Biotech REIT Blinks Back: Nearly $700 Million in Capital Construction Investment is Halted

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--Real estate investment trusts (REITs) have become increasingly attractive to the life science industry for the financial flexibility they can provide. Funds can be invested into increased research and other needs, rather than the "bricks and mortar" end of business. At the top of the REIT list, in both the public and private sector, is Alexandria Real Estate Equities (NYSE:ARE) (Pasadena, California). Known for the quality of its developments and financial strength, the company has projects throughout the country. In a departure from the typically reticent nature in discussing its landmark buildings, the company recently announced that it was putting the brakes on several major projects until the economy stabilizes.

Alexandria, favored by both the public and commercial sector, has stopped construction in California, Massachusetts and New York. The projects in question total more than half a billion dollars and illustrate the company's diversity in building within the industry.

The first project to be stalled is the $250 million second phase of the East River Science Park in New York, New York, (Reference: Pharmaceutical Tracker - Online Database). Alexandria was tapped by the city to develop the project, with Tishman Construction (New York) serving as the owner's representative and Turner Construction (New York) handling construction. The 300,000-square-foot first phase is now under construction just off of FDR Drive between East 28th and East 30th streets. Plans call for an eventual total of 1.1 million square feet of lab and office space to be developed on a 3.5-acre site along Manhattan's East Side medical life sciences corridor. Alexandria CEO Joel Marcus was quoted as saying several lenders have expressed interest in forming a syndicate to finish the project "as soon as the credit markets either loosen or unseize in a more dramatic fashion." Original plans called for the entire project to be completed by 2010.

In Boston, work has been shut down on Alexandria's (in partnership with National Development (Newton Falls, Massachusetts)) $350 million Life Science Center at Brookline and Longwood (Joslin Place). Site work had already begun on the 250,000-plus-square-foot building, which was to provide research space for the Joslin Diabetes Center and other enterprises. Unable to secure lease agreements, the company issued a statement that it will revisit the project early next year, when the market could be in better shape.

Despite having secured tenant lease contracts on two new buildings at the Mission Bay development in San Francisco, Marcus has stopped them, as well. He said: "We could be teaming up on two new construction starts in Mission Bay for something in the range of 200,000 to 300,000 (square) feet and have no leasing challenges other than the negotiations of the lease, but we are simply not doing that. We don't think it's prudent, and clearly the capital markets are such that that would not be a smart move."

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