Site Expansion: Adaptive Reuse of Facilities

Biopharm companies can save up to one year in start-up time by converting semiconductor factories to their use.
May 01, 2005
Volume 18, Issue 5

Facilities that make semiconductors and biopharmaceuticals have a lot in common. Both need high ceilings, pure water, cleanrooms, reliable electrical systems, and to be attractive to skilled workers. The semiconductor industry has hit hard times and as a result, is closing facilities in the US and opening them in Asia. Just in Oregon alone, SUMCO, DuPont Photomask, and Komastu closed manufacturing facilities. The spectacular cleanroom manufacturing facilities left behind can be purchased at bargain prices. The American biotech industry is on an upswing and finds converting these buildings an attractive option.

Some of the facilities remain in the semiconductor industry because of the valuable manufacturing equipment. Examples include Fujitsu's wafer fabrication (fab) plant in Gresham, OR, acquired by Microchip in 2002, and Philips' fab in San Antonio, TX, acquired by Maxim in 2003. For biopharm buyers, the shell has value because these facilities already contain required infrastructure, including cleanrooms and power. Companies can save six to twelve months in start-up time.

Recycling state-of-the-art technology buildings is a trend called adaptive reuse. Used facilities can be purchased at a fraction of the original cost. It is a buyer's market made to order for growth industries such as biopharmaceutical, health care, biotech, photovoltaic, and nanotechnology, which need to ramp production quickly and cost-effectively. Sellers will increasingly employ creative adaptive reuse strategies. Even the largest companies will evaluate existing facilities to save time and money.

Conversion of facilities from one use to another is a positive trend that keeps good paying jobs in local communities. Because of the commonality, a conversion really makes sense. Here are three examples of completed conversions and one waiting in readiness.

Springfield, Oregon - In 2004, PeaceHealth purchased Sony's former optical disk manufacturing facility in Springfield, OR for $16 million. PeaceHealth is converting the 327,000-ft2 facility into a laboratory and support area for hospitals and clinics in Oregon, Washington, and southeastern Alaska. Jim Werfelmann, director of property planning and development for PeaceHealth, said, "It would cost about three times more to build similar space, and the option to purchase, rather than build, rapidly accelerates our master plan development."

Temple, Texas - Local governments are eager to participate in economic development. In March 2002, the City of Temple, TX bought a 500,000-ft2 building with 503 acres of land from Texas Instruments for $4.35 million. The state and city reorganized this facility as Temple's Life Science, Research & Technology Campus. Texas wants to facilitate advances in biotechnology, nanotechnology, medical, and agri-bioscience research, medical device manufacturing, and education.

Then in December 2004 there was a land partition. Scott & White Memorial Hospital bought the building and 200 acres for $2.5 million from the Temple Health and Bioscience Economic Development District. The City of Temple retained approximately 300 acres at the site for other biotechnology industry development, and retained the right to lease back 200,000 to 220,000 ft2 of the building from Scott & White to develop for other research partners. After five years, Scott & White may choose to use the space for its growing needs.

Durham, North Carolina - In August 2003, KBI BioPharma, Inc. acquired Mitsubishi's former semiconductor campus in Durham, NC for $15.5 million. Mitsubishi originally spent $270 million building and equipping the campus of 34 acres in the early 1990s. The attraction of the 340,000-ft2 building was 52,000 ft2 of cleanrooms and systems for producing highly filtered water and air. KBI plans to invest about $65 million in the next five years to become fully operational. As comparison, a new facility was built in Research Triangle Park for Biogen, cost $173 million, and took three years to build. Generally, new biomanufacturing space can cost $1,200 to $1,400 per ft2 to construct, but by adapting the Mitsubishi facility, KBI reportedly spent just $600 to $700 per ft2.

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