September 13, 2024

Fred Hutch pays $150M for life-sci building, partners with Alexandria in steam plant and more

Photo via CollinsWoerman [enlarge]

The 1165 Eastlake building is now home to Adaptive Biotechnologies.

In a nearly $150 million deal, the fairly new 1165 Eastlake Ave E. life-science building has sold to Fred Hutch Cancer Center. King County recorded the deal yesterday.

Fred Hutch and seller Alexandria Real Estate Equities simultaneously announced the sale — plus three more significant news items.

Along the same strip, Fred Hutch already leases space at 1201 Eastlake, the landmarked former steam plant, and at 1208 Eastlake (aka the Earl Davie Building). Alexandria has owned those two in a minority partnership with Clarion Partners.

In the new deal, which hasn't yet closed, Fred Hutch will buy Clarion's 70% stake in that duo. The prior Clarion-Alexandria JV was announced at the very end of 2020, and spanned four nearby buildings — but not 1165 Eastlake.

Fred Hutch's Dr. Thomas J. Lynch Jr. said in a Thursday statement, “This opportunity allows us to swiftly advance our research, expand our South Lake Union campus in the heart of Seattle's life-science and biotech community, and preserve space in the center of campus for future needs including clinical care, all in a way that is extremely cost-effective.”

Photo by Alexandria Real Estate Equities [enlarge]

Fred Hutch leases all of the landmarked former Lake Union Steam Plant, which was converted to life science in the early 1990s for ZymoGenetics.

All three buildings in the newly announced Fred Hutch deal total about 300,000 square feet. Fred Hutch estimates the entire deal will save it more than $300 million in new construction costs.

That savings represents the previously planned Stuart and Molly Sloan Precision Oncology Institute, to replace a parking lot at 1340 Aloha St., on the Fred Hutch campus, which was announced in 2022. That has been in design review, and was previously valued at $275 million — a figure that's likely increased. The Sloans had given (or committed) $78 million for that purpose. And the Bezos family foundation previously gave (or committed) $225 million to the effort.

Stuart Sloan said of his money's new direction, “This acquisition is an extraordinary opportunity for Fred Hutch. We are in full support of this investment because it advances the researchers and their work to help cancer patients around the world. I've long believed that miracles come from the labs.”

Mike Bezos — stepfather to Jeff — added, “This is an amazing opportunity to accelerate not only the growth of Fred Hutch's campus, but also the important science discoveries and the recruiting efforts supported by these new buildings. As my wife Jackie is fond of saying, by acting together, we can make the impossible, possible.”

The Bezos gift will now fit into what Fred Hutch calls its Anniversary Challenge, to “inspire gifts of $1 million or more in support of this acquisition and scientific priorities.”

In announcing the new three-building deal, Fred Hutch cited higher construction costs for the Sloan project. Phase I of that was to have about 315,000 square feet. Fred Hutch estimates this week's deal represents 60% in savings compared to new construction.

Fred Hutch calls the move both a “pivot” and “a strategic shift.” Public records, before deadline Thursday, didn't shed any light on the steam plant and Earl Davie partnerships. Those may not record as sales, but as new LLCs. For its part, Alexandria says it will retain its 30% stake in the steam plant and Earl Davie buildings.

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The 1165 Eastlake building has been fully leased to Adaptive Biotechnologies, which moved from another nearby Alexandria building. That 2019 lease came before 1165 Eastlake was completed. Adaptive moved there in 2021, taking all 100,086 square feet. It presumably has a 10-year lease. Fred Hutch will now become the co-landlord, with a cap rate that Alexandria puts at 4.9%.

Alexandria further says that Fred Hutch extended its steam plant and Earl Davie leases for another 15 years; the new venture will collect rents from both.

Alexandria's Hart Cole said in a statement, “Alexandria has been at the forefront of cultivating a world-class life-science cluster in Seattle since entering the region in 1996 through our acquisition and leaseback of the original Fred Hutch campus, which marked the beginning of our longstanding strategic relationship with Fred Hutch.”

Proceeds for the sale will feed into Alexandria's development pipeline — which includes the very ambitious Mercer Blocks in SLU. There, 701 Dexter appears close to topping out. Three more life-sci buildings are planned, plus an apartment building to be developed with a partner.

Brokers for the 1165 Eastlake sale, if any, were not announced. It was worth about $1,498 per square foot. The building was designed by CollinsWoerman, and constructed by BNBuilders.

The Sloan Institute building was being designed by Perkins&Will, with Lease Crutcher Lewis attached as the builder. The parking lot will evidently be land-banked for possible future development.