A Saudi-based PE firm just signed a $225 million deal for a life sciences campus in Philadelphia — a signal that investment interest from abroad is heating up

By Alex Nicoll

Sidra Capital, a Saudi asset management and private equity firm, purchased a suburban Philadelphia life sciences and healthcare campus in a recapitalization deal that valued the property at $225 million.

Spear Street Capital, a real estate investment firm, will retain a 10% minority interest. The deal was brokered by JLL. 

The five-building, 855,600 square foot Arborcrest facility was completed in two phases, 2015 and 2019, and includes as tenants Signant Health, a clinical trial management company, Pharmaceutical Research Association, a clinical research organization, and Abington Memorial, an outpatient facility. 

The sale signals an increasing interest from Middle Eastern investors in the life science real estate space, which has outperformed most segments of commercial real estate. JLL data shows that Middle Eastern investors have spent $164.2 million in life science real estate this year before Sidra Capital's investment, after two years without any investment in the space.  

JLL data on Middle east

Sidra Capital made its first life science investment because the property type has shown itself to be resilient in a recession, and also is less likely to be disrupted by remote work, like other office and workplace asset types.

"Our overall strategy is to invest in defensive and cyclical commercial real estate and real estate tenants, regardless of where we are in the market cycle," Hani Baothman, chairman of Sidra Capital, said in a press release. 

Sidra Capital has recently made other investments in recession-resilient assets. In 2019, the company purchased a portfolio of 30 industrial, net-leased properties for $206 million, its second US industrial portfolio. With an unprecedented rise in e-commerce, industrial assets have been some of the most profitable in the face of the pandemic. 

The life science industry has accounted for 10% of leasing this year, after making up just 3.8% of leasing in 2018 and 2019, according to CBRE. While other sectors have been hit hard by the pandemic, life science's reliance on in-person work and increased workload in the face of a public health crisis have kept demand strong.

"The past several months have demonstrated how critical the life sciences industry is to our economy," says Audrey Symes, Research Director, JLL Healthcare and Life Sciences. "There is a significant increase in general overseas interest in life sciences investment, especially because the U.S. is the clear leader in the industry."