Blackstone financing bioscience properties in $628M securitization
The Blackstone Group is financing a new $628 million single commercial mortgage for two adjacent life sciences buildings in the Boston area’s bustling biopharmaceutical corridor.
The two buildings are located at 675 West Kendall and 650 East Kendall in the Kendall Square neighborhood of Cambridge, Mass., within a 10-minute walk of the Massachusetts Institute of Technology.
The KNDL 2019-KNSQ Mortgage Trust is backed by the fee interests in the two lab-office facilities with 590,000 combined square footage, as well as a parking garage, that secure a two-year, floating-rate loan with three one-year optional extensions.
The large single-loan transaction (structured as a REMIC) is interest-only and jointly sponsored by Blackstone and its BioMed Realty affiliate.
The cross-collateralized and cross-defaulted first mortgage – underwritten by Deutsche Bank, Goldman Sachs and Citi Real Estate Funding – has a relatively high loan-to-value ratio of 111.4% based on an estimated property value of $563.6 million (Moody’s). The loan is part of an $808 million debt structure that $180 million in planned mezzanine loans not included in the trust’s collateral.
The loan also accrues annual interest of Libor plus 1.35% added to principal.
But the six classes of notes in the deal will be supported by a currently sizable cash-flow level ($46 million annually) that provides a 1.92x debt-to-service coverage ratio (including support for a 4.35x DSCR for the $263.5 million Class A notes tranche).
The Class A notes have preliminary triple-A ratings from Moody’s Investors Service and Morningstar Credit Ratings. Morningstar also rates two interest-only tranches of $111.9 million in Class X notes and a $55.2 Class B tranche as AAA, while Moody’s provides only a Baa3 rating to one of the Class X notes tranches and an Aa3 to the Class B notes.
The 675 West Kendall building is undergoing renovations for an impending move-in for a new tenant, Alnylam Pharmaceuticals (Nasdaq: ALNY), a biopharmaceutical firm that will hold 96% of the building’s net rentable area of lab and office space on a lease with 14.4 years remaining. The building was built in 2002.
650 East Kendall, constructed in 2009, has two primary tenants: Baxalta, a privately held spinoff from Baxter International specializing in hemophilia treatments, and Ipsen Bioscience, which focuses on oncology, neuroscience and rare diseases.