Amgen Pharmaceuticals

Cambridge, MA 600,000 sqft https://www.amgen.com/

Services Provided: Asset Management Tenant Services Site Selection Services

Amgen Pharmaceuticals is a global company leading the way in several key areas of medicine: oncology, cardiovascular disease, nephrology, inflammatory disorders, bone health, and euroscience.

Overview

AMGEN hired IPG to lead a nine-month detailed real estate review in partnership with Lend Lease for AMGEN in three major life science markets: South San Francisco, Seattle, WA, and Cambridge, MA.

Each market had a specific set of unique challenges and independent business cases to consider.

IPG Services Provided:

Real Estate Review
Workplace of the Future Analysis
Redevelopment Estimation
Investment Sale Programs

Assignment & Process

As part of Amgen’s “Full Potential” initiative, Amgen instructed the IPG team to step back and look closely at Amgen’s real estate portfolio from a broad range of perspectives. We were to identify strengths, weaknesses, opportunities, risks, and put into action critical programs to drive operational efficiency and value.
The primary project goal was to identify viable options for maximizing the most efficient and profitable facility solutions for both short-and long-term needs of their Class A 600,000 square foot research facility at Kendall Square in Cambridge, MA.
They also wanted us to analyze a self-funding option to facilitate their improvements, versus executing a sale-leaseback and a new facility/campus.

The Challenges

Tired Finishes And Fixtures

Antiquated Building Systems

Floorplan Layout Efficiencies

Workforce planning and headcount forecasts are particularly relevant to long-term real estate strategy. Our preliminary studies projected a 900-employee capacity if Amgen’s ‘workplace of the future’ initiatives were implemented.

According to our observations, the positive factors AMGEN had to work with were:

Class A Design & Construction
Strongest Biotech Market in the World
Prime Location at Kendall Square
Many Buyers and Lessors for Disposition Options
Amgen’s Cost Basis Was Incredibly Low
Strong Corporate Image
Highly Efficient Floor-By-Floor Mechanical Systems

Negative factors that worked against Amgen in the effort to lower their costs:

Tired Finishes And Fixtures
Antiquated Building Systems
Floorplan Layout Efficiencies
10+ Year Constraints Relative To Amgen’s Expansion Needs (the Building Would Be Too Small In Ten Years)
Square Foot Discrepancy
Required Minimum Investment of $70M To Get Building To Class A Standard

It was clear that the 1 Kendall Square property represented the best opportunity for Amgen to either recapitalize their asset or implement a self-funded improvement program based on their business requirements.

The Success

The redevelopment program would cost $70m in capital investment, plus $10m in swing space expense

The Sale Lease-Back Scenario repatriates capital from real estate to product innovation and investment

Sale Lease-Back is the shortest path to implement Amgen’s facility goals and represents the highest net present value

Amgen’s baseline plans cap office growth at 900 employees
The redevelopment program would cost $70m in capital investment, plus $10m in swing
space expense
The Sale Lease-Back Scenario repatriates capital from real estate to product innovation and investment
Sale Lease-Back is the shortest path to implement Amgen’s facility goals and represents the highest net present value

Acquiring a new facility was the best opportunity to return capital and create a bespoke campus for Amgen if employee growth forecasts were to exceed 900 employees in five years. It also represents the lowest amount of business disruption, as it only required one move for staff.

In the end, AMGEN’s facility at the 1 Kendall square campus was best evaluated as the sum of its parts. As a single property, the building is likely too large for single-tenant use, and the excess land as zoned and entitled does not maximize its use.

A strategy that evaluates the highest and best use of the building and the land should return the most capital to Amgen.

Amgen went with the facility revitalization effort and maintained ownership of the highly valuable 1 Kendall Square facility.