Hendrie Lane's first R&D buy leans on a four-name rent roll

Hendrie Lane Capital, V12 Investments and The Zaro Group have paid Ciminelli Real Estate Corporation $43.5 million for 3 & 6 Riverside Drive in Andover, Massachusetts, a two-building, 170,771-square-foot portfolio of research-and-development and advanced manufacturing space that came fully leased at roughly $255 a square foot, according to Connect CRE.

The acquisition is the first under Hendrie Lane's new R&D and advanced manufacturing mandate, which spans five markets—Greater Boston, the New York Tri-State region, greater Washington, D.C., the San Francisco Bay Area and North Carolina's Research Triangle—and principal Tony Calabrese framed it as "well-located, high-quality, well-maintained buildings, acquired at a significant discount to replacement cost and to historical market pricing," leased long-term to "tenants who have invested heavily in their space." The discount is the buyer's claim; the coverage supplies no comparable to test it.

JLL Capital Markets' Andrew Gray, Hugh Doherty and Emily Fuller arranged $28.6 million of acquisition financing on the buyers' behalf from Washington Trust Bank, about two-thirds of the purchase price, while JLL's Scott Carpenter represented the seller. A New England regional bank writing two-thirds of cost against occupied product suggests the lender priced the tenant roster, and a four-name roster is a narrow thing to price.

The roster is the trade. Four tenants fill the portfolio, three of them headquartered at Riverside Drive, the occupancy profile of companies that have paid for their own space and can be carried through a soft leasing market. It is also concentration: four names cover the whole 170,771 square feet, so the next expiration is a portfolio event, not a suite event. Coverage of this corridor has lately run the other direction: Blue Light's $62.5 million loan on a 32%-leased Bedford manufacturing campus was priced for its tenant pipeline, and CIBC's refinancing for SkyREM was written off a full rent roll on a three-year bank clock. Andover is the trade where the pipeline has already arrived.

As this publication has argued, industrial pricing has become a rents-and-scarcity trade rather than a building trade, and this one fits the position cleanly: land and a roster acquired below replacement cost, levered at a loan-to-cost that leaves the JV room to sit through a repricing. What the basis cannot buy back is tenant depth. Calabrese's strategy names four markets outside Greater Boston where neither the headquarters stickiness nor the discount is established, and the discount is the part of the underwriting that has to be re-earned deal by deal. That makes the second acquisition the informative one: if a bank writes two-thirds again on a comparable roster, the constraint on this program is finding four more tenants like these, not finding the money; if it doesn't, the first trade was a Boston trade wearing a national mandate.