Writer: Esteban Pages
2 min read August 2023 — Real estate solutions firm MRA Group reached another milestone for its former DuPont campus redevelopment project in Wilmington — securing $63 million in financing for the next portion of its project amid lending challenges for developers nationwide.
After acquiring the former DuPont Chestnut Run Laboratory campus (now called Chestnut Run Innovation & Science Park) back in 2021 for $40 million, which includes 14 existing buildings extending over 780,000 square feet, the Horsham-based private developer announced financing to build a 102,000-square-foot building dedicated to specialty chemicals manufacturer Solenis. Part of this new slate of financing will be injected into renovations of existing buildings for lab, research and development and advanced manufacturing purposes.
The $1 billion redevelopment, designed to be Delaware and the region’s hub for companies related to life sciences, is around 30 minutes south of the Philadelphia International Airport.
Additional financing was reached amid a challenged construction market grappling with higher costs, 16 months of continuous interest rate hikes, dried up development debt capital and rent levels that failed to pencil out projects. Alterra Property Group’s 352-unit modular apartment building in University City isn’t moving forward, while Goldenberg Group’s 468-unit tower in Broad and Lombard Streets hasn’t broken ground, as cited by the Philadelphia Inquirer. In contrast, Fulton Bank and Nuveen Green Capital provided $50 million in C-PACE financing while WSFS Bank provided the remaining $13 million to MRA Group.
Philadelphia and the surrounding regions continue to capitalize on its life sciences industry boom. In 2022 alone, the region secured $4 billion in industry-related projects resulting in an aggregate 11 million square feet of projects at different stages of development. According to CBRE’s 2023 Life Sciences Research Talent report, Philadelphia’s life sciences industry ranks 6th nationally among the top 25, with close to 12 million square feet of existing lab space throughout the metropolitan area.
“Interest rates have impacted everything, including financing, construction costs, and rates for delivery. It puts every real estate developer in a yield squeeze. For example, where we may have been looking for an 8% return on cost, we need to raise that return on cost to compensate for increased delivery costs. We currently have about $1.2 billion under development. Our game plan is to complete and lease those projects within the next 12 months while continuing planning for future development. However, if we can’t get clarity on construction and capital costs, then we may put the next round of projects on hold until we better understand the direction of the capital markets,” said Jerry Sweeney, president & CEO of Brandywine Realty Trust in an interview with Invest:.
Yet, he shines a bright light on what is happening in Greater Philadelphia’s life sciences landscape. “Over the past several decades we have seen the emergence of cell and gene therapy growth opportunities, with many success stories unfolding in the region. Our market fundamentals, from our robust education and research ecosystem to our attractive cost of living, set up Philadelphia to be a global life science leader,” Sweeney said.
Sweeney referenced Schuylkill Yards as a prime example of the impact the life sciences industry is having in the region. “It is a great partnership with Drexel University and another monumental step in the evolution of University City. It is one of the most exciting developments in the U.S., supported by fantastic academic and financial sponsorship, mass transportation, as well as tremendous growth in the cell and gene therapy sector. Recently, with Roche Pharmaceuticals building a $600 million research center adjacent to Schuylkill Yards, we have another institutional University City anchor. Schuylkill Yards can be a lead contributor to regional growth, and we are excited to be part of that.”
Image via CRISP
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