AstraZeneca sells Fairfax campus to Delle Donne for $50 million

AstraZeneca sold its U.S. headquarters in Fairfax to Delle Donne & Associates in a deal valued at $50 million, but company officials insist the pharmaceutical giant is not going anywhere.

On the same day it closed on the sale, the pharmaceutical giant signed a long-term lease agreement for two buildings on the 80-acre campus it has occupied for nearly two decades.

"AstraZeneca remains committed to the state of Delaware," spokeswoman Alexandra Engel said. "Selling the site and leasing back a smaller footprint will allow us to more efficiently use our office space while lowering ongoing operational costs."

The drug maker, which recorded $23 billion in revenue last year, declined to disclose terms of the lease it signed with Delle Donne, the development company owned by the family of WNBA star Elena Delle Donne.

Ernie Delle Donne, president and chief executive officer of the Stanton-based company, said AstraZeneca signed on for enough years to make him "extremely comfortable."

"Having AstraZeneca remain in place was extremely important to our future plans for the property," he said. "Them, along with JPMorgan, Nemours and DuPont's Experimental Station all being nearby will be a major selling point as we begin to market the site to future tenants." 

The sale and leaseback contract was finalized on June 30, but only became public this week. The deal completes a plan AstraZenca first revealed last summer when it put the property on the market.

AstraZeneca sold the 80-acre campus of its U.S. headquarters in Fairfax last week. "It's definitely a fair price," said John Kaczowka, senior vice president at the brokerage firm CBRE. "It's a great location that's just outside the city and accessible from two major roadways. I think [Delle Donne] will be very successful with that property."

The drugmaker says it now plans to consolidate its operations into the two office buildings closest to Concord Pike (U.S. 202), known as the Alapocas and Brandywine buildings. AstraZeneca said it will spend an undisclosed sum to renovate those structures, which collectively total about 380,000 square feet.

Once that move is complete sometime around late 2018, Delle Donne will invest another $50 million to renovate the other two buildings on the site, known as FOC and FOP. Those buildings collectively total about 500,000 square feet of office space.

The campus is approved for another 900,000 square feet of development, and Delle Donne said his company is weighing the best use for that land.

"We're contemplating a mixed use that could involve housing, retail, office space and possibly even a hotel," he said.

Delle Donne & Associates is developing a similar mixed-use project on 16 acres of the University's of Delaware's Science, Technology and Advanced Research Campus off South College Avenue in Newark – the former site of a Chrysler Assembly plant.

The developer said he sees the AstraZeneca site as the second piece of major redevelopment projects in opposite ends of New Castle County. Delle Donne & Associates also paid $55 million to purchase the 450,000-square-foot Christiana Executive Campus near the Christiana Mall in late 2016.

"A location with this kind of geography, physical plant and incredible infrastructure doesn't come around very often, at least not in my lifetime," he said of the AstraZeneca site. "This is really something special."

AstraZeneca built its North American headquarters in Delaware in the late 1990s after state leaders, led by then-Gov. Tom Carper, lured the company with what remains one of the largest incentive package in the state's history.

The state ponied up a $41 million package of grants and tax credits, along with $70 million in road improvements near the campus, in exchange for AstraZeneca's pledge to increase its workforce at the site from 2,400 to 4,000 by 2004.

The pharmaceutical company met that obligation and more, reaching an employment peak of 5,000 workers in 2005, only to have patent losses and a global recession lead to a major restructuring that has gradually reduced the company's local workforce ever since.

Following a round of layoffs last December, AstraZeneca now has about 1,500 workers in Delaware spread across its headquarters campus and a packaging facility near Newark.

"Ultimately, that deal made a whole lot of sense," Carper said Thursday. "Do I wish they still had 4,500 employees? You bet. But I'm glad they still have 1,500. Not a lot of employers in Delaware have that many."

As AstraZeneca's headcount has shrunk so has its need for office space.

AstraZeneca has demolished several buildings on the campus in an effort to reduce its Delaware footprint, including 450,000 square feet of research space — accounting for 35 percent of the property's total square footage. That move came after the drugmaker phased out its entire Delaware-based research development, cutting 500 jobs in Fairfax and 600 more throughout the United States.

In 2013, the pharmaceutical giant also sold the 15-story Rollins Building in Fairfax to a company affiliated with the owner of Applied Bank for $10.5 million. Less than a year later, AstraZeneca sold two buildings totaling 357,000 square feet on its south campus to JPMorgan Chase for a reported $44 million.

AstraZeneca is only the latest in a string of major companies that have consolidated space in Delaware over the last year.

Capital One announced in April that it plans to move all 2,200 of its Delaware employees into two adjacent office buildings in downtown Wilmington. Bank of America said in February that it plans to move all of its 1,200 Wilmington employees to a single building in its three-structure downtown Wilmington complex.

Kaczowka said those moves likely have as much to do with office design, as efforts to save money.

"Gone are the days of large private offices," he said. "Companies today are trimming the size of their work stations and creating tighter, collaborative environments. That means they need less space for their employees."

Engel, the AstraZeneca spokeswoman, said the new design for the company's office space in Fairfax will offer room specially designed to support "concentrated individual work, one-on-one meetings, private phone calls, socialization and formal meetings and presentations," giving employees "freedom to exercise personal preference over which space they want to work."

"This strategy has proven within the AstraZeneca community to foster more vibrant and collaborative working environments for its employees," she said.

While AstraZeneca has vowed to remain in Delaware for the foreseeable future, some see the company's gradual move to sell off its real estate holdings as a troubling sign.

"To me, it says impermanence," said Lawrence Hammermesh, a professor of corporate law at Widener University's Delaware Law School.

"Maybe they just don't want to be in the business of owning real estate and would rather hand that over to someone with a specific expertise in that area," he said. "But I can't help think that it's a lot easier to pack up and leave when you rent than when you have to sell a building."

State Sen. Greg Lavelle, R, Sharpley, represents the district where AstraZeneca is based. He said he sees the deal as an opportunity for Delaware.

"AstraZeneca by their own account is going through a transitionary period, and I'm hopeful they will be able to execute their vision," he said. "But you can't wring your hands forever. This deal opens the property back up to multiple, good-paying employers, and I'm optimistic we're going to get good results."