In a major turnabout, Exact Sciences Corp. is withdrawing from the massive Judge Doyle Square project south of Capitol Square and now intends to expand at the University Research Park on the West Side, company officials announced Monday.
JDS Development, which had been spearheading the $200 million Judge Doyle Square project with Exact Sciences as an anchor tenant, may also be out of the project as the city revisits other suitors for the blocks that now hold the Madison Municipal Building and the Government East parking garage, city officials said.
Mayor Paul Soglin, Exact CEO Kevin Conroy and University Research Park managing director Aaron Olver revealed the changes at a news conference Monday afternoon, nearly a month after a federal review caused the company’s stock to plummet and sparked doubts about the viability of the project. JDS, made up of the Hammes Co. of Madison and Majestic Realty of Los Angeles, did not attend the event.
The chance to locate Exact’s headquarters Downtown was “incredibly appealing,” but consolidating at University Research Park, where the company began and where it already occupies space in three buildings was “a prudent decision for our company and our community,” Conroy said.
He said Exact Sciences is a “well-funded company with a great product” and is “confident” it will grow. By the end of 2015, 108,000 people are expected to have been screened for colorectal cancer using the company’s Cologuard noninvasive, DNA-based stool test, he said.
Exact has more than 700 employees, including 425 at its Madison offices and town of Madison labs, and will likely add 300 in the coming years, he said.
But the “hard reality” is that the JDS deal with the city would have required Exact to put two years’ worth of rent — totaling $15 million — into escrow, Conroy said. “That just doesn’t make sense if the world becomes a little less certain,” he said.
The reference was to an Oct. 6 draft report by the U.S. Preventive Services Task Force that named Exact’s Cologuard test as an alternative option, rather than a primary choice, for colorectal cancer screening. Comments on the task force designations were due Monday, and a final report is expected in 2016. Conroy has said the designation could slow approval by insurance companies to cover Cologuard’s cost.
The task force report led to a sharp decline in Exact Sciences’ stock, intensifying the outcry of opponents of the JDS proposal.
Conroy said Monday that criticism wasn’t a factor in the change in plans. He said the vast majority of people he talked to supported Exact’s effort to move Downtown and were “cheering us on.”
Conroy also reiterated that the stock price is no measure of the company’s future success; that will by judged by Cologuard’s acceptance by the public and the health care community.
Exact’s stock rose $1.60, or 19 percent, Monday, closing at $9.93 a share after topping $10 earlier in the day. The stock has ranged from $6.79 to $32.85 over the past year.
The city remains committed to working with Exact Sciences in its expansion at University Research Park, Soglin said in a letter to City Council members Monday.
“There’s no question having Exact Sciences with its corporate headquarters Downtown was our preference,” Soglin said at the news conference. But the announcement Monday is a second choice, “which is pretty good, darned good at that,” he said.
Ald. Mike Verveer, 4th District, said he was disappointed Exact won’t be moving Downtown. “However, I’m relieved they’re staying in the city of Madison,” he said.
Olver called University Research Park, which runs along Whitney Way between Tokay Boulevard and Mineral Point Road, “one of the most concentrated communities of life sciences companies in the Midwest.” The site has been “proud to be home to Exact Sciences from the time they were just two people in an office,” he said.
Exact plans to build a 50,000-square-foot headquarters that will connect with its new research and development center at 501 Charmany Drive, into which the company moved in September. Details on the new building are still being worked out, Conroy said.
The city will now contact JDS and three other developers that had offered proposals for the Judge Doyle Square project, Soglin said in the letter. “Now we take on the challenge of doing two projects,” he told reporters.
On May 1, four developers — JDS, Beitler Real Estate Services, Doyle Square Development and Vermilion Development — proposed mixed-use projects with a new hotel to serve Monona Terrace, offices, housing, commercial space and parking. They offered different designs, features and price tags.
A week later, a special city negotiating team recommended the city begin exclusive negotiations with JDS, which the City Council approved. JDS had proposed up to a 357,000-square-foot headquarters for Exact Sciences, a 216-room hotel, commercial space, a bicycle center and 1,250 parking spaces.
Exact Sciences pushed fast-paced talks on a development agreement with the city in order to break ground in December and have new Downtown corporate offices ready by mid-2017. At 3:15 a.m. on Sept. 30, the council voted 12-6 to approve the agreement with JDS. The $46.7 million in public investment included $12 million to help Exact move Downtown and create at least 400 jobs there.
After the federal task force recommendations and subsequent drop in stock value just days later, Soglin submitted a detailed list of questions to Conroy and Dunn, with answers due Monday.
As it negotiated with JDS, the city also took steps to create a new tax incremental financing (TIF) district at University Research Park that could benefit Exact Science’s expansion there. A recently approved plan says a potential $2.3 million is available for development loans.
Exact’s announcement on Monday is the latest twist in a long saga for the Judge Doyle Square project.
The city had negotiated with JDS from February to December 2014 on a project that included a hotel, housing, commercial space, a bike center and parking. But the council voted to reopen the process to others because the project — especially the hotel — evolved amid concern about city costs.
Now, the city is revisiting the other proposals received in May.
- Beitler Real Estate Services of Chicago, which proposed the least expensive project at $112.8 million, offered two mid-priced hotels, city office space, housing and parking, and was the lone entity not seeking any public support. The company proposed to lease land from the city with annual payments and other revenue that could help the city pay for parking facilities, new city office space and renovating the Municipal Building, president J. Paul Beitler said then.
- Doyle Square Development, made up of Urban Land Interests of Madison and North Central Group of Middleton, proposed a hotel, housing, office and retail space, and 1,302 parking spaces on five underground levels.
- Vermilion Development of Chicago had a $189.5 million proposal with a hotel, restaurant, meeting space, housing, offices and 1,055 parking spaces.
The city will now ask the developers to express interest in moving forward by Nov. 13, and to share changes to proposals by Dec. 18, Soglin’s letter says. The city, with more knowledge about challenges and opportunities, will inform developers of new expectations including a minimum 250-room hotel and better-designed underground parking.
By the end of January, the city’s negotiating team will complete an initial review of proposals still under consideration and meet with the council for direction, the mayor’s letter says.
Hammes president Robert Dunn could not be reached for comment Monday. It was not immediately clear if the other three developers want to be part of a new process.