San Francisco Chronicle Mar 1, 1999 page B7
By Tom Abate
If Mission Bay is reborn as a biotech mecca, business schools one day will write case studies about how this mammoth deal came about.
It all began with two parties with one thing in common - frustration.
For two decades, the University of California at San Francisco had looked for room to expand.
For two decades, Catellus Development Corp. had tried to win city approval to develop its 303-acre property at Mission Bay.
San Francisco had one answer for both: no.
It was not until late 1994, when Catellus got a new chief executive Nelson Rising, that the university in need of land and the developer in need of tenants decided to join forces.
"On his very first day on the job, Nelson Rising came to meet with me," said Bruce Spaulding, the UCSF vice chancellor in charge of land deals. "He brought a fresh attitude to the whole deal."
Soon after that meeting, two other players vital to the deal fell into line when San Francisco's business and political leaders found their own deal-making motivations - fear and envy.
In the mid 1990s, as the University of California at San Francisco despaired of expanding in the city, it considered moves to Brisbane and Alameda. The prospect of losing part of USCF wounded the civic pride of leading San Francisco citizens.
"Here we had this world-famous research university, an asset other cities would die for, and it was talking about expanding outside San Francisco," said investment banker Sandy Robertson.
Robertson, Chiron Corp. Chairman Bill Rutter (a UCSF alumnus) and Gap Chairman Don Fisher were among the business leaders who in 1996 formed BALSA - the Bay Area Life Sciences Alliance - which played a key role in pulling off UCSF's move to Mission Bay.
The election of Mayor Willie Brown put the last player in position.
"Willie Brown got the fact that biotech meant high-paying jobs," Robertson said.
Before Brown, San Francisco had stood by while South San Francisco and Emeryville wooed biotech startups like Genentech and Chiron - both founded on UCSF research - because the city never created an industrial zone where big-startups could feel at home.
"We've had 48 biotech spin-offs from our research," said UCSF Vice Chancellor Zach Hall. "Not one of them is located in San Francisco."
Once all the players were in alignment, UCSF, Catellus, BALSA and City Hall worked out a complicated deal over the past three years.
Catellus agreed to give UCSF 30 acres of Mission Bay land worth some $70 million. The city kicked in 13 acres to present UCSF with a free 43-acre campus.
In return, UCSF pledged to quit flirting with other towns and transplant part of its research brain to Mission Bay.
San Francisco officials agreed to let Catellus surround UCSF's Mission Bay campus with a U-shaped zone of 5 million square feet of R&D, office and manufacturing space. Catellus is betting that biotech and pharmaceutical firms will pay top rents to bask in UCSF's research glow.
Catellus' Rising laughed when asked whether the prospect of higher rents in the commercial zone would recoup its $70 million land gift.
"I wish, after 27 years in the real estate business, I could quantify things that way," he said. "It was simply intuitive that locating a major biotech campus on our property would increase the surrounding uses.
He pointed out that as part of the quid pro quo, Catellus also won city approval for its plans to build 6,000 residential units and some retail space on the northern part of Mission Bay.
Spaulding, UCSF's lead negotiator, explained how BALSA's business leaders played a subtle but essential role in the process.
The details of Catellus' land gift to UCSF are spelled out in a legal document two inches thick. BALSA board member T. Robert Burke - chairman of San Francisco's AMB Property Corp. and an expert real estate lawyer - advised UCSF throughout those torturous negotiations.
BALSA now is gearing up for a more hands-on role in developing UCSF's new campus. It has hired two veteran San Francisco project managers, Cliff Graves and Tom Swift, to oversee the design and supervise the construction of the next two buildings on UCSF's drawing board.
Spaulding explained that UCSF only has state funding for the first building at Mission Bay. BALSA board members, notably Chiron's Rutter, have agreed to prepay about $15 million of future development costs on the assumption - but without any guarantee - that the university eventually will get state funding and repay the nonprofit group.