Why Longfellow bought $ 842 million in office buildings in Sorrento Mesa and Sorrento Valley


What started with a collection of indescribable industrial buildings along Sorrento Valley Road has grown into a commercial real estate portfolio large enough to make the owner, Longfellow Real Estate Partners, one of Sorrento’s most prominent owners in just three years.

Formed 13 years ago, Longfellow is a private life sciences real estate developer headquartered in Boston with 14 million square feet of lab and technology space spread across San Francisco, San Diego, Raleigh. -Durham and Boston-Cambridge.

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The company, however, had no connection with San Diego until November 2018. It was then that it purchased 13 mostly one-story buildings on Sorrento Valley Road as part of a $ 112 million transaction that, aside from its price, might have seemed uninteresting.

Today, Longfellow has amassed about 90 acres of land in Sorrento Mesa and Sorrento Valley at a cost of $ 842 million, according to public records. It is currently converting and leasing a combined 1.26 million square foot space for life sciences. The vast acreage means the company can also erect an additional 3 million square feet of research and development space in a market where it and other speculators envision a biotech boom as drugmakers expand from Torrey. Pines.

The farms meander along Sorrento Valley Road to Mira Mesa Boulevard, enter and exit Qualcomm’s Lusk Boulevard territory, and continue east to Camino Santa Fe.

“Longfellow is bullish on the San Diego life sciences market, and in the Sorrento Mesa area in particular, where we are seeing companies gravitate toward due to the new biotech space being created there by us and others,” said Nick Frasco, who is the head of the company. General manager. “Ultimately, we strive to provide interconnected destination campuses within an ecosystem that provides our tenants with the best equipment and state-of-the-art laboratory space where they can create new ideas and scientific advancements.”

Redesigned and renamed SOVA Science District, Longfellow’s first project in San Diego is somewhat hidden away along a sleepy stretch of Sorrento Valley Road. The once bland structures had little to no appeal. Even now, with a top-to-bottom lab conversion effort completed at around 75%, passers-by would be forgiven for having a shoddy attitude here. A closer look at the low-rise property group reveals a diamond that is no longer in the rough.

There’s new paint, sure, but there’s also now a central outdoor lounge next to past and current tenant New English Brewing, an upscale gym with spa-style locker rooms, and a yoga room. , a trendy café and a future restaurant. The indoor workspaces, designed for small and medium-sized biotech startups with sufficient funding, are also refined with all new office and laboratory facilities.

“The space we deliver in our SOVA Science District has been in high demand due to the quality lab infrastructure and unique equipment,” said Frasco. “(The upgrades) have resulted in a real sense of belonging where our tenants can not only do groundbreaking life science work, but also enjoy downtime in our cafe, brewery and restaurant. outdoor cafe organized. “

So far, the company has rented all converted suites prior to their completion, he said, with tenants currently paying $ 5 per square foot per month, not including operating costs, taxes and other charges. . That’s nearly double the market rate for industrial or standard office space just down the street, according to data from real estate tracker CoStar.

The SOVA transformation is emblematic of how Longfellow views Sorrento’s commercial real estate portfolio – ready for an extreme biotech transformation. The initial purchase launched a series of hyper-regional purchases at a seemingly unprecedented rate.

In June 2019, Longfellow landed another three-building project on Sorrento Valley Road for $ 26.7 million. Just under a year later, the developer paid $ 39 million for three buildings at 10070 Barnes Canyon Road, sandwiched between Qualcomm properties, which it plans to replace with 550,000 square feet of brand new. construction. In September 2020, Longfellow had secured another Sorrento Valley Road asset, this one further south at the Carroll Canyon Road intersection, for $ 42.8 million.

The shopping spree continued for another year, recently peaking with $ 465.4 million spent on two deals closed in September and October.

“They were just aggressive. They saw where the market was going when they invested in 2018 and now we’re seeing it all accelerate, ”said Joshua Ohl, local director of market analysis for real estate tracker CoStar. “We really haven’t seen anything like it.”

Longfellow has been the most zealous buyer in the Sorrento Mesa and Sorrento Valley submarkets, but Alexandria Real Estate Equities, Harrison Street and Prime US REIT also make big investments, he said.

“We’re probably going to start to see a more vertical construction of the lab space (in Sorrento Mesa). … The inventory changes completely to look more like the Torrey Pines inventory, ”said Ohl. “For years, these were dated office buildings and dated industrial buildings with really nothing going for them.”

A rendering of Longfellow's Oberlin project

A rendering of Longfellow’s 316,000 square foot Oberlin project at the corner of Mira Mesa Boulevard and Oberlin Drive. The project represents the developer’s first base-building effort in the San Diego market.

(Courtesy, Longfellow)

Longfellow has a penchant for taking over generic low-rise office and industrial buildings, although it treats each site a little differently in the future.

Many assets are in the process of being modernized from second- or third-level warehouses to high-end life science facilities. Some properties, like the BioVista towers visible from Interstate 805, are already in first class condition and only need labs. Others like its Oberlin and Lusk Business Park properties are demolished, meaning everything will be demolished and replaced with shiny, new, and expensive science campus environments. The total investment in the Lusk project, for example, will likely reach $ 2 billion, Frasco said.

The strategy is expected to allow the developer to regularly deliver ready spaces for tenants of different sizes at a constant rate through 2027.

Longfellow’s first construction project at 5889 Oberlin Road, tentatively named Oberlin, is said to be a testament to what he can build without the constraints of a pre-existing footprint.

The company plans to build a 316,000 square foot, six-story, utility-packed tower with a large rooftop patio overlooking Mira Mesa Boulevard. The bridge will include a catering option open to the public. Longfellow plans to start next year and complete the project two years later.

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