$576M San Diego Life Sciences Sale Showcases Hot Sorrento Mesa Submarket
City Office REIT has agreed to sell its entire life sciences portfolio in San Diego’s Sorrento Mesa submarket for $576M.
The deal, announced last week, underscores the incredible growth in the region and this area in particular. In late July, Shorenstein sold a 300K SF office complex in Sorrento Mesa for $146M, a premium of roughly $150 per SF above the area’s median sale price.
“Since our initial acquisition of properties in Sorrento Mesa in 2017, we have re-positioned, re-tenanted, renovated and strategically enhanced our portfolio,” CEO James Farrar said in a statement. “The resulting aggregation of life science assets and over 1M SF of zoned life science development potential created an extremely valuable portfolio.”
The sale will take place via two agreements, a $395M sale of the northern portion of the REIT’s property in December 2021, and the remaining $181M southern portion, which closes in February 2023, according to City Office REIT's press release. It didn't identify the buyer.
The deal is a huge cash-out for City Office REIT, which paid $116M for six of the eight buildings in the deal in 2017, it said in an investor presentation. It acquired two adjacent office buildings this year to round out the portfolio it is selling. The deal almost entirely wipes out the REIT's existing debt, which stood at $612.5M at the end of June, according to the Motley Fool.
Rents in Sorrento Mesa life sciences buildings were up 14% year-over-year in Q2, JLL Senior Managing Director Grant Schoneman told Bisnow, and he predicts development in the submarket will soon outpace Torrey Pines, traditionally the top region in San Diego.
Upcoming projects in Sorrento Mesa include Longfellow’s purchase of the Foundry, a conversion project, and a massive campus-in-the-making by Alexandria Real Estate Equities that will measure 1.9M SF when conversion and ground-up projects are complete.
One of the City Office properties, a five-building office complex, is near the Qualcomm HQ and Sequence Drive, which contains some of the properties Alexandria is assembling into its megacampus.
