00:00Harvard had a vision, you know, decades and decades ago that they would create a biotech hub
00:06near the campus. If you've ever been to Cambridge, it's kind of landlocked where Harvard is. So they
00:11decided we're going to buy up some land across the river in the neighborhood of Alston, which is in
00:17the city of Boston. Very ambitious plan, certainly made a lot of sense considering, you know,
00:23Stanford is all about real estate, biotech. They are the landlord to a lot of massive companies.
00:31So it took Harvard quite a long time to get where they are. They bought land, then they had the
00:37financial crisis. Their endowment lost 30% of their value. So, you know, this plan had been in the works
00:44for a long time. Finally, they break ground on a biotech lab building in 2023 and things started
00:54unraveling somewhat. The market for biotech space in Boston, especially where they are,
01:02is, you know, vacancy rates north of 70, 80%. Wow. Yeah. Well, that lab that you mentioned,
01:08only 20% least at this point in time. I mean, how much of this is really about just a
01:13broad
01:14downturn in biotech and how much of this is miscalculations by Harvard itself?
01:20Well, it's a little bit of both. And, you know, at the time when they were very bullish on this
01:26building, remember, you know, back in the times of COVID when the federal government investors were
01:32putting lots and lots of money into the biotech sector. It was a hot area. Moderna's vaccine was
01:38developed right in this, in this Cambridge area. And it's a multi-use plant. So the apartments took
01:44quite a while to get the rezoning. And as everybody knows, real estate is about timing.
01:52So what's the Harvard plan here? Because it seems like the world may be in a different place. It
01:57looks like their finances are going to remain challenged, at least for the foreseeable future,
02:02as relates to government funding, as are many other institutions, higher learning. What's the plan
02:08here? So there's two areas that we're talking about. The first one is called the Enterprise Research
02:13Center, where this biotech building is. Tishman Spire, which is a developer, has the majority of
02:20the risk in leasing up the building. Harvard is not on the hook for leasing it, although they've been
02:25helping since they want, you know, great research partners. Roche is the first tenant, and they're
02:30looking to build up their obesity drug business there. And then there's this whole other massive land
02:37area about 90 acres that hugs the Charles River that Harvard had bought up, you know, again,
02:43decades ago, envisioning this brand new neighborhood in Boston. And the Trump administration pulled
02:49several hundred million dollars in transportation funding that would have untangled highway exits and
02:56really made it, as Harvard had envisioned, sort of like this new seaport district that would have
03:01brought in development, mixed use, you know, a brand new neighborhood. And Boston would have been
03:08helped also by, you know, increased tax revenue, more jobs. So that is on hold sort of indefinitely
03:14until they figure out what to do with that. Yeah, well, it seems like maybe it's a little bit of
03:19an
03:19area-specific issue. But then I want to draw the contrast between Harvard and MIT, right? Because
03:24its development of Cambridge's Kendall Square has really flourished. It's now known as the most innovative
03:30square mile on the planet. So what did MIT do right that Harvard did wrong in this case?
03:36First mover advantage? MIT had also seen the potential in Cambridge, right next to their campus.
03:46And they had sort of a brilliant strategy in their endowment. Instead of looking out and finding some
03:52real estate managers, they took that in-house. And they said, this is going to be our real estate portfolio.
03:58And we're going to develop these buildings ourselves. Now, their land costs were not the same
04:03as Harvard's because, you know, it was very derelict land, former parking spots. And they had a huge
04:14demand. And, you know, now it's filled with drug companies. Biogen selected its new headquarters there.
04:22Google is there. Google is there. And, you know, it has a huge advantage. And that is
04:27the subway stop. Whereas Alston is kind of far. You know, it feels more like a suburban area when
04:34you're driving in there. And Kendall Square is, you know, very easily accessible by transit. So it's a
04:40real estate story. It's a transportation story.
04:44So how about the people involved, like the locals there? Because oftentimes when you see
04:48universities and they want to expand, they kind of butt heads with the townies versus the gowns,
04:55the town and gown. Every town has that, that has a big university. How's that playing out?
04:59Well, initially, Harvard bought up this land in a very clandestine manner. It was not known that
05:05Harvard was the purchaser of all this land. So the community in Alston had a really sour taste for
05:11quite a long time. But Harvard has proved to be a very good partner with them. And we talked about
05:17the apartments and the rezoning took quite a long time. They have a lot of affordable units in this
05:22building. And that really protracted approval process potentially was something that cost them
05:30a lot of time. And if they had that done a lot sooner, they may have latched on to a
05:36thriving market
05:37versus a downturn market in the biotech app space.
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