IQHQ’s $900M Raise Aims To Jump-Start Leasing At Megaprojects
Six different groups contributed to a $900M fund-raise announced earlier this month by San Diego-based life sciences developer IQHQ, which also emphasized a potential turnaround in the soft leasing market.
According to PitchBook data, the groups that contributed were all previous IQHQ investors: GPS Investment Partners, Morgan Stanley Tactical Value, NexPoint, Apartment Investment and Management Co., Madison International Realty and CenterSquare Investment Management.
IQHQ declined to confirm the names on the list when reached by Bisnow Wednesday but said the list was at least partially incorrect.
IQHQ didn’t disclose the repeat funders or circumstances of the $900M investment, which came after it struggled throughout 2024 to find tenants for some of its massive lab campuses and lost some investor confidence. An IQHQ spokesperson told Bisnow the majority of the $900M is “corporate-level and can be used for all projects.”
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An executive at one of the firms that took part in the recent $900M round told Bisnow they saw an opportunity despite IQHQ’s well-publicized issues filling up lab space. The executive said he believes Research and Development District, the REIT’s San Diego megaproject that has yet to sign a life sciences tenant, would be first-to-fill, sought-after space.
IQHQ needed capital and hired PJT Partners to help raise it. IQHQ reached out to its previous investors during the fourth quarter, the executive said, and the deal mostly came together postelection. The company would have gone to external investors if the initial raise wasn’t enough, he said.
“I think they were able to structure it in a way that would allow them to keep [RaDD] afloat, rather than getting stuck into a position where maybe their lenders wouldn't allow capital to be invested into tenant improvements,” said JLL Senior Associate Taylor DeBerry, who wasn't involved in the transaction. “If that happens, especially in a market like this, you end up with a ghost building where you’re really kind of stuck.”
The question has long been whether downtown San Diego, not a traditional biotech market, can attract life sciences firms like the established submarkets of Torrey Pines and University Town Center.
IQHQ expects leases to be signed in the first quarter and first half of the year. The executive compared its attraction to the demand for trophy office right now and said there is more leasing momentum in the market than he has seen in quite some time. Despite all the noise around supply, there isn’t as much trophy-level lab space in the market, and there isn’t much in the pipeline.
“The investment timeline has been pushed out, so these investors have a lot of money stuck into it, and so they want to be able to see this project through,” said DeBerry. “The only way to do that is to invest more capital.”
IQHQ co-CEO Tracy Murphy told The San Diego Union-Tribune that the REIT had agreements with two life sciences tenants that it expects to result by March in signed leases of between 40K SF and 50K SF each at its RaDD project. IQHQ is also in talks with traditional office tenants to take additional space at RaDD.
“I have to imagine that the economics are going to be pretty tenant-favorable, right?” DeBerry said of potential RaDD leases. “It’s a tenant market. And sometimes the strategy is, you need to take a loss leader to get the first tenant in, to get some momentum.”
The San Diego life sciences market saw increased venture capital investment last year, as well as increased vacancy to 17.9% as developers hold off on new projects, according to Savills data. As of Q3, San Diego had net negative absorption of 160K SF.
IQHQ is also backing out of a project in Cambridge, England, as of mid-January after missing development milestones. The project is a $250M lab development in the UK’s Golden Triangle. Green Street News reports UK developer Kadans Science Partners seeks to take its place. IQHQ declined to comment on the details of this project.
In addition, IQHQ just signed a 75K SF lease renewal and long-term extension with Generate:Biomedicines at IQHQ's Innovation Park campus in Andover, Massachusetts.