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Yale Plans to Occupy Bayer’s Former West Haven Digs in ‘08

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Yale University will launch a long-planned expansion of its biomedical research programs next year when it moves into a West Haven, Conn., campus it has agreed to purchase from Bayer HealthCare.
 
The university on June 13 signed an agreement to buy the 136-acre campus and warehouse space from Bayer for an undisclosed sum. The German pharma giant is moving out its oncology research facilities and its 700 employees next year as part of a global consolidation following its €16.9 billion ($22.6 billion) purchase of Schering last year.
 
Yale expects the expansion to solidify its role as anchor of the nascent biotech cluster in and around the university’s principal campus in New Haven, Conn.
 
Yale President Richard Levin told BioRegion News the university expects to more than recoup its acquisition cost in the savings of time and money. Levin said purchasing the campus will allow Yale to accelerate a planned expansion of biomed research by 10 years or more.
 
“Some of the programs where we would have built new facilities between 10 sand 20 years out [are] here now, so we can start to build programs here now,” Levin said in an interview minutes after announcing the acquisition during a ceremony at the Bayer campus. “What this allows us to do is utilize in the near term buildings that were only in our capital plan for 10 to 20 years from now. It’s a once-in-a-lifetime opportunity.”
 
And one that Yale initially did not expect, Levin added: “We were helping [Bayer] try to find a pharmaceutical tenant for many months. It was only when it was clear it wasn’t going to happen, when they decided to have an auction two months ago, that we got into the bidding.”
 
The availability of warehouse space was another attraction for Yale: The university had searched sites in nearby towns for space to store artifacts from its art and natural history collections, Levin added.
 
The expansion marks Yale’s next step in bolstering its science and medical research programs, to which the university has committed $1 billion since 2003. Levin said the purchase won’t affect Yale’s plan to open later this year a new building for its medical school on Amistad Street, or to break ground “in about a year” on a new 315,000-square-foot biological science building at the Science Hill portion of its New Haven campus. The latter was to have started construction last year but has been delayed by a redesign sparked by community opposition to the original plan.
 
Yale has calculated the cost of building new lab space at $650 to $700 per square foot. That would amount to $385 million for 550,000 square feet, the quantity of lab space available at the Bayer campus.
 
Yale and Bayer will not disclose the purchase price until the sale is closed, something Levin said was expected in about 90 days, following the conclusion of a due diligence review. The Associated Press reported the university bought the campus for about $100 million, citing unnamed “people familiar with the deal.”
 
The Bayer lab space requires little renovation, according to a commercial real estate broker familiar with the region’s life sciences market. A 125,000-square-foot chemical research facility opened in 2002 is the newest building on campus.
 
“A lot of the labs are in pristine condition. They’re beautiful pharmaceutical research labs,” said Patricia H.C. Ardigo, a first vice president and director of the life sciences group at CB Richard Ellis, the commercial real estate brokerage that marketed the campus.
 
In addition to the lab space, the Bayer campus includes 600,000 square feet of manufacturing and warehouse space, and 275 square feet of office space. In all the campus has 17 buildings built between 1968 and 2002. The manufacturing building could be converted to another use or demolished, Levin said. “We’re not going to manufacture anything here,” he said.
 
Bayer acquired the campus in 1979 when it bought Miles Laboratories, which created the campus as a manufacturing site, then expanded the facility by building new office and research facilities in the two decades that followed. About 80 percent of the campus is in West Haven. The remainder is in the adjacent town of Orange.
 
Yale projects employment at the campus will grow gradually over several years, to an eventual 2,500 people – about as many people as worked there for Bayer five years ago. A series of consolidations since then has caused Bayer to shrink its workforce to 1,000 last November. As of this week the headcount stands at 700.
 
Yale’s work force on the campus could grow further if the university adds facilities long-term, which it anticipates. Levin said Yale was also attracted to the campus for its additional development potential. Specifically, it could accommodate new buildings totaling “double or triple” the existing amount of space. Only about one-third of the campus has been developed.
 
Levin said Yale will use the campus to house new interdisciplinary life-sciences research programs, mostly for the medical school, though he would not say which programs. The university would not hold classes on the campus, though graduate students could be trained there.
 
“Our present intention would be to make this 100 percent academic use. We have enormous potential here,” Levin said. “We see the potential here for interdisciplinary research that is innovative, that tackles human disease as probably a core use of this facility in the near term.”
 
Spin-Off Haven
 
Yale would use the Bayer campus to develop technology and other intellectual property that could be commercialized by spin-off companies. Yale has spun off most of the 40 companies that comprise the Greater New Haven cluster, said Paul Pescatello, president and CEO of Connecticut United for Research Excellence, an education and business support group for the state’s life sciences industry with more than 100 members.
 
About half the 40 companies are based in New Haven with the remainder located in West Haven, Orange, and other nearby towns.
 
“A university like Yale committing to this, buying this, and really increasing its life sciences work means a good future for Connecticut bioscience, with more companies being spawned from Yale,” Pescatello said.
 
Yale’s growing cluster, he said, could draw some companies fleeing high costs in New York or Massachusetts to consider moving halfway between there and New Haven, in adjacent Fairfield County: “There’s certainly an opportunity in Fairfield County. Over time you could have a real dense corridor of life sciences work.”
 
Levin said spin-off companies developed on the Bayer campus would likely locate outside the campus in any of two existing biotech properties in New Haven.
 
One is the 45-acre Science Park, which has filled all but 8,000 square feet in two buildings totaling 140,000 square feet under its direct control, 375 and 396 Winchester Ave.
 
Yale now leases a minimal amount of space at Science Park but is in talks to lease between 100,000 and 150,000 square feet, Levin said. Sheila Anastas, Science Park director, would not detail how much Yale leases now and would not discuss Yale’s interest in more space there.
 
Science Park has more than 1 million square feet of vacant space in three buildings: 275 and 315 Winchester Ave. and 270 Mansfield St.
 
Science Park also includes the 267,000-square-foot 25 Science Park, located at 150 Munson St., as well as a parking lot and an abandoned parking lot, both on Winchester Ave. All are controlled through a ground lease by BioMed Realty Trust, a real estate investment trust based in San Diego. BioMed took over the building last February as part of a $511 million acquisition of sites from Lyme Properties of Hanover, NH.
 
Another site for the spin-offs is the 560,000-square-foot 300 George St. in New Haven, where Levin said Yale leases about 150,000 square feet for use by its School of Medicine, and where 40,000 square feet is available for lease. The building is owned by Winstanley Enterprises of Concord, Mass., whose president Adam Winstanley was unavailable at deadline.
 
Bayer’s Bitter Pill
 
Bayer announced last November it would vacate the campus, rejecting a combined $60 million in incentives offered by Connecticut and the communities of West Haven and Orange. The state then formed a committee of business leaders and officials that concluded the best future use of the campus was research.
 
Bayer’s move out of the campus should be “mostly complete by the end of the first quarter 2008,” said Mark Bennett, senior manager, external communications for Bayer HealthCare.
 
If the transaction with Yale close before that time, Yale will lease back some space to Bayer for it to “maintain appropriate work space for employees” in the town, Bennett added.
 
Bayer paid $2.3 million in taxes to West Haven and another $702,000 in taxes to Orange during the 12 months ending June 30.
 

“When the phone call finally came as to who [the campus’ new owner] was going to be, I felt such a relief.”

Next fiscal year, the state will make in-lieu-of payments to both communities equal to two-thirds of what they received in taxes. Connecticut is one of two states — Rhode Island is the other — that make in-lieu-of-tax payments to municipalities for independent colleges and hospitals.
 
In addition, the communities will receive from Yale a combined $600,000, or $250 per employee, whichever is greater. West Haven would receive 80 percent of that money or at least $480,000, the proportion of the campus within that city; Orange would receive the remainder.
 
“In reality, we’re pretty much even,” West Haven Mayor John Picard told BioRegion News. “Over the long term they plan on growing, so that PILOT money is going to increase. This changes the face of West Haven forever in a very positive way.”
 
In addition to the municipal payments, Yale said it will spend another $1 million over the next four years on programs to train middle- and high-school science teachers in New Haven, Orange, and West Haven.
 
Yale already owns around 50 acres in West Haven, some of it for Yale Field and other athletic fields. Some of this land could be used to fulfill a longtime goal of town officials – creating new Metro-North Railroad stations downhill from the Bayer campus in West Haven and Orange.
 
Gene Colonese, rail administrator with Connecticut’s department of transportation, said in an interview that design work has started for the West Haven station, while talks are continuing for the Orange station “to move that off the dime as well.”
 
Picard and Orange’s chief elected official, First Selectman James Zeoli, said they were relieved that Yale was acquiring the campus, after seven months in which several developers seeking to build retail, residential, and mixed-use projects had expressed interest in the site.
 
“Mayor Picard and [I] probably had more visits from developers and re-use people who wanted to turn this into another shopping mall site than anything,” Zeoli said. “When the phone call finally came as to who [the campus’ new owner] was going to be, I felt such a relief.”
 
The officials had opposed rezoning the campus for other uses besides those carried out by Bayer. They also opposed Bayer dividing the campus for sale to multiple buyers – something the pharma giant heeded when it solicited bids through CBRE for the entire campus.
 
While the officials expressed happiness with Yale’s acquisition, Bayer’s top executive at the campus sounded more bittersweet. Paolo Pucci, head of Bayer’s global oncology business unit, recalled how in the summer of 2004 when he arrived from Italy and couldn’t find a hotel room in or near the campus while getting settled in the US, the university housed him at its Yale Club.
 
“It is sad for us at Bayer to leave West Haven,” Pucci said. “But we are also happy to see that the legacy of innovation will continue on.”
 

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