Oxford Properties Group Enters Philly Market By Buying Stake In Ensemble/Mosaic's Navy Yard Plans
Big money continues to roll into the Philadelphia life sciences market from sources that passed over the city for years.
Oxford Properties Group has entered an investment partnership at the Philadelphia Navy Yard with Ensemble/Mosaic, the joint venture of Ensemble Real Estate Investments and Mosaic Development Partners, the companies announced Tuesday. That includes Oxford taking an equity stake in the five operational, fully leased life sciences buildings Ensemble owns at the site: 300, 351 and 400 Rouse Blvd., and 4701 and 4751 League Island Blvd.
With Oxford as its big-money backer, Ensemble/Mosaic will break ground this year on its first two new buildings since being awarded master development rights by Philadelphia Industrial Development Corp. in 2020. Both 1201 Normandy Place, a four-story, 137K SF lab building, and 333 Rouse Blvd., a two-story, 105K SF lab and biomanufacturing facility, will be built on speculation.
Ensemble/Mosaic's original plans called for the Current Good Manufacturing Practice-compliant, or cGMP, 333 Rouse to wait for pre-leasing before construction, but life sciences tenants have clearly demonstrated their preference for space that is closer to readiness, leading to the pivot. Gaining the financial strength of Oxford as a partner also could offset what many developers consider the risky proposition of spec development in Philly.
The partnership between Oxford and Ensemble/Mosaic came as a result of a formal search process led by CBRE to find a capital backer that started last year, the Philadelphia Business Journal reports. More than 30 potential investors from private equity groups to pension funds and insurance companies showed interest. Oxford is a wholly owned subsidiary of Canada's Ontario Municipal Employees Retirement System.
Oxford plans on investing in every bit of life sciences real estate that will be developed by Ensemble/Mosaic over the next few years, which is now projected to approach 3M SF and be worth as much as $1.5B, according to the announcement. The total value of Oxford's investment and the percentage of its equity stake were not disclosed.
Ensemble/Mosaic also plans to build residential, retail and other uses at the Navy Yard to create more of a mixed-use district, while an unaffiliated spec cGMP facility is currently under construction, developed by Gattuso Development Partners.
The investment giant is making a major push into life sciences real estate, having committed over $2B of investment into the sector in the past year, the announcement stated. In addition to Philly, Oxford also entered the San Diego market with a $464M portfolio purchase announced last week, PBJ reports.
In the U.S., Oxford Properties Group might be best known for being a financial partner in the massive Hudson Yards district developed by Related Cos. in New York. In adding Philly life sciences to a portfolio that includes trophy-class office property in the biggest city in the country, Oxford follows Silverstein Properties and Cantor Fitzgerald, who bought a majority stake in the under-construction 3.0 University Place project in University City in late 2020.
One of the biggest developers in Chicago is also planning to enter the Philadelphia market through life sciences, with Sterling Bay announcing a 13-story lab project in partnership with New York-based Botanic Properties, also in University City, last month. And the leading light of Philly's gene therapy industry, the driving force behind all this activity, seems to be keeping pace, as Spark Therapeutics announced a plan to build its own $575M cGMP facility late last year.
Unlike more mature life sciences markets such as Boston and the San Francisco Bay Area, Philadelphia has a relative abundance of land tabbed for large-scale life sciences projects, most notably in Hilco Redevelopment Partners' Bellwether District and PIDC's Lower Schuylkill Innovation District, which sit across the Schuylkill River from each other a few miles northwest of the Navy Yard.
Between those two sites, millions more square feet of lab and cGMP space can be built, but with copious work still needed to prepare the land for development, bringing space to market is still years off. With gene therapy and its sister industry cell therapy growing in popularity across the world, Philly will need to sustain all of this new capital and construction to retain its place as a leader in the two fields.
