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Alexandria Delays Plan to Break Ground on Second Tower of NYC's East River Science Park


Alexandria Real Estate Equities has delayed its plan to break ground soon on the second tower of its Alexandria Center for Science and Technology at East River Science Park laboratory campus in New York City, though it said it is close to a lease deal with an anchor tenant for the first tower now under construction.

Alexandria Chairman and CEO Joel Marcus acknowledged the pullback during a conference call with analysts Feb. 9 that followed release earlier that day of the REIT's fourth-quarter and year-end results.

The pullback was reflected in a shift of 389,000 square feet from its current development pipeline to its embedded future development square footage, nearly doubling that number from the 516,000 square feet recorded during the third quarter to 905,000 square feet as of Dec. 31, 2008.

Marcus offered no explanation for delay, though he said during the call that the ongoing financial upheaval in the US has compelled Alexandria to embark on a "major reduction" of capital spending, as well as "substantial and continuing progress and major reduction in operating costs, including the review by the CEO and CFO [Dean Shigenaga] of every expenditure exceeding $250."

Construction of East River Science Park "related to the overall site, plaza, garage, and underground infrastructure work" and accounted for part of the $19.2 million in interest that Alexandria capitalized during the fourth quarter of 2008, Marcus said.

He added that interest-capitalization was a cost Alexandria was looking to contain going forward: "We definitely hit the peak of capitalization of interest in the fourth quarter and for 2009 we are projecting an overall decline in the amount of capitalization of interest."

Marcus did offer one upbeat update on the New York City project, saying that Alexandria is "negotiating a letter of intent with a very high-quality anchor tenant for approximately a third of the space" — a little more than 100,000 square feet — of the 16-story, almost 320,000-square-foot East Tower. That building is set to be completed by year's end.

"This is the single highest priority for leasing in the company," Marcus told analysts. "We hope to have a positive report to you on our first-quarter call."

East River Science Park is zoned for up to 1.1 million square feet of laboratory space. In December 2008 the commercial real estate firm Cushman & Wakefield announced it had been awarded an exclusive agency agreement to market the development, which is technically a venture of Alexandria and New York City's Economic Development Corp.

Representing Alexandria for Cushman & Wakefield will be its brokerage team of William Hartman, Jonathan Serko, Barry Zeller and David Malawer from C&W's New York Midtown office. The team will partner with C&W's Global Life Science Practice, consisting of Mark Winters, Christopher Kinum, Thomas Giannone and John Minervini; Marc Packman of C&W's Strategic Agency Services; and C&W Global Consulting Group, comprised of Matthew Jackson and Matthew Highfield.