Financial Feasibility Analysis • Technical Evaluation of Buildings • Market Research
• Financial Analysis • Capital Requirements
“In 2018, we began a study process and engaged Nancy J Kelley + Associates to advise Hines about how we should think through the trade-off between office leasing and conversion of buildings to life science use… It makes a ton of sense to convert a building to life science use – $70 million positive to the NPV of office use over a 10-year period… It’s great to have another arrow in the quiver to attract life science tenants. But you have to do the homework building by building first, to get the conclusions as to how the building specs will align for life science leasing.” Matt Ashbaugh, Managing Director, Hines,
at 2018 NYC Life Sciences Real Estate Development Symposium
Situation:
Trinity Real Estate, Norges Bank, and Hines wanted to evaluate the feasibility of positioning their New York real estate portfolio in and around Hudson Square for occupancy by life sciences companies. The partnership was also interested in the possibility of submitting a proposal for the NYC EDC Applied Life Sciences Hub RFI, which was dependent upon its understanding of the life sciences opportunities for its portfolio.
Action:
NJK+A assembled a world-class team of NYC life sciences real estate and development experts, including architecture, construction management, mechanical and electrical engineering consulting, code consulting, and real estate advisory and brokerage services. This team performed an initial assessment of possible candidate properties and then performed detailed due diligence and analysis of a primary target building, developing a detailed set of recommendations, including financial models, to help Hines understand its options with regard to conversion for life sciences.
Key activities included:
Market research and evaluation; assessment of modifications required for the mechanical, electrical, plumbing (MEP) and fire protection (FP) systems; concept level architectural review of the building; review of key code and zoning topics raised by the building; construction estimate of the required upgrades in the building; detailed pro forma financial model of various use case scenarios; and recommendations for next steps.
Results:
NJK+A was able to demonstrate that converting the target building to life science occupancy was substantially accretive to the NPV for office use, as well as show the breakeven point for the minimum number of square foot conversion needed to make a partial conversion from office to life sciences financially feasible. NJK+A also provided recommended next steps for Hines and its partners with regard to strengthening its relationship with NYC EDC’s life sciences team.
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