American Tobacco gives startups a break

Lease American Tobacco for less

Staff WriterJuly 21, 2010 

— Hoping to enhance the region's reputation for innovation and entrepreneurship, the American Tobacco Campus will convert the basements in two of its historic buildings into an office complex for startups.

The first tenants in the new 26,000-square-foot space will be two business incubators - LaunchBox Digital and Joystick Labs - and the Council for Entrepreneurial Development, a nonprofit group that provides support to entrepreneurs and small businesses.

The new space, called American Underground, will nurture the type of companies that are increasingly driving the economy, said Jim Goodmon, CEO of Raleigh-based Capitol Broadcasting, which owns American Tobacco.

"The new jobs are these startups," Goodmon said.

Capitol also owns the Durham Bulls baseball team, its stadium adjacent to American Tobacco and TV stations Fox 50 and WRAL.

The new space, on the lower levels of the Strickland and Crowe buildings, has until now been used as storage space for other American Tobacco tenants.

When it opens Oct. 1, it will include offices and suites, shared conference rooms and break rooms and a classroom that accommodates 60 people.

Capitol is charging $19.95 per square foot to rent space in American Underground. That's below the square-foot price of $25.95 the company is asking for 88,000 square feet that American Tobacco tenant GlaxoSmithKline said it will vacate in May.

Capitol also is relaxing the credit requirements for prospective tenants looking to move into American Underground. Companies can rent anywhere from a 300-square-foot office to 4,000 square feet, said Mac Hammer, a broker with Synergy Commercial Advisors who is handling the leasing.

LaunchBox, Joystick and CED have leased about a third of the available space.

Chris Heivly, executive director of LaunchBox's Triangle operations, said American Tobacco offers the kind of vibrant environment that is crucial to building a business. "It has to be a place where you want to spend 100 hours a week starting your company," he said.

LaunchBox of Washington provides software and Internet startups with seed capital and free or heavily discounted professional services. In exchange, LaunchBox receives an ownership stake in the businesses.

Joystick Labs, which has raised more than $500,000 from investors, has a similar model but is targeting video-game companies.

Both incubators will likely create a stream of potential tenants for the American Underground space.

CED, formed in 1984, is one of the country's largest support groups for entrepreneurs and small businesses, with more than 5,500 members. Joan Siefert Rose, who became the group's president in 2008, has been trying to boost its visibility.

"Any organization that's been around for a while has to ask if we're still relevant and meeting our members' needs," she said. "This gives us a chance to shake things up and add a little excitement. It was an opportunity we couldn't pass up, to be there with a new wave of startups."

CED will lease about 3,500 square feet, less than half the size of its 8,000-square-foot offices in Alexandria Technology Center on Capitola Drive near Research Triangle Park. CED downsized as the economy slowed and now employs nine people.

Staff writer Alan M. Wolf contributed to this report.

david.bracken@newsobserver.com or 919-829-4548

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