Alexandria Real Estate Equities' Marcus

NEW YORK CITY-The Boston metro area is ringed with pockets of commercial life science properties. Ditto the San Francisco Bay area, San Diego and suburban Washington, DC. With its wealth of world-renowned hospitals and medical universities coupled with its deep pools of venture capital, New York City ought to be running with that crowd. To date, however, the city’s commercial lab space stock hasn’t gone much beyond an incubator facility at Columbia University. With last week’s opening of the first phase of the Alexandria Center for Life Science—New York City, and the BioBAT facility at Brooklyn Army Terminal under development, the city is entering the race. Yet these pioneering efforts to establish a commercial biotech market here are just that—pioneering, which made the Alexandria Center a special case for developer Alexandria Real Estate Equities. Following the Dec. 2 launch ceremony. GlobeSt.com sat down with Joel Marcus, chairman and CEO of the Pasadena, CA-based life science REIT, for an interview in one of the new facility’s spiffy assortment of conference rooms.

GlobeSt.com: Alexandria has developed in all of the major biotech markets around the country. Was coming into New York unique in the sense of being a pioneer?

Marcus: In two respects. One, we had never done business here and didn’t have one employee in New York when we were selected by the city. That was a big challenge, and it took a lot of guts by the city. A number of the bidders had established operations here.

Two, New York had never really had a commercial life science presence. They have academic and clinical, but no commercial side.

GlobeSt.com: What had the more established markets done that New York City hasn’t yet?

Marcus: There are four elements in a cluster market for life science. You need great science, and New York has great science. Two, you need a talent pool both for people to hire and for leadership and management, and there’s a pretty good talent pool here. You need smart capital, and New York has that. What New York didn’t have was a place to put a commercial sector, and that’s why the city saw this as a dedicated site. In the other established markets, the commercial sector had been there for decades.

GlobeSt.com: Would it be accurate to say that at one time they had to go through the same processes of finding the land and working with the municipal or state governments?

Marcus: Correct. With the Alexandria Center, this was kind of a throwaway piece of land, an abandoned laundry building and throwaway parking. Underneath it were all the Bellevue utilities pipes, so you couldn’t just go underground or you would cut off the power and steam to Bellevue Hospital. It was a very odd site, but it was in a good location for access to the clinical and academic centers. It was about a 10-year process that culminated in a formal RFP.

GlobeSt.com: What was Alexandria looking for in bidding on the site?

Marcus: One of the key reasons the city chose us was that we were the only bidder that had developed buildings in every other life science market. We had an established track record in the life science niche. We were a pure play, and nobody else was. From our end, we knew the sector and the tenants, and we thought we could build a first-class facility.

GlobeSt.com: The opportunity to come in as a pioneer must have been a very strong motivating factor, as well.

Marcus: It was, but it was scary. We had never done anything in New York, and everybody said, “well, you’re not a New York developer, you don’t know the ropes.” So there was some trepidation. But we learned very quickly and had a great team. There was a little bit of faith on each side: that the city would work well with us, and from their viewpoint, that we would build something that maybe others couldn’t.

GlobeSt.com: Since many of the other bidders had never tried this before, what would you say were some of the factors that had held them back?

Marcus: Access to a site, and the cost of a site. Also, this had to be done on speculation. You couldn’t sign a tenant beforehand; you had to go on the basis that you thought you could get a tenant. In addition, they didn’t know the sector.

GlobeSt.com: What makes life science tenants unique?

Marcus: It’s a pretty diverse sector. We deal with pharma, biotech, universities, not-for-profits, service companies. A bigger difference is the infrastructure. I’ll give you an example: if you were sitting in a room like this in a traditional office building, you might get one or two air changes per hour. In a typical lab, you get 15 to 30 per hour, 100% fresh air. A typical office building has about one-third the infrastructure investment you need for a lab facility.

GlobeSt.com: Along with the city taking on Alexandria as a partner on a leap-of-faith-basis, there had to be a pretty strong forward-looking vision on the Bloomberg administration’s part.

Marcus: It was really the vision of Andrew Alper, who made it a priority when he was head of the New York City Economic Development Corp., and Kathryn Wylde at the Partnership for New York City. And I think anybody who knows Mayor Michael Bloomberg well would say he’s very entrepreneurial and a savvy businessperson. It took those factors to make it happen. In a traditional city run by traditional politicians with no business experience, maybe it would have been harder.