Philly Life Sciences Charges Ahead With New 500K SF Lab Building In UCity, Groundbreaking At Navy Yard

New announcements in life sciences development are now coming fast and furious in the Philadelphia market as its ascent on the national stage picks up even more steam.

Gattuso Development Partners plans to develop a $400M, 500K SF building dedicated to lab and life sciences space on Drexel University's campus via a 99-year ground lease with the school, Gattuso co-founder and principal John Gattuso confirmed to Bisnow. The project is already 55% leased to multiple as-yet-undisclosed tenants and would be the largest dedicated lab building in the city, as the Philadelphia Business Journal first reported on Tuesday.

Also on Tuesday, the joint venture of Mosaic Development Partners and Ensemble Real Estate Investments broke ground on its first ground-up construction project as master developer for the Philadelphia Navy Yard, a $46M, 137K SF lab building started entirely on speculation. The four-story development at 1201 Normandy Place is scheduled to deliver next April and will set a new standard for the inclusion of minority- and women-owned businesses, from Mosaic and the general contractor to subcontractors on both the construction and professional services side.

Ensemble/Mosaic, as the partnership has dubbed itself, brought in Canadian life sciences giant Oxford Properties Group as a majority owner and equity partner to put this next phase of development at the Navy Yard on equal footing with flagship projects in the established powerhouse markets for life sciences, Ensemble Senior Vice President of Development and project lead Mark Seltzer told Bisnow Tuesday. In doing so, he echoed Gattuso’s comments to PBJ earlier in the day about his company’s development.

“Historically, there have been two [life sciences centers]: Boston and the Bay Area,” Gattuso said. “The consensus is Philadelphia will be the third center to emerge and because of that increased recognition nationally, this is a place where people need to be. That is the case for tenants, capital and talent.”

Gattuso building Drexel’s next lure for life sciences companies

Gattuso is partnering with two investors from gateway markets to fund the 11-story building at 3201 Cuthbert St. in University City, with Vigilant Real Estate Partners hailing from New York and Baupost Group from Boston. Gattuso plans to break ground on the Robert A.M. Stern Architects-designed project this fall, with completion projected for fall 2024.

Drexel’s involvement in the project goes beyond the ground lease. In a separate arrangement, the school will relocate its core research and business development programs to a 60K SF space in the building. Though 3201 Cuthbert St. is already more than halfway leased, planning for the development began at the same time Ensemble/Mosaic was assembling its team for 1201 Normandy — about a year ago, Gattuso and Seltzer said.

Currently, the property is a field that plays host to athletic activities for Drexel and its students, which will be moved to nearby Vidas Athletic Complex, the announcement stated. The green space will be replaced when Myers Hall, a residence hall a block north of the property, is demolished in the coming years. 

Gattuso founded his company after leading Liberty Property Trust's development efforts as Ensemble/Mosaic’s predecessor at the Navy Yard before it turned away from urban development and was acquired by industrial giant Prologis. Now, he has development projects ongoing in both of the biggest life sciences nodes within Philly city limits, having broken ground on a speculative biomanufacturing facility at the Navy Yard, on land separate from Ensemble/Mosaic’s 109-acre plot in December. Attempts to establish more life sciences hot spots in North and Southwest Philadelphia are at early stages in their multiyear plans.

Drexel's deal with Gattuso is another in a long line of partnerships struck with private developers to build on university-owned land for the life sciences industry, with Drexel gaining connections for its co-op and career placement programs. Two of the most significant projects for the life sciences ecosystem of Philadelphia — Spark Therapeutics' plan for a $500M, 575K SF gene therapy manufacturing facility and Brandywine Realty Trust's multiphase Schulykill Yards development — are on land ground-leased by Drexel. The school has already received more than $100M worth of upfront payments on its ground leases that will be invested in its endowment, President John Fry told the Philadelphia Inquirer.

Drexel’s site neighbors a historic National Guard armory building on campus, which reopened last year as a squash-dedicated athletic facility that also serves as the headquarters of U.S. Squash. Less than a block away is the intersection of 34th and Market streets, with Schuylkill Yards three blocks to the east and University City Science Center's growing uCity Square campus immediately to the west. 3.0 University Place, a hybrid research/light biomanufacturing building, held its topping-out ceremony on March 10 at 41st and Market streets, University Place Associates announced.

As those projects deliver their next phases in the next year or two and parcels controlled by out-of-town players like Sterling Bay move forward, unprecedented opportunities for life sciences construction await for the local industry. As for making those opportunities available to historically excluded groups, Ensemble/Mosaic’s development at the Navy Yard has already been held up by the city of Philadelphia as an example to follow.

Promise of a new era at Philly’s Navy Yard

In addition to bringing equity funding to 1201 Normandy Place and Ensemble/Mosaic’s future phases, Oxford bought majority stakes in the properties Ensemble purchased from Liberty Property Trust when the latter pivoted to industrial. Ensemble/Mosaic waited until Oxford’s involvement was ready to be publicized to truly kick off leasing at the building, Seltzer said. With a construction timeline of just over a year, Seltzer expects a blistering pace of leasing.

“The Oxford announcement is huge, not just this project and the life sciences market, but for Philadelphia,” Seltzer said. “So we held on some of the marketing until that was announced. But we’re 100% a go, with all financing in place on a speculative basis.”

With its $1B diversity and equity pledge at the Navy Yard now backed by Oxford, Ensemble/Mosaic is attempting to bridge the gap between that opportunity and the structural barriers that prevent minority and women business enterprises from taking advantage — and do so ahead of an anticipated rush of construction.

“There’s a lot of money out there and a lot of projects out there,” Seltzer said. “There are a lot of projects getting announced, but not too many groundbreakings yet. This is a groundbreaking.” 

Partly at the direction of PIDC, Ensemble/Mosaic has hired partnerships of MBEs and WBEs with established companies that have the capacity and expertise to execute a lab development. Owners of two Black-owned companies echoed the city of Philadelphia’s sentiment on Ensemble/Mosaic’s diversity work at the Navy Yard: It represents a new level of top-down commitment to advancement of diversely owned businesses at a project, one that can and should be repeated for every upcoming major project.

“I would not normally be considered for a project like this, but because of Ensemble/Mosaic’s intentionality, they saw that I worked hard and they liked me, and that mattered more than what I had already done before,” said Ayotunde Ogunbiyi, whose company, Ayo Partners, was hired by the JV as the owner’s representative on the project soon after he founded it. 

Halyard, a woman-owned project management firm, is serving as Ayo’s more established counterpart, and Ogunbiyi is currently working out of Ensemble’s Navy Yard office, he told Bisnow.

“When you use this new model, at times there will be gaps, and sometimes they’re like gaps in knowledge, sometimes gaps in funding,” Ogunbiyi said. “On the GC side, it often comes down to issues like bonding. For me, it was a gap in knowledge, so they partnered me with someone who has the knowledge, so it ensures that the project gets done the way it should while I learn along the way.”

LF Driscoll serves as 1201 Normandy’s general contractor, but locally owned Pride Enterprises is a second-tier general contractor. Unlike a standard joint venture, Pride has a clearly defined scope of work to carry out and bear responsibility for, which amounts to about $13M of the project’s budget — “well within our capacity,” Pride founder, President and CEO Craig Williams told Bisnow. 

“Joint ventures don’t always come together the way you think they would, because the larger partner tends to take over,” Seltzer said. “So I wanted Craig and Pride to be solely responsible for their scope. It’s a big project, but it’s a very significant piece they’re running, and that they’re accountable for. And that’s the way they wanted it.”

Pride and LF Driscoll still collaborate on the overall execution of the project, as do Ayo Partners, Halyard, woman-owned landscape architect Ground Reconsidered and POC-owned mechanical engineering firm DBHMS. Both Williams and Ogunbiyi raved about the level of commitment shown by stakeholders at the Navy Yard to building capacity for diversely owned businesses.

“This effort is, I think, a new benchmark, a new bar in terms of the 360-degree, top-to-bottom effort at diversifying,” Williams said. “The effort is being deepened and refined as we go forward, and it’s my hope and expectation that this is a permanent change.”

With a speculative lab building at the Navy Yard under their belts and on their résumés, all of the diversely owned businesses brought on by Ensemble/Mosaic will now have much better chances of being involved when the millions of square feet being planned across the region, like Gattuso’s development at 3201 Cuthbert, become tangible construction projects.

"These life sciences projects are coveted, and now Pride is right at the cutting edge of what’s going on in the local economy,” Williams said. “That flows down from PIDC to Ensemble/Mosaic to Driscoll and Pride, all the way to the laborers on the site. Whoever wants a chance will get a chance.”