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Wednesday, Jul 6, 2022

Westlake Bio, Alexandria Team on Lab Buildout

Two real estate deals have put the Conejo Valley’s biotech hub on the fast-track to expansion.The larger deal involves Westlake Village BioPartners, a venture capital firm that last month announced two new funds worth a combined $500 million.

In conjunction with the money, the company is working with Alexandria Real Estate Equities in Pasadena to build out a 130,000-square-foot, three-building campus with wet labs in Thousand Oaks. So far, Alexandria has finished 30,000 square feet of space where several of Westlake Bio’s portfolio companies have moved in.The other deal developer, HATCHspaces, bought a former Amgen Inc. property with plans to create lab space.Both projects are near each other in the Rancho Conejo area of Thousand Oaks.“What we’ve really seen, between this and a number of other transactions that are occurring, is the culmination of our strategic focus on building an interconnected biotech hub in the Rancho Conejo area,” said Andrew Powers, city manager for Thousand Oaks. “We had an economic development strategic plan and it really called out the fact that we have Amgen as an anchor out here, Takeda (Pharmaceutical Co.), and Atara (Biotherapeutics), which is increasingly growing in the area, along with a number of other bioscience companies in the mid-range.”Powers added: “What we’re missing really is that startup component. And when you have a large anchor like Amgen, to have a healthy biotech ecosystem, you want to see those startup opportunities come in.” With respect to Westlake Bio’s new funds worth $500 million, the first fund is a $70 million account called Opportunity 1 — the firm will use these monies to further invest in companies they have incubated or already invested in. The Westlake Village BioPartners 2 Fund, worth $430 million, will invest in approximately 12 new portfolio companies; the firm will pull from this fund to co-lead Series A financing rounds with other investors too.Seven of Westlake Bio’s startup companies are or will soon be located at the Alexandria campus, according to Dr. Sean Harper, co-founding managing director for the venture capital firm and a former Amgen executive.Immunology startup Acelyrin is one such portfolio company to be headquartered at the campus out of the firm’s second fund, along with other companies still in stealth mode, Harper said.The term refers to small biotechs that are not yet ready to present themselves to the public.

“As we launched the fund, a couple years ago we began to talk with (Alexandria) about what we found to be the most meaningful, practical bottleneck we were facing in creating companies here. … We didn’t have any turnkey incubator space or graduation space for people to move into after the incubator model,” Harper explained.“We began to struggle with that because it was clear we would have to spend nine months to a year building out a facility and putting quite a bit of capital in up front for these startup biotechs,” he added.Backyard opportunityPatrick DuRoss, senior managing director at commercial real estate brokerage Newmark in Calabasas, sold the properties to Alexandria at 1280-1290 Rancho Conejo Blvd., then later 1300 Rancho Conejo. He works with colleagues John DeGrinis and Jeff Abraham in what is known as the firm’s Team DeGrinis.“If you look at life science across the country, it’s on fire,” said DuRoss. “Companies are doing really well, they’re one of the more active segments in commercial real estate. They’re looking for areas to grow, and I think greater Los Angeles is a big one and Thousand Oaks has all the elements.”DuRoss considers Alexandria to be, by far, the top life science real estate owner in the country. It also happens to be headquartered nearby in Pasadena.The company has been waiting for the right time to move into the Conejo Valley. “Over time, we found that they were very excited about the idea,” Harper said. “(Alexandria) built out much of the infrastructure for the Bay Area, New York, Boston, San Diego. For 20 years, they’ve been wanting to do something in their own backyard. There really was not the critical mass of opportunity, not enough companies forming that would make sense (for them).” Now, the Thousand Oaks campus is just the start of Alexandria’s planned footprint in the Valley region.“We, in partnership with Westlake, are incredibly proud to be at the vanguard and heart of the emerging Greater Los Angeles life science cluster,” Joel Marcus, executive chairman of Alexandria Real Estate Equities and Alexandria Venture Investments, said in a statement. “We have purposefully designed the space with a range of operational and service amenities for high-quality early- and growth-stage life science companies.” All of the 30,000 square feet of office and laboratory space that Alexandria has built out to date is occupied by Westlake Bio companies, DuRoss said, but that doesn’t mean other biotech startups couldn’t move in, too.“As it expands, there definitely is nothing preventing Alexandria from putting other companies into that space, assuming we didn’t need or want the space,” said Harper. “Given our relationship, we’d be able to take the space we wanted, but it’s a timing issue and if they have space available and ready to go and we don’t have anyone that needs it, then they certainly can bring other folks.”Harper hopes to see ancillary companies specializing in rodent vivariums lease the space, which would provide the small animals needed for R&D labs.“If you go to San Diego, San Francisco or Boston, these kinds of facilities are often built into incubators,” added Harper. “These are some of the services to the biotech companies that tend to always be outsourced. It would be nice to have them here.”Premium spaceIt would be easy to sell industrial buildings in the Conejo Valley to regular users, DuRoss said, but life science tenants always pay extra.It’s usually a 30 percent premium because R&D labs are difficult to find turnkey and safety requirements drive up building costs.“That’s the other thing – you’ve got areas like South San Francisco and San Diego that have been on fire for so long, they’re expensive,” he said. “Companies start to look for other locations.”For example, rents in Boston are “somewhere around $7 a square foot triple net,” DuRoss said. By comparison, regular office space in the Conejo Valley leases for an average $2.74, according to data from Colliers International, so even with a 30 percent premium it’s much more economical than other biotech markets.Life science development also coincides with the city of Thousand Oaks’ strategic plan, referenced by Powers.The L.A. biotech clusters represent less than 1 percent of the life science market in the U.S. right now, DuRoss pointed out. Boston, San Francisco and San Diego make up roughly 84 percent of the market.Special buildingOne transaction with huge potential for incoming companies involves HATCHspaces and Chicago-based Singerman Real Estate. The companies purchased Amgen’s facility at 2495 Teller Road in December as part of a joint venture and now look to lease it.The 50,000-square-foot building is designed for manufacturing small molecule drugs in small batches, said Allan Glass, managing partner of HATCHspaces.“This is what they call a pilot plant. This is meant to manufacture product at a very small scale,” said Glass. “We’ve quietly put it out to market to several pharmaceutical companies around the globe. … There has been overwhelming interest in the facility already without any formal marketing put together yet.”Pharmaceutical ingredient producers, businesses that specialize in contract manufacturing or other chemistry-based companies are in need of space like this, Glass said.That’s because such a facility is so expensive to build out. Having a turnkey small molecule facility built by one of the most trusted names in the biotech industry attracts attention.“Manufacturing capabilities like this available in a real estate facility means that more advanced companies, more mature companies are now going to have an entrance in the region, because the real estate product is available to them,” said Glass. “It’s very rare for a facility like this to ever become available for lease. … It becomes so expensive to build this out that developers won’t do this for a tenant.”

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