What Will Happen to ZymoGenetics’ Landmark Headquarters when Bristol Calls the Shots?
The big question these days in Seattle biotech is about people. What will happen to the 320 people who work at ZymoGenetics (NASDAQ: ZGEN), now that the pioneering company has agreed to be taken over by pharmaceutical giant Bristol-Myers Squibb for $885 million?
Given the history of takeovers like this, the safe bet is that many employees, especially those on the administrative and business side of the house, will lose their jobs. But ZymoGenetics CEO Doug Williams insists that “no decisions have been made,” yet, and that it could take a couple months for executives from both companies to make the hard choices.
While everyone waits for those answers, the takeover has also created uncertainty about the future of one of Seattle’s important historical landmarks. It’s the old City Light Steam Plant, designated as a city landmark in 1988. It’s the place that generated electricity back in the city’s early days, fell into disrepair, and was reinvented into a modern gem of biomedical research in the 1990s. Even Northwesterners who know nothing about biotech know that this landmark at 1201 Eastlake Avenue East, with the restored smokestacks, is one of the city’s iconic locations, seen by thousands every day as they drive down Interstate 5.
There’s some fascinating recent history to this building, first built in 1914. The power plant was de-commissioned in 1987, declared a landmark the following year, and sat vacant for several more years. By 1993, ZymoGenetics, which was owned by Danish drug giant Novo Nordisk, bought the building and the adjacent Hydro House, and agreed with developer William Justen to spend $25 million to transform them into a biotech center. The following year, the city passed an ordinance which essentially mandated that anyone who wanted to alter the exterior of the building would need approval from the city’s Landmarks Preservation Board.
ZymoGenetics, which lived large for many years as the research wing of Novo, turned it into one of the iconic headquarters buildings in Seattle. It took a ton of work—ZymoGenetics chairman Bruce Carter called it “the mother of all fixer-uppers” in this post at HistoryLink.org. I’ve done many interviews there over the years with Carter and others at Zymo. It’s hard not to admire the tasteful art collection on its walls, the central foyer decorated with flags that represent the multi-national heritage of its employees, and the gorgeous views of Lake Union for its scientists. The place even has kayak access along the lake, and employees are known to sometimes do a little rowing during breaktime.
“It’s an awesome space,” says Bob Mooney, managing director of Jones Lang LaSalle in Seattle, who represents ZymoGenetics in its effort to sublease part of the facility.
ZymoGenetics spokeswoman Susan Specht had no comment about what might happen to the facility as part of the transaction, and a Bristol-Myers Squibb spokeswoman said “no decisions have been made” about the people or the site. The owner of the building, Alexandria Real Estate Equities, didn’t respond to a request for comment. (Disclosure: Alexandria is an underwriter of Xconomy, and is also our landlord in Seattle, San Diego, and Boston.)
Since ZymoGenetics and the Steam Plant’s developer struck their agreement with the city, a lot has changed. ZymoGenetics agreed to sell the headquarters to Alexandria for $52 million in October 2002, as part of an agreement to lease the space for another 15 years (a story which I covered for The Seattle Times.) The deal was later extended another two years, and the total value ballooned to $70 million, when ZymoGenetics built a modern facility across Eastlake Avenue for small-scale biotech drug manufacturing and process development. That building is called the Earl Davie Building after one of Zymo’s founders.
Some of the space in the original Steam Plant has been vacated after ZymoGenetics experienced two rounds of layoffs in April and December of 2009, which brought its staff down from 500 to its current headcount of 320.
Having a tenant like Bristol-Myers is a clear benefit to Alexandria as the landlord, because a profitable Big Pharma company like that shouldn’t have any trouble paying the rent, Mooney says. Still, it remains to be seen how the facility might be put to productive use if Bristol decides to vacate part or all of the Steam Plant. The building, Mooney says, was designed for a single tenant like Zymo, not a smattering of biotech startups. And there’s no obvious breakout biotech success story of the moment that’s currently prowling the local market for space—Dendreon has already found room to grow in a new Martin Selig building along Elliott Bay.
Bill Neil, the senior vice president of GVA Kidder Mathews and another veteran of Seattle life sciences real estate, says he can foresee someone stepping in to fill the void that Zymo may leave.
“Both the Steam Plant and the Earl Davie Building have building infrastructure and improvements that other life science office/lab users, both for-profit and non-profit, can utilize, so I would be very surprised if either of these two office/lab building would be re-positioned for an alternate use, especially since they are owned by Alexandria,” Neil says. “The Steam Plant, especially, is a shining star of Seattle’s life science critical mass and I’m sure that it will continue to operate as a corporate headquarters/R&D facility.”
We may not have to wait very long for the answer on what will happen to ZymoGenetics’ people and buildings. Bristol-Myers has set a deadline of Oct. 7 for shareholders to hand over their shares at $9.75, so it’s possible this deal could close sooner rather than later.