‘It only takes one.’ Flush with cash, IQHQ bullish on life science hub on San Diego Bay

Quiet for much of last year, particularly amid speculation about the prospects of its mega projects, San Diego-based life science real estate developer IQHQ appears to be taking a different tack in 2025.

The firm announced last week that it raised $900 million in capital in 2024 from existing equity investors. And, in an interview with the Union-Tribune, co-CEOs Steve Rosetta and Tracy Murphy provided new details on the company’s 1.7 million-square-foot Research and Development District, or RaDD, which overlooks San Diego Bay on six blocks of downtown real estate south of Broadway between Pacific Highway and Harbor Drive.

The financing announcement and posture of openness are likely intended to quiet whispers of trouble as the firm looks to fill its mostly empty waterfront buildings.

“It’s a positive symbol, especially since (the money is) coming from insiders that have been investors in the company since it was started. It’s a large amount of money in any market, but it’s a very large amount of money looking at the backdrop of 2024,” Rosetta said of the fundraising news. “Not just our competitors and private (companies), but even public companies are largely frozen out of the capital markets or chose not to tap them in some cases. But it’s a big amount of money for the economic times we’re in.”

The infusion of cash, he said, was raised in the latter half of 2024, with the most recent round closing in December. The money will be used to complete construction projects and for general corporate purposes.

IQHQ is not disclosing names of its repeat backers. To date, the firm has raised nearly $5 billion in equity and corporate financing, a substantial sum that doesn’t include loans for specific projects, Rosetta said.

Previously announced investors include investment banker Raymond James, Madison International Realty and CenterSquare Investment Management. The equity raises mean that IQHQ’s principal owners are its third-party investors, with employees retaining a minority stake in the company.

Started as Creative Science Properties in 2019, IQHQ quickly raked in billions to buy and develop millions of square feet of life science space in key biotech hubs, including Boston, San Francisco and San Diego. In September 2020, IQHQ acquired the leasehold for the former Navy Broadway Complex from Manchester Financial Group, paying $230 million for an 8.7-acre portion of the complex and rebranding the area as RaDD, an urban life science city on the bay. Shortly thereafter, the firm also bought a connected block reserved for a public park, and later inked an agreement with the city of San Diego to build and manage the park.

Starting just north of Ruocco Park, RaDD includes five lab and office buildings with ground-floor storefronts, including one 17-story tower, and the public park, which IQHQ is calling Progress Park. The project also includes an art-filled paseo that travels the length of the property.

RaDD has been marketed as radically distinct in both location and design from the research buildings and campuses concentrated 15 miles north in San Diego’s celebrated science cluster.

Last year, IQHQ completed the exterior shell of RaDD’s lab and office buildings. But everything remains empty — with the exception of the Rivian showroom and an event space operated by the San Diego Padres. The company said in October that it leased half of the RaDD project’s 200,000 square feet of retail and amenity space. The retail tenants include the upscale gym Equinox, the high-end Mexican restaurant Javier’s and The Shade Store, a window treatment company.

There are, however, no research or office tenants, and restaurants and shops aren’t anticipated to open until later this year, making the expansive stretch of waterfront land feel more like a ghost town than a mini city bustling with innovation.

Over the summer, the absence of life at the $1.9 billion project led an analyst to downgrade the stock of IQHQ’s publicly traded lender, Bank OZK. What’s more, founding Chairman Alan Gold exited the company in December. Gold remains an equity owner in the company.

“I think (2024) was a heads-down year for most people and leasing momentum was certainly slow across the whole peer group. It wasn’t just us,” Murphy, the co-CEO, said.

The downtown office market, in particular, has struggled to respond to an influx of new construction, a pandemic-fueled shift in space needs, peak vacancy rates and fire-sale transactions, all creating a hostile environment for building owners.

“As it relates to RaDD, our management team is rooted here. We’re homegrown. We live here and we continue to have conviction in the project. The timeline has been stretched out — that is for certain — because of broader dynamics,” she said. “The only way to have sustained growth in this (biotech) ecosystem in San Diego is to think outside of central county. And our town has always suffered from sort of a rearview-mirror mentality or a sheep-like mentality. But RaDD isn’t something until it is, and it only takes one to get it going. Then we believe we’ll be on our way.”

That one anchor life science tenant may still be out of reach, although IQHQ is talking with some prospects. The firm is making more progress on smaller deals.

Murphy said IQHQ has agreements with two prospective life science tenants and expects the relationships to graduate into signed leases by the end of March. The would-be research tenants are each interested in 40,000 to 50,000 square feet of space, she said.

The real estate developer is also talking to a couple of office tenants. Those talks, which are not as far along as the life science lease conversations, are with traditional downtown office users — financial firms, insurance companies, real estate businesses and law firms — and range in size from small suites to two full floors, Murphy said.

With announced retail leases, interest from office and lab tenants is picking up, she said, just as the company expected.

“It’s obviously a great project. It’s got sweeping views. There’s the addition of Freedom Park (at Navy Pier), and a lot of things … helping to make a real postcard-like statement for San Diego. Our project obviously plays a big role in that, and it has to be led with retail,” Murphy said. “We are executing in the order which we planned, and we hope to have proof of concept, if you will, in the first quarter on (life science and office) product types.”

Real estate analyst Gary London, a principal of local firm London Moeder Advisors, said that RaDD has an advantage over other downtown properties in the current challenging real estate cycle, simply because it’s the best and newest project in the market.

“My sense is that, eventually, the highest quality tenants will bleed into their project,” he said, cautioning that the developer will have more success filling space if it shifts to focus on office over lab tenants. “The most important thing is … they need to activate the ground floor. The park needs to be opened and they need to populate the ground floor with retail and restaurant tenants. Once they do that, then we’re going to see a lot of energy and interest.”

The vibe shift will likely take the better part of a year to play out. IQHQ expects to open Progress Park in tandem with most of the project’s storefronts. The grand debut isn’t expected until the third or fourth quarter of the year, Murphy said.