By Jim Gray
Bayer CropScience’s recent decision to buy a building in West Sacramento, including plans to relocate about 140 employees from Davis to this facility, should be taken in context. This was a complicated decision that a large global corporation made after much deliberation.
Bayer and the Sacramento region have a reason to celebrate. Davis residents have no reason to find fault and should focus on landing (or growing) the next job creating opportunity!
Large employers like Bayer are the quality of firm that Davis should try to attract and keep. Proximity to world-class UC Davis; a highly educated work force; commitment to sustainability, greenbelts and bike paths; a vibrant downtown; and a great community in which to live, work and raise our kids are some of the attributes that Davis has in spades.
But let’s face facts: What Davis didn’t have (and West Sacramento did) was a large, vacant, bargain-basement facility that could be acquired at a fire-sale price. It wouldn’t be wise economic or public policy to have an oversupply of distressed empty buildings sitting vacant, hoping that a user would come along.
I offer my perspective on why Bayer chose the West Sacramento site and would like to offer some personal and professional insights as a commercial real estate broker serving the Davis market and Sacramento region.
Consider the opportunistic capital investment that Bayer was able to make on a relatively new, high-tech building with expansion space that was sitting vacant only 15 minutes from its current Davis operations. Bayer acquired a building for approximately $11 million, approximately $67 per square foot, in which the former occupant reportedly had invested more than $60 million, or $365 per square foot.
The building was vacant and available because a global company, Affymetrix, moved its operations to Singapore. In other words, Bayer got the existing building for 18 cents on the dollar. No way could a new building be built this cheaply!
Let’s not beat ourselves up and let’s not misdiagnose the reason that Bayer chose West Sacramento. Bayer’s decision does not reflect poorly on the community of Davis and its desirability to technology or agricultural firms. Before rushing to cause and effect such as “not enough big buildings,” “not enough zoned land,” the old and untrue stereotype that the city of Davis “planning and zoning requirements are too tough,” that there is a “lack of competiveness” or some other speculation, I would encourage Davis residents and civic leaders to acknowledge that Bayer made a screaming deal for pennies on the dollar.
I know first-hand that there were at least three very competitive teams with proven track records who tried to structure a transaction for Bayer in Davis or on campus. We also know that the leadership of the university, the Davis Chamber of Commerce and the city collaborated to assist the efforts that were being made.
Bayer CropScience is a huge global company. In 2009, my partner Nahz Anvary and I served as brokers for its vegetable seeds division Nunhems and relocated its scientists and business staff in a lease of approximately 8,500 square feet near UCD. We were fortunate to find them “vacant lab space” in an existing building that they then renovated to meet their needs.
From those very early meetings, it was apparent that Bayer CropScience wanted to keep its options open on how and where to grow near UCD. The scientists and employees of Nunhems and AgraQuest liked their facilities in Davis. Many of them were hoping that they could stay in Davis while at the same time realizing that they were bursting at the seams.
Consider that Bayer is a very large and diversified firm and in the first quarter of 2013, Bayer had revenue of 10,266 billion euros, or $13.613 billion. Bayer is a conglomerate with large business units in health care, crop science and material sciences. Bayer employs 111,600 people worldwide and the Bayer CropScience group employs 21,200 people.
Just last summer, we were negotiating with Bayer/Nunhems to grow and expand its operations in Davis. Proposals were worked on, budgets were developed, draft leases were prepared and then, surprisingly, all that work was put on hold just before the Fourth of July in 2012 because Bayer announced the acquisition of AgraQuest.
That AgraQuest acquisition precipitated new decisions and added further complexity to the process. Decisions related to work force as well as to integration, collaboration, expansion and growth were now added to the mix. Bayer’s plans and those driving its decision-making and review changed as well.
Local business unit leaders, real estate and facility professionals, management teams and executives from all over the world came in waves to Davis and the region to establish revised criteria and plans. As it turns out, there were both strategic as well as opportunistic considerations.
We should all be thankful that Bayer is investing and staying in the region. Furthermore, we should be thankful that we have strong and collaborative leadership within the city of Davis (including the mayor and members of the City Council, city management and community development staff), the Chamber of Commerce and at the university who are working hard to attract and retain high-quality firms.
There are clearly unintended consequences of the growth control measures that were designed to slow the community’s residential growth. We do need additional state-of-the-art buildings with competitive business infrastructure so we can compete effectively on the global stage. We need to continue to work collaboratively and competitively to attract and win our fair share of great jobs and world-class companies. Our planning policies can continually be enhanced so that we can react nimbly and positively to compete when good companies come along.
Those are matters for the community to work on and will make us even more competitive. But with regards to the Bayer decision, Bayer made a great buy and the region is a winner as a result.
We have to remember that Babe Ruth struck out 1,330 times but he also hit 714 home runs. Don’t worry about the occasional loss. Worry about the chances that you miss when you don’t even swing. Davis has much to be proud of and needs to continue evolving and pursuing great companies and jobs!
We can’t win them all. Let’s declare victory for the region and work together to get the next one in Davis.
— Jim Gray is a longtime Davis resident, a partner of Cassidy Turley Commercial Real Estate Services and a commercial real estate broker and developer for nearly 30 years.