Strategic Value Partners Buys Life Sciences Building Loan

Bank OZK has found a buyer for a nine-figure construction loan backing a mostly empty life sciences campus in Southern California.

The lender sold a $265 million loan tied to Pacific Center, a 500,000-square-foot property at 9955 Pacific Heights Boulevard in northwestern San Diego, to Connecticut-based private equity firm Strategic Value Partners, Bisnow reported. Bank OZK’s sale marks one of the largest whole-loan dispositions in the Arkansas-based bank’s history. Though the loan is valued at $265 million, the exact amount Strategic Value Partners paid to acquire the debt package was not disclosed.

Chicago-based Sterling Bay completed development on the property last May. A joint venture between Sterling Bay and Harrison Street Real Estate secured the loan in 2023 for the first phase of Pacific Center’s construction, comprising two six-story buildings, an amenity center and a parking garage. A dearth of life sciences tenants as federal funds — and tenant demand for space — dry up has left the campus largely vacant. Several 37,000-square-foot suites are available for immediate occupancy, according to LoopNet.

The sale represents the latest time Bank OZK has seen a loan with Sterling Bay go south. In 2019, the bank provided the developer with a $128 million mortgage for land at the Lincoln Yards megaproject in Chicago, but seized the property last March following the project’s collapse. The parcel was sold to JDL Development in October for roughly $84 million, Bloomberg reported.

Pacific Center is in San Diego’s Sorrento Mesa neighborhood, a life sciences hub in the city. More than 3 million square feet of life sciences space was available for rent at the end of the third quarter, representing about 40 percent of the market’s entire inventory and more than any other neighborhood in San Diego, per CBRE data cited by Bisnow. The vacancy rate in the area was 35 percent at the end of the third quarter, well above the 23 percent average across all of San Diego’s core markets.

Elsewhere in Sorrento Mesa, Bank OZK also provided Longfellow Real Estate Partners with a $202 million construction loan to build the 316,000-square-foot Bioterra life sciences property in 2022. The Bioterra development, like Pacific Center, is also facing vacancy and loan distress, per Bisnow.

— Chris Malone Méndez