Sunday, May 26, 2024

Small companies are key to RTP’s continued success

Photo of Larry Pickett Jr. by Christer Berg

By Dan Barkin

Larry Pickett Jr., CEO of RxDataScience Inc., had a problem common to startups: running out of space. His company, which crunches data for health care providers, employed three workers on the third floor of the 800 Building at the Frontier campus, a cluster of ’80s-era buildings in Research Triangle Park first used by IBM but now converted into an entrepreneurial coworking hub.

He needed space for 10 more staffers, but the 800 was leased up. Pickett was going to have to move after just three months, which he hated because he liked the Frontier’s funky vibe.

“I was panicking,” he recalls. He went to Frontier’s management, which pitched an idea: On the first floor was a 700-square-foot storage room.

“And I said, ‘Well, I don’t know if that’s going to be enough.’ And they said, ‘Well, let’s just knock out the wall and go out a little bit farther then.’

“I said, ‘We’ll take it.’”

The response impressed Pickett, who calls the Frontier staff “creative and client-oriented.” But it was not so surprising.

[/media-credit] Research Triangle Park was built on bigness: It’s the largest U.S. suburban research park by acreage, and multinationals dominate its employment base. But in recent years, park officials have added coworking space to attract startups and small businesses.

RTP was founded 60 years ago in the woods and farms of Durham and Wake counties. Its 7,000 acres made it the nation’s largest suburban research park. Now, it has staked its future on startups such as Pickett’s, following a decade of groundwork for a transformation to keep RTP competitive as a technology and life-sciences mecca. For all of its historic success, RTP is challenged by densely populated center cities, which are favored by many tech workers.

“There are about 280 companies total in RTP,” says Scott Levitan, CEO of park manager Research Triangle Foundation. “One hundred of them are located at the Frontier now. That’s pretty cool.”

After years of delay, Levitan’s foundation has taken the first steps to create a downtown for RTP. An upscale retail, office and residential hub is planned at Park Center off Interstate 40, with construction expected to start this summer on a grocery store and restaurants. Over the next decade, officials envision 1 million square feet of new offices, hundreds of luxury apartments and a couple of hotels.

The Frontier occupies the western half of Park Center’s 100 acres, while the new development is planned on the east side. The new downtown will be easily visible from I-40, Levitan says.

Private developers are driving some of the park’s transformation: California-based Alexandria Real Estate Equities has turned a million square feet of space — including buildings vacated by plant-science giant Syngenta when it moved to a new RTP campus — into homes for emerging agricultural technology companies. Keith Corp., a Charlotte developer, bought 105 acres for speculative development on land once occupied by Chemstrand Corp., the maker of AstroTurf and the park’s first corporate employer.

Then there’s California developer Karlin Real Estate, whose Parmer RTP subsidiary bought GlaxoSmithKline’s massive campus in 2017 after the pharmaceutical giant consolidated its research and development to Philadelphia. The drug giant now leases several nearby buildings for its smaller footprint here.

Parmer is turning the former Glaxo domain into an amenity-laden campus for companies it wants to lure to RTP’s north end. Plans call for a conference center, food-truck pavilion, putting greens and more.

Parmer executive Bart Olds tore out the barrier gates at the entrances to Glaxo on his first day as the landlord overseeing 650 acres. “At GSK, they’re like ‘What?’ And guess what? Nothing bad happened,” Olds says.

[media-credit name=”Ralph Voltz” align=”alignleft” width=”400″]RTP map[/media-credit]

Those gates were an integral part of RTP, one of the most successful economic-development projects in U.S. history, which today has a workforce of 40,000 to 50,000 inside the park and tens of thousands more in nearby office complexes. Some of the most iconic companies in technology and science have planted their flags there. Nobel Prize winners have worked in its labs.

But RTP was never a place to visit, unless you were an employee or had business dealings. A favorite saying of Bob Geolas, Levitan’s predecessor as foundation CEO, was that in 7,000 acres, you couldn’t buy a cup of coffee.

Turning the ship hasn’t been easy: It’s been more than six years since Geolas, with much fanfare, unveiled a master plan to revitalize the park. RTP is still waiting for the grocery store to get underway, while Geolas left in 2016.

The park’s historic success makes it easy to overlook that in its earliest days, not much happened, either. The Research Triangle Institute consortium (now called RTI International) formed in 1958 and a few companies followed. But it wasn’t until 1965 that the National Institute of Environmental Health Sciences announced it was coming. IBM followed, and those two announcements gave the RTP project credibility. Still, in the 1960s, just 20 companies and research organizations arrived. By the 1980s, the pace picked up substantially, with the park adding nearly 120 more tenants.

For all of its acclaim, the site that stretches 8 miles north to south and is 2 miles wide and crisscrossed by major highways remains easy to miss. Buildings can’t be higher than 120 feet, and lots of trees and wide setbacks make for a low profile.

Randy Woodson, N.C. State University’s chancellor and an RTP foundation board member, recalls visiting the park in the late 1980s when he was a plant-science professor at Purdue University.

“I always found it kind of strange,” he says. “You land at the airport, and you drive out there, and you just go through the woods and suddenly, there’s a company. There’s nothing urban about it.”

That’s a problem because technology and life-sciences companies are increasingly drawn to urban markets, where they believe younger generations of employees want to work and live.

But it was more than that. The internet revolution that spawned so many of the park’s companies — such as networking giant Cisco Systems Inc., with 5,000 employees — also was chipping away at RTP’s ace asset, namely its proximity to Duke, N.C. State and UNC Chapel Hill, the trio of universities that gave RTP its name. With the ability to communicate with scientists through video conferencing and email, “you don’t really have to walk down the hall to absorb this knowledge,” says Albert Link, a UNC Greensboro professor and the author of a two-volume history of RTP.

In addition to increased competition, the park was nearing the end of its core mission of selling real estate because most of the land had been sold. Woodson joined the board after he became N.C. State chancellor in 2010. “It was clear from the beginning … that the board was starting to push the organization and the leadership to think differently about how to continue to develop the park.”

In 2010, the board commissioned a master plan, and it brought Geolas back to the Triangle. Geolas had run Clemson University’s International Center for Automotive Research in Greenville, S.C., for eight years, following nine years at N.C. State’s Centennial Campus.

The plan unveiled in 2012 envisioned a “Triangle Commons” mixed-use development in the northern end of the park with hotels, retail, residential and conference facilities.

Then everything changed after Geolas learned that the Radisson hotel in the centrally located Park Center area was for sale. The aging facility had been a key obstacle to changes favored by foundation board members.

The foundation acquired the 100 acres for $17 million, a significant investment for an organization that had $78 million in net assets at the time, according to tax filings. In February 2014, Geolas unveiled the Park Center plan and, a year later, announced that he had secured a pledge of $30 million from Durham County and park tenants for infrastructure and open-space development. The east side of the property would be developed first. On the west side, old buildings vacated by IBM after it sold its PC operations to China-based Lenovo would be demolished to make room for new development.

[media-credit name=”Business North Carolina” align=”alignright” width=”400″]RTP[/media-credit]

Then, plans changed again.

After the foundation bought the Park Center land, Geolas took a walk with his wife through one of the old IBM buildings. “I said, ‘You know, this isn’t a bad building. I don’t know why we want to tear it down.’ And she said, ‘Well, you shouldn’t.’

“And I said, ‘Let’s create an environment here. Let’s create a test lab.’”

Dubbed the Frontier, it offered free space on the ground floor of the 800 Building where anyone could come and open up their laptops, and affordable offices for startups on the floors above. It would be a good way to market RTP to both seasoned entrepreneurs who could make rent and startups with more dreams than money. Conference rooms, whiteboards and free Wi-Fi made it appealing to both groups.

The idea took off, largely because the Army Research Office became the 800 Building anchor tenant. That made it financially possible to create the free coworking space and fix up the rest of the building for paying tenants, says Liz Rooks, a longtime foundation executive who retired in 2015. The result is a mix of busily interacting entrepreneurs on the first floor and off-limit military-research offices on the restricted-access top floor. “Unless you have the magic pass, you can’t get up there,” she says.

The success of the 800 Building encouraged the foundation to renovate other empty buildings at the Frontier. The 600 Building, connected by an elevated walkway to the 800, has new tenants on the ground floor, such as the Council for Entrepreneurial Development. CED, a fixture in the Triangle’s entrepreneurial community since 1984, was an early tenant of startup hub American Underground in downtown Durham but liked RTP’s central location. The 400, which opened in May, offers labs for life-sciences startups while renovations at an adjacent building are underway.

One of the startups is Ricky Spero’s company, Redbud Labs, which moved with its 13 employees from a shared space on the UNC Chapel Hill campus. “We wanted the community you get from an urban environment with the convenience and value of RTP. The Frontier is becoming the best of both worlds,” says Spero, who has a Ph.D. in biophysics and co-founded his microchip-technology business with two UNC professors in 2010.

And all of it was supposed to be a large vacant lot by now, awaiting new construction some time in the 2020s.

Meanwhile, though Geolas isn’t in charge as the park transforms — he resigned in 2016 to head the Raleigh office of HR&A Advisors, a New York-based real-estate and economic-development firm — he hints at some of the challenges. “Boards are complicated, and a big board like [the Research Triangle Foundation] is complicated,” he says.

Uncertainty triggered by Geolas’ departure was compounded in the summer of 2017 when the foundation ended its deal with Houston-based real-estate firm Hines, which had been master developer of the revitalization plan.

Levitan, who was hired as Geolas’ successor in August 2017, made it clear that Park Center was still the foundation’s top priority. He previously oversaw development of a $1.5 billion multiuse project adjacent to Johns Hopkins University in Baltimore and was executive director of real-estate development for Georgia Institute of Technology in Atlanta.

Last October, Willard Retail, a Chevy Chase, Md.-based commercial real-estate development firm, bought 12 acres and pledged to build the retail phase. It is a modest start, but after nearly a decade of talk, construction might finally start by the middle of this year on the grocery store and restaurants, with small shops and a health club down the road.

“It seems like it’s taken a while,” says foundation Chairman Smedes York, a former Raleigh mayor and veteran developer, “and it has. But when it’s done, we want it to be done successfully and right.”

By the end of 2021, Levitan says about 450 apartments will be built, though no developer has signed on. It would mark the first housing in RTP. At completion, sometime in the 2020s depending on market conditions, the east side of Park Center will hold a million square feet of offices, one or two hotels and maybe 1,000 apartments.

To be sure, the foundation remains on the prowl for larger companies that could raise its national profile. The master plan would allow for denser development that could theoretically permit tens of thousands more employees. And there are still a few undeveloped tracts, including hundreds of acres at the very south end of RTP that Apple was reportedly looking at before it announced plans to expand to Austin, Texas.

Just before Christmas, a mysterious company called Acute Investments LLC acquired that land in several transactions with the foundation and Fidelity Charitable Gift Fund. The investment giant had bought the land before deciding to renovate older buildings that formerly housed Nortel Networks Corp. Parker Poe lobbyist Bruce Thompson, whose firm has represented Apple and whose name was listed on Acute’s real-estate filing, has not commented publicly on the transaction.

In any case, officials are intent on giving RTP a higher profile — literally. The approved height for Park Center is now 300 feet, which Levitan says is suitable for a 20-story office building or hotel. Terms tossed around over the years have included “Sydney Opera House” and “Epcot Center.” Not exactly, but you get the point.

“So these buildings will be landmarks, flying into RDU, driving on 40 [or the Durham Freeway],” Levitan says. A model is the Iqvia building, one of the most visible structures along I-40 with a height topping 150 feet. “That makes a pretty prominent statement on 40. So we could be a hundred feet taller than that.”

What about the Frontier, which went from wrecking-ball candidate to hot startup space on the west side’s 50 acres? It’ll probably be there for a while. Improvements to the Frontier buildings are being made with a 10- to 15-year horizon before the foundation needs to expand the site and its street network, Levitan says.

Which means that RxDataScience has room to grow, though probably in another building if plans to double its headcount annually come true.

It might be next door in the 600 Building, connected by the elevated walkway to the 800, where RxDataScience now has its converted storage-room office.

“We used to use that bridge as open space. We would go grab a couple of chairs,” says Pickett, the CEO, “and pull (them) onto the bridge, and we would have conversations with customers right there.

“We call that the bridge to the future.”

[media-credit name=”Business North Carolina” align=”alignleft” width=”800″]RTP timeline[/media-credit]

[media-credit name=”Business North Carolina” align=”alignleft” width=”800″]RTP timeline 2[/media-credit]

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