Tishman Speyer is seeking to capitalize on the significant growth of the life sciences industry with the launch of a new global firm.
The subsidiary, Breakthrough Properties, is a joint venture between the New York-headquartered investment manager and developer and Bellco Capital, a Los Angeles-based family office that specializes in private equity and venture capital investments in biotechnology companies.
Breakthrough will seek to purchase and develop office and lab space specifically for research and development of biomedical technology, as well as advancements in agriculture and nutrition, PERE understands.
“It’s much more bespoke than the average piece of commercial real estate,” Rob Speyer, president and chief executive of Tishman Speyer, said. “But that’s where the opportunity is.”
The partnership will finance its initial life science investments internally, Speyer said, noting that it will explore “several capital strategies” as it looks to expand the platform. Breakthrough’s first acquisition is a development site in Boston’s Seaport District, where it plans to build a 250,000 square-foot facility.
Driven by new technology and data, the life sciences field has grown substantially in the past decade. In the US, the industry has added 60,000 jobs and $12 billion of venture capital funding since the third quarter of 2009, increases of 46 percent and 400 percent, respectively, according to data collected by CBRE. Much of this growth has been driven by a shift from pharmaceuticals to advancements such as gene editing and targeted cancer therapies.
Rapid expansion has led to a shortage of supply, Ian Anderson, director of research and analysis at CBRE, told PERE. Many startups remain confined to shared incubator labs because of a lack of available space, he said, and investors have taken notice. In the US, quarterly sales volumes for research and development facilities have remained above $7 billion since mid-2014, peaking at nearly $13 billion in 2017, according to Real Capital Analytics. Biomedical real estate construction in the top markets – the San Francisco Bay area, Boston-Cambridge, New Jersey, Washington, DC-Baltimore and Raleigh-Durham in North Carolina – doubled from 3 million square feet in 2017 to 6 million square feet last year, per CBRE.
Despite growing demand for life science real estate, private equity has had limited exposure to the market. Healthcare REITs such as HCP and Ventas have built substantial portfolios in the space, while Alexandria Real Estate Equities has led the way as the largest pure-play life science investor with its 23.2 million square feet of operating properties and a 4.4 million-square foot development pipeline.
Blackstone entered the market with its $8 billion acquisition of BioMed Realty Trust in 2016, but the specialized nature of this industry and the properties that serve it have kept other larger managers at bay, Anderson said.
“It has created a barrier to entry for a lot of firms and allowed a competitive advantage for those that are already in it and have that expertise,” he told PERE.
The knowledge gap makes Bellco Capital a sound partner for Tishman Speyer, Anderson said. Founded by medical doctors Rebecka and Arie Belldegrun in 2003, the family office has founded and financed several in life science startups. The married couple sold Kite Pharma, a cell therapy firm, for $12 billion in 2017, and took Allogene Therapeutics public for $288 million last year. Combining Bellco’s hands-on experience in the biomedical lab space with Tishman Speyer’s development and management track record creates a logical synergy, Anderson said.
“It’s not surprising to see this partnership,” he said. “You’re taking a large existing owner of conventional office space, seeing the attractiveness of the life science space and partnering with someone who knows it very well. We will probably see other large REITs and competitors of Tishman employ a similar strategy.”