Hendrie Lane's first R&D buy starts at $255 a square foot

The constraint on the strategy is sourcing. Hendrie Lane Capital, V12 Investments and The Zaro Group have acquired 3 & 6 Riverside Drive in Andover, Mass., a two-building research and development and advanced manufacturing portfolio of 170,771 square feet on 16 acres, for $43.5 million from Ciminelli Real Estate Corp., a price that works out to roughly $255 a square foot, or $2.7 million an acre, for buildings that come fully leased.

The rent roll is four names—Fishman, the maker of acoustic guitar amplifiers and pickups, NEOLab, Physical Sciences, and SciAps—three of them headquartered on Riverside Drive. Tony Calabrese, a principal at Hendrie Lane, said the portfolio was bought at a significant discount to replacement cost and to historical market pricing, with long-term leases to tenants who have invested heavily in their space, so the income starts on day one.

It is the first purchase under a strategy Hendrie Lane has built around R&D and advanced manufacturing across 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.

Underwriting the deal the way the buyer describes it, the trade is duration plus basis, in that order, in a market where industrial pricing has become a rents-and-scarcity trade rather than a building trade, with the operator, the land basis and the data-center pull setting the clearing price. Andover cuts against that on one leg: no data-center demand runs through a suburban R&D park, and four private tenants on long leases mean little of this income reprices to market soon. What Hendrie Lane bought is cash flow with a defined end date, on land cheap enough that residual value carries the back half of the hold.

The deal carries bank debt against a four-name rent roll, which means the collateral that cleared was the roster: three tenants with their headquarters and their buildouts in these buildings, one without. That stickiness is not easily undone by a soft leasing market, and it is also a single credit story repeated four times.

A firm that needs full occupancy, headquarters tenants and an entry below replacement cost in five separate markets has drawn a short shopping list, and the first asset in a five-market program bought alongside V12 and Zaro suggests the capital is being assembled deal by deal rather than held on one balance sheet. Riverside Drive set the template at $255 a square foot; the strategy lives or dies on whether four more markets clear in the same range.