David Clem’s connection to an Upper Valley timber company looking to diversify led to a breakout success in what has become one of the most scientifically significant square miles in the United States. Photo courtesy of Lyme Properties
Kendall Square, Greater Boston’s biotech hub, might never have become the world’s life science capital if a New Hampshire timber company hadn’t decided to diversify some of its investments into commercial real estate.
David Clem’s classmate at Massachusetts Institute of Technology was a member of a family that was an investor in Lyme Timber Co., and the connection resulted in his selection to lead its new development affiliate, Lyme Properties. Clem, now 72, was already active in the intertwined worlds of Cambridge politics and real estate as a former city councilor and partner at The Athenaeum Group, which developed the first private life science project in Kendall Square outside of the urban renewal zone.
The Texas native saw opportunities to reactivate former factories near MIT as biotech research labs. Between 1993 and 2006, he built Lyme Properties into the third-largest life science developer in the U.S. and attracted a who’s who of global biotech firms to Cambridge. The firm sold its Cambridge portfolio in 2008, and Clem turned his attention to projects near his home in the Upper Valley.
Q: What’s the history of your first lab project, One Kendall, and the origin of the idea that it would be a good site for life science startups?
A: The One Kendall parcel was originally the Boston Woven Hose division of American Biltrite. They manufactured Mason-lid jars and hoses for the automotive industry and expanded to 23 buildings on the 12-acre site. Many of the buildings were 4 stories tall, and they reached the point where they wanted to go to the suburbs in a more horizontal environment for manufacturing. The property is directly across the street from Tech Square, and a short walking distance from MIT, and that was one of the reasons it was so successful for startup lab space. The other feature of that building that was unique is it had been built as manufacturing space, so it had unusually high floor-to-floor heights and unusually heavy floor loads.
Q: Why did you focus on life science rather than traditional tech offices?
A: The market dictated that. Our competition effectively was Boston Properties, which had been awarded the development rights for Kendall Square, and MIT had partnered with a private company to do University Park. Those were all new buildings, and the Boston Properties site was closer to the T stop and immediately adjacent to the MIT East campus where most of the life science departments were: biology, chemistry, etc. David Barrett of Boston Properties actually referred our first lab tenant to us. He had been approached by Ciba Corning. They wanted a small lab and Boston Properties did not believe in putting animal rooms in a first-class office building. We were looking for tenants, period. It was just that simple.
Q: How did Lyme Properties’ business plan take shape?
A: After One Kendall, The Athenaeum Group was bought out and that’s when I attempted to retire the first time. I moved my family back to the Upper Valley, where Dartmouth is located and where I had been an undergrad. My wife and I had been married junior year, and we had a farmhouse in Norwich, Vermont. I was going to take a year off and decide what I wanted to do, but within a month I had formed Lyme Properties and was back in Cambridge, this time with a group that was better capitalized. That really launched our activity in Cambridgeport, and then we bought the Kendall Square site from Commonwealth Energy.
Q: What made you rethink retirement?
A: The partners of Lyme Timber Co., which was a parent of Lyme Properties, had just recapitalized and I was familiar with that company through my best friend at MIT, whose family had been one of the initial investors. They asked to meet with me, and they wanted to diversify into commercial real estate as opposed to timber and conservation projects. I told them I thought there was growing demand in Cambridge for life science and research space. They invited me to join and I created Lyme Properties, and that launched the larger projects. We continued to develop for 15 years and at that point, the founding partners of Lyme Timber wanted to retire, and we made the decision to liquidate the Lyme Properties portfolio and we did that in three separate tranches.
Q: How difficult was it to raise financing for life science projects initially?
A: When The Athenaeum Group bought the Boston Woven Hose property, we went to every major bank in the cities of Boston and Cambridge, and we were turned down for acquisition financing. The feeling at the time was you should tear all those buildings down and build new, just like Boston Properties had started to do in the Kendall Square redevelopment area. Our response was: Boston Properties was the designated developer and they had effectively no land cost, because the redevelopment authority cleaned up the environmental hazards. We told banks, “We can’t compete with them.”
We bought the Boston Woven Hose property for under $5 a square foot, and we said we wanted to position ourselves as a cheaper alternative because we thought we could renovate those buildings and be competitive. Even though it’s older space, we think it’s interesting. We’d be the lowest-cost alternative. And everyone turned us down. Eventually the loan was made by Winter Hill Federal Savings [in nearby Somerville]. The president said, “I don’t know if you’re going to succeed, but I’m going to give you enough money to acquire the property and pay me interest for 18 months. If you don’t have anything in 18 months, I’m going to foreclose. And you’re going to pay 6 points for the closing and pay 6 points above prime as the interest rate.”
And this was the Jimmy Carter years, but we pulled it off. We were approached by Draper Labs to buy a portion of the site and we were able to lease the first phase pretty quickly.
Q: Utility sites can be difficult to acquire, so how were you able to get the Commonwealth Energy property north of the Broad Street Canal under Lyme Properties’ ownership?
A: They wanted to build a 1 million-square-foot office building, but there was a constant effort to downzone them. The Athenaeum Group owned property nearby and they approached me because I’d been on the Cambridge City Council. Whenever a downzoning petition was filed, I would help them organize opposition so it required a two-thirds majority. If 20 percent of the affected landowners are opposed, it requires a supermajority. I had done that probably three separate times for them. And then when Dukakis was governor, his cabinet said utilities could not hold land for speculative purposes, only ones directly related to energy production. A Commonwealth Energy real estate officer called us and said, “You helped us protect our value, would you be interested?” That’s how Lyme Properties became the owner of it.
Q: What projects are in Lyme Properties’ current development pipeline?
A: When I left in 2008 I negotiated the rights for the use of the name and we call ourselves Lyme Properties. Lyme Properties is run by my son, who took over at the end of last year. River Park is my biggest current project and my quote-unquote “retirement project.”
It’s a very interesting site in West Lebanon, about five minutes from Dartmouth College and Dartmouth Health Medical Center. I permitted that for over 1 million square feet of mixed uses. The first building was designed by [late Elkus Manfredi Architects Founding Principal] Howard Elkus. We were scheduled to begin in April [2020] and had to pull the plug on it. We had two-thirds of it leased and we’re trying to start again. Hopefully it’ll get under way this year.
We had some single-family house lots and sold all of those, so the infrastructure’s phase one is complete. It has over a half-mile of frontage on the Connecticut River and we spent a year-and-a-half getting to know the neighborhood and running a series of charrettes. We had a letter of intent for the third floor with a life science user who is still in the Upper Valley, and we had an LOI with a major institution for the entire second floor. On that basis we were going to commence construction, and we would have but for COVID.
