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Kite Pharma Buying $135M Building in Santa Monica

Sale is the Highest Price for an R&D Building in LA County
January 18, 2018
Cancer-research powerhouse Kite Pharma, Inc. is buying a Santa Monica, CA research and development building for approximately $135 million, which will be the highest price ever paid for such a building in Los Angeles County.

The Santa Monica-based company, a subsidiary of Foster City’s Gilead Sciences, Inc., is under contract to buy the 160,000-square-foot flex building at 1800 Stewart St. from Agensys, Inc., a biotechnology and cancer-research company owned by Tokyo’s Astellas Pharma, Inc., according to sources knowledgeable of the deal.

The $135 million price would amount to about $844 a square foot. On both a per-square-foot as well as a total value basis, it is the highest price ever paid for a flex research and development building in Los Angeles, according to CoStar data.

What’s more, the deal is likely to include a leasehold agreement. The City of Santa Monica owns the land under the property. Agensys’ lease runs for an additional 15 years, with an option to extend until 2042 at a rental cost of $972,000 a year to the building owner. It’s unclear whether this is being renegotiated as part of the sale.

Some brokers say the sale price could have been even higher had the ground lease not been in place.

Agensys redeveloped the building, located near Bergamot Station, in 2011 to accommodate its growing workforce and research and development, manufacturing and laboratory units. Last year, its parent company, Astellas, announced it would be moving away from the type of research Agensys did, and would be shuttering the firm, laying off its 220 employees and selling its property.

The Stewart Street building was listed with Holliday Fenoglio Fowler LLP’s Andrew Harper and Nick Psyllos, who did not return calls for comment. Agensys did not return calls, and Gilead declined a request for comment.

Kite Pharma is already headquartered in Santa Monica in approximately 180,000 square feet at Colorado Center, a 1.1 million-square-foot office center at 2525 Colorado Ave. owned by Boston Properties, Inc. and TIAA-CREF Investment Management LLC. Kite Pharma also occupies a handful of smaller sites in Santa Monica as well as nearly 104,000 square feet in El Segundo, on Utah Avenue. It has additional locations in Europe.

Gilead bought the cancer research company for $11.9 billion in August 2017. Kite Pharma has had successful trials for a cancer-fighting therapy known as CAR-T that teaches the body’s natural immune cells to fight malignant cancer cells. That success has made it one of the most talked about biotech companies in the country.

Given that Amgen, one of the largest biotech companies in the world, is headquartered in Thousand Oaks and three top universities with strong life sciences departments are within Los Angeles County, it’s been surprising to many observers that Los Angeles hasn’t developed a larger hub of biotechnology companies, the way San Diego or Cambridge, Mass. have.

The question now is whether Kite Pharma’s continued growth in Santa Monica has the potential to draw other biotech companies to the area. There are several biotech companies already located in Santa Monica as well as many real estate locations that could provide for the company's needs. For instance, a site not far away at 2105 Colorado is under renovation that would lend itself to a research and development center.

Greg Bisconti, executive director of the Life Science Practice Group at Cushman & Wakefield in San Diego, said that Los Angeles has struggled to create a biotech hub in part because of the city's sprawl. But he sees the potential for a company like Kite Pharma to change that, and spin off new companies and attract others nearby in Santa Monica the way growing biotech companies have done in San Diego.

"There is a lot of excitement about what is the next economic demand driver in Los Angeles, and one answer is science and research and development in biotech," he said. "Now that Kite Pharma is growing full-speed and buying and expanding in Santa Monica, it could be the next growth driver."

Jacquelyn Ryan, Los Angeles Market Reporter  CoStar Group   
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