Still in the midst of remodeling 17 Sorrento Valley buildings it acquired in 2018 and 2019, Longfellow Real Estate Partners bought three Sorrento Mesa office buildings for $39 million with plans to convert them to life science lab and office space.
The Boston-based company bought the 93,483 square-foot Sorrento Tech campus from BLT Enterprises as part of an ongoing drive to expand its holdings in San Diego with more acquisitions to come, said Nick Frasco, Longfellow Real Estate managing director for San Diego and Southern California.
“The main driver in the decision to acquire this is to expand and diversify our portfolio in San Diego,” Frasco said. “We have a great foundation we built in Sorrento Valley.”
The Sorrento Tech campus at 10070, 10140 and 10180 Barnes Canyon Road represent a step up for Longfellow Real Estate Partners’ offerings in San Diego, with newer, larger buildings that have larger floor plates.
“Sorrento Mesa in a lot of ways serves as an ideal graduation market for tenants coming out of their early stages in Sorrento Valley or elsewhere,” Frasco said. “It’s also a stone’s throw from our SOV portfolio.”
SOVA Science District is the name Longfellow Real Estate Partners has given its Sorrento Valley property as it consolidates and remodels the 17 buildings into a single life science campus, spending more than $10 million on renovations.
About half of the SOVA buildings have been converted to serve life science tenants so far, Frasco said.
Longfellow Real Estate Partners added a new tenant to SOVA in late May when DTx Pharma based in San Diego subleased 14,123 square feet of space. From Element Biosciences. The sublease runs through 2024.
John Hundley and Jon Engle of Kidder Matthews brokered the sublease on behalf of DTx Pharma.
Redevelopment in Stages
The three Sorrento Mesa buildings that are Longfellow’s most recent purchase were fully occupied by office tenants at the time of sale, but will be converted to life science space as leases expire.
“Over the whole period, we will be converting that space on a staggered basis into new, cutting-edge life science space,” Frasco said. “We’ll effectively be gutting and completely rebuilding the interiors. That will coincide with an extensive overhaul of the exterior façade.”
The landscaping also will be redone and new amenities will be added to the campus, although what they’ll consist of hasn’t been set.
“We’re still in the design process, finalizing what we want to do on the site,” Frasco said, adding that the redevelopment of the Sorrento Tech campus will likely take about five years.”
“We have a long-term investment horizon, which gives us flexibility to look at what the longer conversion strategies are on certain assets,” Frasco said.
Referring to the COVID-19 pandemic, Frasco said, “It’s also important to note that we were able to execute this transaction during a fairly tumultuous time,” adding that “it outlines our ability to be flexible and to execute acquisitions.”
The Sorrento Mesa deal was brokered by Rick Reeder of Cushman & Wakefield and Ron Jacobson of SD Realty Partners.
The pandemic has had little effect on Longfellow’s ability to attract tenants to the Sorrento Valley campus.
“Tenants need the lab space to do their work. They can’t do what they need to do from home,” Frasco said.
Prior to the Sorrento Mesa purchase, Longfellow Real Estate Partners acquired Sycamore Research Park at 10655, 10665 and 10675 Sorrento Valley Road.
Longfellow Real Estate Partners entered the San Diego County market in November 2018 when it bought 12 Sorrento Valley industrial buildings from Parallel Capital Partners for $112 million — its first West Coast investment.
In January 2019, the company acquired the two-building Roselle office project for $15.5 million.
Sorrento Mesa has become increasingly attractive to life science investors.
A Chicago-based real estate investment company, Harrison Street, in April acquired two Sorrento Mesa life science buildings.
Partnering with BioScience Properties (BPI) based in San Diego, Harrison Street bought the buildings at 10770 Wateridge Circle and 6325 Lusk Blvd. for an undisclosed price.
The buildings were remodeled in 2019 from general office use to Class A science.
Like Longfellow Real Estate Partners, Harrison Street is looking for more life-science investments in San Diego County, said Mark Burkemper, a senior managing director at Harrison Street and head of the company’s transaction group.