at the Science Park at Yale University.
The bulk of the joint-venture deal consisted of Cambridge sites – the just-completed, 185,000-square-foot facility at 320 Bent Street; the 420,000-square-foot space at 301 Binney Street now under construction; about 600,000 square feet of life science space recently completed or under construction at the Rogers Street project; and land that can support approximately 266,000 square feet of life science lab and office space at Kendall Square.
BioRegion News last week gleaned some insight into the recent activity of BioMed by speaking with the company’s top East Coast executive, Matthew McDevitt.
Given all of BMR’s recent activity, how far has the East Coast come to catching up with the West Coast in terms of development of biotech space? Why has that come about?
That’s really more of a question, I would say, for a biotech CEO-executive. My answer to that: It would be a market maturation. The tenant base in biotech has been – I wouldn’t use the term behind, but just behind in terms of maturing. If you look at San Francisco, you have the likes of Amgen and Genentech, which are essentially a few years ahead in their development stage, whereas some of the other companies on the East Coast are behind. In Maryland, MedImmune [is] being purchased by AstraZeneca. They came out with a product maybe four years ago, whereas Genentech basically has had products for years. It’s not really a question that really pertains too much on the real-estate market.
And yet that market hasn’t been as mature on the East Coast as it has been in the West.
Right. If you look at what we focus on, basically some of the demand generators that we focus a lot of our attention on … have begun to mature. Take an example from Boston. If you look at MIT, you look at Harvard, the companies that are spinning out of those institutions have been growing at a fairly steady pace that has created the demand.
How do you define demand indicators? Which are most significant?
You’ve got several indicators. Some that we would like to track is venture capital funding. With venture capital funding, we typically see an increase in new companies moving through their cycle.
Let me back up a little bit … and let me tell you how we look at our tenant base. It’s our vernacular. We have what we think are essentially four tiers of types of companies – tier 1, 2, 3 and 4. We categorize the tier 1 tenant base as the fully indicated pharma: the Sanofi-Aventis, the Pfizer, the Merck. And as we move down to tier 2, tier 3 and tier 4 – we look at tier 4 as a guy coming right out of the university, with a few rounds of venture capital behind him. And then tier 2 and tier 3 are companies that maybe have recently gone public and maybe have one or two products in late-stage clinical trials. And tier 3 would be the company that has been public for several years but has been successful in getting a product or two approved but has several more in late-stage trials.
Then there are all of the different sectors within the life sciences industry that we focus on. They would be the research companies, what we call the tools companies – the people that actually make a protein to be used by a researcher. There are all kinds of different companies within what we expanded to say is the life science industry. We don’t use the term ‘biotech.’
How has demand changed in recent years? Are they looking for smaller space, more equipment? Less?
Over the past few years, depending on how venture-capital funding is, your tier 3 and 4 tenants might want to raise not as much capital as they used to and try to live within a smaller space than what they normally would have historically signed up for. The guys that are in tier 2 and 3 are looking to make their space more efficient. But they still need space to basically continue to expand their product line base.
BioMed recently topped out the Center for Life Science | Boston. Where does that project fit within the overall Boston-Cambridge market?
That building actually sits within the Longwood Medical Area, which would be best defined as, essentially, Harvard. That’s where Harvard Medical School is. Harvard Medical has several of the associated teaching hospitals, and some of those are our tenants like Beth Israel [Deaconess Medical Center and] Dana-Farber Cancer Institute. And then there are the Children’s Hospital Boston and the Center for Blood Research or CBR Institute for Biomedical Research.
They’re really all related around Harvard. And really that area has what is known as a bench-to-bedside mentality. What is so dynamic there is that somebody at Harvard will have a teaching responsibility, he will then go to the hospital where he has a clinical responsibility, then he’ll go over to his research institute where he’s got a research responsibility. And that all needs to be done basically within walking distance.
That is why the building we now own is aptly known as the Center for Life Science Boston. It truly is the center of the wheel that basically has several spokes to it. If you look closely at those spokes, it would be Children’s Hospital. It would be Beth Israel Hospital. It would be Harvard. It would be Merck. There are several demand generators in those spokes.
Beth Israel, Dana-Farber, Children's Hospital and CBR have been announced as tenants of the center. How does BioMed plan to fill the remaining space? Will it pursue more institutions like these? Will it seek more business tenants?
Most likely, the space is designed as what we call laboratory shell. We’ll be looking for other research institutes. But that wouldn’t preclude a big pharma wanting to come and set up a research institute in Longwood Medical, very similar to what Merck did.
What kind of asking rents are you looking at?
That’s something I probably couldn’t give you. That would be what we would call a forward-looking statement.
BioMed has said the center is 80-percent leased. Is that still accurate?
That is accurate.
What has been market response to the Center for Life Sciences?
Given the fact that it’s been probably one of the tightest markets in the country, we’ve been getting some very good activity.
What types of prospective tenants are checking out the center?
I can’t give you that either.
The center is an urban, vertical life sciences park. How much of a marketing challenge does that pose to an industry sector more accustomed to the low-rise campus setting?
It isn’t a challenge at all. Fundamentally, our buildings need to have higher floor-to-ceiling heights. Fundamentally our buildings need to have a larger floor-load capacity. We need to have much more electric, much more water. Our utilities need to be much more robust than a typical office building that you’d see.
Almost every asset of ours, whether it’s a low-rise or a high-rise, needs to have a beefed up utility system to it. Most of the time, all of our buildings have a tremendous amount of air flow – what we call 100-percent fresh air – going in and out of the laboratories. We’re providing essentially 100-percent conditioned space. It’s humidified. Its temperature is exact. All that needs to be done prior to entering into the building. And then it is essentially ducted out. And the changes per hour to that are roughly six to eight times per hour. You’re lucky if you get six to eight changes a day in a traditional office building.
When you’re talking about an urban setting, all of that needs to be pre-designed into where all the mechanical spaces are. If you look at our building, we have multiple mechanical floors, some of them right in the middle of the building. We actually don’t have a penthouse mechanical floor. We actually have a fifth floor mechanical floor and a 13th floor mechanical floor. We built that into the available space.
Turning to The Landmark at Eastview, why did BioMed choose to build on spec the space not being leased by Regeneron?
We are doing the third building completely on spec. We obviously believe the market is there to accompany the New York area’s demand for lab space.
What effect will East River Science Park and other New York City projects ultimately have on The Landmark at Eastview?
That’s really not a comment I can give you. It’s not a project that has been factored in to this point.
[In an interview minutes after the groundbreaking, BioMed President and CEO Alan Gold offered a different perspective: ‘[The Landmark at Eastview] is where a majority of the for-profit life science companies are located in the New York state area. These are big companies – not incubator-type companies. There isn’t any other comparable location. They’re trying to create something in the city of New York – way too expensive. This is the right location. It has the right demographics, the right cost structure for companies to grow in.’]
Where would the tenants in the Landmark space come from? Westchester County? Elsewhere in the New York region?
You can answer that several different ways. We believe the New York market has a strong pre-existing tenant base, and has a continued need to grow.
What attracted BioMed to the Cambridge, New Haven, and Houston sites it plans to develop with Prudential Real Estate Investors?
We have never veered off our existing business plan. They have been our original target markets from the time we went public. They were markets we have identified to acquire assets in from the get-go.
Does this signal a shift for BioMed toward development of new sites as opposed to acquiring ready-made properties like Landmark and the Center for Life Sciences?
Our goal is to provide real estate to the life sciences community. We believe firmly that we need to [serve] every tier and every facet of those growing companies. You can’t do that unless you are doing what we’re doing.