The $213.3M acquisition of a Durham, N.C., agtech campus could be a sign of things to come
By Murray W. Wolf
Oak Street Real Estate Capital acquired the 50-acre Syngenta research campus in Durham, N.C., for $213.3 million. (Photo courtesy of CoStar)
DURHAM, N.C. – Although life sciences real estate (LSRE) has grown more mainstream in recent years, it is still viewed by many investors as an “alternative” asset class. Now, with investor demand for LSRE far exceeding supply, some buyers appear willing to consider alternatives within the alternative – looking beyond both the core office/lab product type and the three largest clusters.
An example of this broader perspective can be found in the Research Triangle Park (RTP) area of North Carolina, where the real estate unit of a large publicly traded alternative asset management firm recently acquired a crop research lab and a massive greenhouse operated by the world’s third largest agricultural seed company.
According to RevistaLab data, Chicago-based private equity firm Oak Street Real Estate Capital LLC acquired the two-building, 336,189 square foot Syngenta RTP Innovation Center and Advanced Crop Lab at 9 Davis Drive in Durham, N.C., for $213.3 million. The single tenant and seller was Basel, Switzerland-based Syngenta AG and the transaction closed Nov. 21.
To be sure, investors including Alexandria Real Estate Equities Inc. (NYSE: ARE) have for years acquired real estate used by agricultural technology tenants, such as crop protection and seed companies, especially in the Research Triangle area. But it remains unusual to hear about the third-party acquisition of agtech facilities, especially by more recent LSRE market entrants such as private equity (PE) fueled investment firms.
The very nature of agtech – with its focus on applying technology to increase the yield, efficiency and profitability of agriculture, horticulture and aquaculture – often makes it more practical to locate in more bucolic settings. That way, facilities can be closer to ag-oriented universities supplying research, training, startups and labor, and farmland for test plots. Those kinds of facilities and locations aren’t necessarily a good fit with the urban mindsets and investment strategies of some potential buyers.
However, the Syngenta campus evidently was a good fit for Oak Street Real Estate Capital.
According to its website, Oak Street is a diversified real estate PE firm whose core strategy is to focus on acquiring both core-plus and value-add single-tenant net-leased (STNL) assets in the industrial, “essential retail” and office sectors, long-term leased to investment grade and creditworthy tenants. Oak Street, which says it owns more than 1,365 properties and has $18.6 billion in assets under management (AUM), was acquired on Dec. 29, 2021, by New York-based alternative asset manager Blue Owl Capital Inc. (NYSE: OWL).
Syngenta, which was acquired in 2017 by Beijing-based China National Chemical Corporation (ChemChina), a Chinese state-owned chemical company, is a provider of agricultural science and technology, primarily seeds and pesticides.
According to RevistaLab data, Oak Street paid about $130 million, or $634 per square foot (PSF), for the “Class A,” 204,927 square foot Syngenta RTP Innovation Center, and about $83.3 million, or $634 PSF for the 131,262 square foot Syngenta Advanced Crop Lab, a greenhouse that is “one acre under glass.”
Syngenta’s 50-acre RTP campus is the firm’s global research and development center for Syngenta Seeds. According to the Syngenta website, “At the Advanced Crop Lab, the first facility of its kind, scientists simulate various growing environments to aid in the discovery and development of biotech seed technologies.”
The “state-of-the-art” greenhouse enables the firm to test its products in “over 40 available growth environments for precise conditions,” with “lighting capable of mimicking the total spectrum of natural light. “ It also features “a liquid fertigation system to precisely feed and water the plants,” and “around-the-clock monitoring with built-in metrics and reporting.”
Aside from Boston/Cambridge, Mass.; the San Francisco Bay Area; and Greater San Diego, the Research Triangle area is generally ranked among the top life sciences clusters. Alexandria refers to it on its website as “the country’s most important, dense, and diverse agtech and biomanufacturing cluster.”
Even so, the acquisition of a North Carolina building and greenhouse that facilitate research for corn, soybean, wheat, vegetable and sunflower seed production seems like a far cry from the trophy office/lab towers that dominate the three largest life sciences clusters, it clearly saw an opportunity.
As for Syngenta, the benefits are more obvious. The monetization frees up more than $200 million in capital that can be redeployed in other ways to support its long-term growth, according to a company spokesman quoted in article in the local Triangle Business Journal. Syngenta said the sale-leaseback will not affect the company’s operations at the campus or any of its other North American facilities.
Syngenta’s innovation center in Durham opened in 2017, enabling the firm to consolidate three separate facilities at other locations in the area. More recently, in April, the firm broke ground for an $18 million, 13,000 square foot expansion – an “insectary” devoted to the study of pests that can harm agricultural production – which is scheduled to be completed by May 2023.
According to Syngenta, the firm has 53,000 employees in more than 100 countries. North America is home to more than 4,000 Syngenta employees at 30 research and development (R&D) sites and 30 production and supply sites. Syngenta has more than 1,100 employees in North Carolina, including 400 in RTP and 700 at its U.S. headquarters in Greensboro.
Syngenta’s largest competitors are St. Louis-based Monsanto, which is a unit of the pharma and biotech giant Bayer AG, based in Leverkusen, Germany; Corteva Inc. (NYSE: CTVA), DowDuPont’s former agchem and seed unit, which was spun off in 2019; and BASF SE (OTC MKTS: BASFY) of Ludwigshafen, Germany, the world’s largest chemical producer.
Will the LSRE space be seeing more deals like the Syngenta campus acquisition? We can’t predict that. But market fundamentals and current economic conditions seem to favor such a scenario.
According to a report from Ottawa, Canada-based Precedence Research, the size of the global agtech market is projected to increase to $43.37 billion in 2030 from $19.9 billion this year, for a compound annual growth rate (CAGR) of 10.2 percent.
Also, aside to the usual funding and assistance from the National Institutes of Health (NIH) and the U.S. Department of Agriculture (USDA), the agtech industry also stands to benefit from President Biden’s Sept. 12 Executive Order (EO) establishing a National Biotechnology and Biomanufacturing Initiative with an anticipated budget of $2 billion. EO 14081 also proritizes agtech, requiring the USDA, “in consultation with other appropriate agencies,” to produce a report within 180 days, assessing “how to use biotechnology and biomanufacturing for food and agriculture innovation, including by improving sustainability and land conservation; increasing food quality and nutrition; increasing and protecting agricultural yields; protecting against plant and animal pests and diseases; and cultivating alternative food sources.”
This is also a time when economic uncertainty and financial pressures might encourage some agtech firms to welcome the capital liquidity a sale-leaseback could provide.
For more information on Oak Street Real Estate Capital, please click here.
For more information on Syngenta’s RTP campus, please click here.
For a copy of Executive Order 14081, please click here.
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