Alexandria Sues NYC For $50M, Says It Delayed Kips Bay Tower

Life sciences real estate developer Alexandria Real Estate Equities has sued the New York City Economic Development Corp. in federal court over alleged delays that the company says cost it millions. ARE seeks $50M and a reformation of the ground lease for the project.

The case relates to a floodwall at the Alexandria Center for Life Sciences campus on New York’s East Side. 

In a statement, Alexandria Chairman Joel Marcus blamed EDC and NYC Health + Hospitals Corp., or H+H, the entity from which ARE leased land for its campus, for their “blatant failures, egregious misconduct, and commercially damaging actions.” 

The NYCEDC didn’t immediately respond to a request for comment.

The Alexandria Center in Manhattan, the subject of a new lawsuit the REIT has filed against the city.

ARE’s suit says it entered into a lease in 2006 to build a commercial life sciences campus in Manhattan, the Alexandria Center for Life Sciences, beginning with an east and west tower, with an option to build a north tower.

ARE claims that it was “fraudulently induced” into agreeing to cooperate on a flood protection system when it exercised an option in 2019 to build the third tower. ARE thought the infrastructure addition wouldn’t delay opening, and the city would reimburse it for any floodwall costs.  

H+H then told Alexandria that the flood system required “unilateral access” to the site to operate the flood barriers, as the Federal Emergency Management Agency didn’t like private control of flood systems. ARE argues this change ended up delaying construction with what ARE alleges was a case of constantly moving goalposts and “arbitrary and unilateral changes.” It is now “impossible to satisfy” the city’s demand for the floodwall.

This effort has cost ARE “tens of million of dollars in damages” in the form of redesign and lost profits. ARE alleges that the delay caused the firm to miss the life sciences bull market of 2021 and 2022, what Marcus calls the “rocketship years.” 

“We have invested over $1.5 billion in physical infrastructure and risk capital into dozens of startup and early stage commercial life sciences companies over the last 15 years,” Marcus said in a statement about the lawsuit. “Despite these efforts, the New York City Economic Development Corporation and New York City Health + Hospitals Corporation have fraudulently strung us along for years with false assurances, concealed essential facts as part of an insidious scheme to offload the costs of a critically needed and long-delayed Kips Bay flood wall, and intentionally blocked us from timely developing our commercial life science campus’ third tower.”

ARE also alleges that the EDC encouraged and induced other developers to build life sciences projects in New York City, which “has led to a material overbuilding of life science space in NYC.”

At other times, Marcus has derided NYC policies and highlighted its life sciences market’s problems. 

“In New York City, the life science market there remains, 14 years later, still a small, startup market,” Marcus said during a fourth-quarter earnings call in January.

During the Q1 call this spring, he brought up what he called the “incompetence of the state of New York and the city of New York” in funding new space when it should be funding startups.

This suit comes on the heels of the EDC’s announcement of $1.6B in funding for another Kips Bay development project, the 2M SF Science Park and Research Campus Kips Bay, which analysts have said is adding too much space to a lab real estate market that is roughly one-third vacant, has little lease activity and has 3M SF of regional lab projects in the pipeline.