CDPQ subsidiary Otéra supplies $310m for all-electric life sciences campus

JLL arranged financing for Longfellow following borrower’s recent Bank OZK, Square Mile deal.

Montreal-based CDPQ subsidiary Otéra Capital has provided a $310 million construction loan to Longfellow Real Estate Partners for the development of a unique all-electric life sciences asset in California’s Bay Area.

The March 3 deal marked the first all-electric life sciences development in the state and arrives at a time when life sciences investments are still finding favorable tailwinds across and near major metropolitan hubs in the US.

JLL arranged the financing for the development of Avia Labs at Millbrae Station, which will total 315,000 square feet at the Bay Area Rapid Transit and Caltrain station in Millbrae, California.

“The Bay Area remains one of the crucial global hubs for life sciences innovation within our international portfolio,” said Adam Sichol, co-founder and CEO at Longfellow. Sichol said as Longfellow expands its presence in the region, the Boston-based real estate investment manager is looking toward ground-up projects built to accommodate robust tenant requirements.

The Avia Labs project represents one of the newest ESG-geared developments to crop up within the US commercial real estate debt financing landscape. Though the interest rate environment and broader bouts of market volatility have presented some near-term hurdles for financing across the industry, green lending remains a top priority even while some managers have opted to lean deeper into more traditional financing opportunities.

When it comes to construction financing in particular, life sciences similarly remains a focus point for lenders alongside more sizable multifamily projects. In December 2022, JLL similarly arranged a $290 million construction loan for Gattuso Development Partners and Vigilant Holdings to build a life sciences campus in Philadelphia’s University City submarket.

Bank OZK and Square Mile Capital Management have also linked up twice in the past three months to assemble life sciences construction loan packages, including a $373 million loan for a mixed-use life sciences development in South San Francisco and a $202 million loan for Longfellow to also build a life sciences project in San Diego’s Sorrento Mesa submarket.

Longfellow broke ground on the Avia Labs development on March 1. The six-story, Class A project is targeting LEED Gold and additional energy and health certifications to solidify its green status. JLL noted in its 2022 Life Sciences Lab Real Estate Outlook report that emerging markets including Millbrae are viable areas for long-term opportunities in the sector – be it for life sciences companies, investors or developers.

The submarket the project is in within Millbrae was noted as being “extremely undersupplied” by JLL with a vacancy rate of 1.8 percent as of the fourth quarter 2022, paralleling the pronounced demand seen across asset categories such as industrial in California’s Inland Empire during the same period.

The JLL Capital Markets Debt Advisory team representing Longfellow on the Avia Labs deal included senior managing director Jordan Angel, director Lillian Roos and analyst Pat Aslanian.