Dec 7, 2016
Soon after she joined Achaogen Inc., Marisol Samperio was charged with a task that in the best of times is a tough one in the Bay Area: find a new home for the antibacterial drug developer.
These, however, are not normal times.
In the Peninsula real estate market, many cash-intensive biotech companies are competing for space against flashy, deep-pocketed tech companies, pushing lab-office lease rates close to $60 per square foot. And though new space is coming online — more than 4 million square feet is entitled or under construction in South San Francisco alone — finding new quarters requires lots of leg work.
For Achaogen, Samperio’s quest took close to a year before the company landed 47,118 square feet at Genesis-South San Francisco, a high-profile tower along Highway 101 in South San Francisco that Phase 3 Partners is converting for life sciences companies.
“There is a lack of vacancy and inventory,” said Samperio, chief of staff at Achaogen (NASDAQ: AKAO). “Landlords understand there is no space out there.”
HCP Inc. (NYSE: HCP) is building The Cove at Oyster Point — more than 800,000 square feet right across 101 from Genesis — and BioMed Realty/Blackstone could begin construction of the 1 million-square-foot Gateway of Pacific. What’s more, Alexandria Real Estate Equities Inc. (NYSE: ARE) will build a nearly 300,000-square-foot, West Coast research-and-development center for Merck & Co.
But the new space is coming on slowly, or it may not be carved out for smaller companies wanting less than 50,000 square feet.
In the end, Achaogen’s pick of Genesis boiled down to availability and cash: Phase 3 was aggressive with a one-time tenant improvement allowance of more than $5.6 million, or $120 per square foot, said Achaogen Chief Operating Officer Blake Wise. For a young company with an accumulated deficit of more than $200 million and cash, equivalents and short-term investments totaling $61 million at the end of September, that TI figure is no small matter.
“The financial support overall is what stands out,” Wise said.
Phase 3 can be more aggressive with tenant improvements, said leasing manager Becka Studer, because its onsite general contractor, XL Construction, knows the property and is aggressive in getting strong bids.
Achaogen, represented by broker Savills Studley, is the first biotech tenant of the 12-story, 150,000-square-foot tower, taking the entire third floor and part of the fourth floor over 10-1/2 years. It is enough space for 250 employees, though the company now has 100 as it awaits data by the end of this year from two late-stage studies that could launch its antibacterial drug toward Food and Drug Administration approval.
If all goes to Phase 3’s plans, the company will have new neighbors soon after it moves in March: Contract research organization Explora BioLabs Inc. is taking 18,000 square feet. Phase 3 also recently finished work to control building vibrations — an important consideration for lab-intensive tenants — and the landlord will have six suites available in the first quarter.
What’s more, Phase 3 is starting work on a neighboring 21-story tower, which should be completed in 2018. The landlord also plans to build an amenities center, including a hotel, restaurant, gym and auditorium.
“The amenities are important to the culture we’re building,” Wise said.