8-K: SAB Biotherapeutics Expands Operations with New Lease Agreement in Sioux Falls

SAB Biotherapeutics secures a five-year lease for office and research space in Sioux Falls, South Dakota, committing to an annual rent of $601,630.82.

Summary

• SAB Biotherapeutics has entered into a lease agreement with Sanford Health for a five-year term.
• The lease, effective February 1, 2025, covers 21,014 square feet of office and research space at 2301 East 60th Street North, Sioux Falls, South Dakota.
• The annual rent is set at $601,630.82, with monthly payments of $50,135.90.
• The lease term ends on December 31, 2029, with potential extensions through mutual written agreement.
• Either party can terminate the lease with 90 days' advance written notice.
• The annual rent will increase by the greater of 2% or the increase in the Consumer Price Index (CPI) starting January 1, 2026.
• Tenant is responsible for general management and upkeep of the Leased Premises.
• Landlord shall pay for all heating, air conditioning, electricity, janitorial services, gas, water and sewer charges used in the Leased Premises throughout the Term of this Lease.

Sentiment

Score: 7

Explanation: The document indicates a positive expansion for SAB Biotherapeutics, securing a long-term lease for its operations. The terms appear reasonable, and the agreement provides stability for the company's future.

Positives

• SAB Biotherapeutics secures a long-term lease for expanded facilities.
• The lease agreement provides clarity on rental costs and potential increases.
• The agreement includes access to common areas such as parking, hallways, restrooms, exercise facility, common conference rooms, and cafeteria.
• Landlord shall pay for all heating, air conditioning, electricity, janitorial services, gas, water and sewer charges used in the Leased Premises throughout the Term of this Lease.

Negatives

• Tenant is responsible for the costs of any disproportionate utility usage caused by their operations.
• Tenant is responsible for the costs of any additional hardware, wiring, plumbing, sewer lines, electrical lines, panels, water lines, or bandwidth, servers, routers, hubs, etc., to accommodate Tenants Work or Tenants use.
• Tenant is responsible for the maintenance, repairs, and replacement of such units at its sole cost and expense.
• Tenant is responsible for specific costs directly attributable to Tenants operations, but paid for by Landlord on Tenants behalf, such as Landlords treatment of Tenants generated sewage.

Risks

• Rent increases are tied to CPI, which could lead to unpredictable cost increases.
• Tenant is responsible for costs associated with hazardous materials they generate.
• Landlord approval is required for any alterations or modifications to the leased premises.
• The landlord can modify or alter the Common Area at any time with reasonable notice to Tenant.
• The landlord withholds the ability to reasonably restrict Tenants employees, contractors, subcontractors, agents, and representatives from entry into the Building until such time that a state of emergency is no longer effective according to the State of South Dakota or Landlords reasonable discretion.

Future Outlook

The lease agreement provides SAB Biotherapeutics with a stable location for its operations for the next five years, with potential for extension.

Industry Context

This lease agreement reflects a continued investment in biotechnology infrastructure, particularly in regions like South Dakota, which may offer cost-effective operational environments.

Comparison to Industry Standards

• Comparable lease rates for office and research space vary significantly by location and facility type.
• In major biotech hubs like Boston or San Francisco, lease rates can be significantly higher than the $28.63 per square foot in this agreement.
• For example, Alexandria Real Estate Equities, a major REIT specializing in life science properties, reports average lease rates that can exceed $70 per square foot in premium locations.
• However, in more regional markets like Sioux Falls, rates are generally lower, making it an attractive location for companies seeking to manage costs.
• The five-year lease term is fairly standard in the commercial real estate industry, providing both stability for the tenant and a predictable income stream for the landlord.

Stakeholder Impact

• Shareholders may view this expansion as a positive sign of growth and investment in the company's future.
• Employees will benefit from the new and expanded facilities.
• Sanford Health benefits from a stable tenant and income stream.

Next Steps

• SAB Biotherapeutics will occupy and begin operations in the leased space.
• The company will work with Sanford Health to finalize any necessary alterations or improvements to the premises.
• The parties will work together to reach agreement on the Tenants Work Construction Cost and will document such agreed upon cost by written agreement.

Key Dates