Alexandria Says It’s Already Backfilling Atreca’s Nixed Lease In Silicon Valley
By Greg Cornfield September 28, 2023 12:30 pm
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Public biotech company Atreca is cutting its headquarters lease in Silicon Valley, deepening the uncertainty around the growth of life sciences real estate. But the property’s landlord, and one of the sector’s biggest owners and developers, Alexandria Real Estate Equities (ARE), says it’s already in talks with a replacement tenant.
Atreca, a clinical-stage company focused on developing therapeutics, announced it negotiated an agreement to ditch its lease with ARE in San Carlos, Calif., as part of its ongoing efforts to lower operating expenses (which also includes cutting 40 percent of its workforce).
The deal commenced July 2019 and represented approximately $13 million of annual expenditures. Atreca will pay $5 million to cut the lease and vacate the premises by Nov. 30, “and will be evaluating options for facilities sized to its current operational needs.”
“The agreement to terminate our lease agreement dramatically reduces our ongoing operating expenses and helps to extend our cash runway through the first quarter of 2024,” John Orwin, president and CEO of Atreca, said in a statement.
ARE is facing growing concern about the longer-term investment viability of life sciences space, particularly with the use of adjoining office spaces. Activist hedge fund Land & Buildings in June raised alarms about ARE by pointing to a 50 percent drop in attendance at its medical office properties after the pandemic. L&B specifically identified massive declines at ARE buildings throughout major life sciences markets.
In reaction to Atreca ditching its lease, Jonathan Litt — founder and chief investment officer at L&B — said “Shoes are a-droppin’ at office/lab REIT Alexandria,” via his X account. However, Joel Marcus, executive chairman and founder of ARE, told Commercial Observer via email this week that the landlord is in negotiations to backfill the entire space that Atreca is vacating. He declined to disclose the name of the pending tenant.
The Pasadena-based life sciences REIT is undergoing a “value harvesting” or “asset recycling program,” by unloading more than $1.6 billion in assets deemed not integral to its mega-campus strategy.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
