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Posted on Wed, Jun 27, 2012 : 2:30 p.m.

Barracuda Networks signs deal to move hundreds of jobs to ex-Borders offices in downtown Ann Arbor

By Lizzy Alfs

barracuda_networks_borders_maynard_street_sean_heiney_paul_krutko.jpg

Ann Arbor SPARK CEO Paul Krutko, Barracuda's Sean Heiney and Lindsay Snider, Ann Arbor Mayor John Hieftje, Bank of Ann Arbor CEO Tim Marshall and First Martin's property manager John Teeter.

Melanie Maxwell | AnnArbor.com

One year after Barracuda Networks announced major expansion plans for its local office, the company has finalized a deal for one of downtown Ann Arbor’s most notable buildings.

The Campbell, Calif.-based security firm, which employs about 180 workers at its operation at 201 Depot St. in Ann Arbor, signed a lease this month for 45,000 square feet of office space once occupied by bookstore chain Borders.

The deal is one of the largest commercial real estate leases in downtown Ann Arbor in recent years, and if Barracuda reaches its hiring goals, it could create more than 200 new jobs downtown.

“We’re hiring two people a week,” said Sean Heiney, Barracuda’s director of new product initiatives. “With the success and exponential growth we have, there’s no sign of us slowing down. We’re expecting at least 300 to 400 employees in this facility, but that’s not going to be capped.”

Barracuda signed a lease for the space on Maynard Street, which is located at the rear portion of the building that also previously housed Borders’ East Liberty Street store. Owned by First Martin Corporation, it’s located on three-floors and partly underneath the public parking garage.

The space was once used as the headquarters for Borders before the company moved to Phoenix Drive.

John Teeter, property manager at First Martin, said construction will begin Wednesday to transform the space into a high-tech, attractive office. The goal is to have Barracuda move in this fall.

That includes putting in windows along the Maynard frontage, completely redesigning the facade, building a small engineering data center, a training center, workout facilities, showers, break rooms with games, and 30 to 50 foot ceilings in some areas.

Heiney — who didn’t have an estimate on the exact cost of renovations — said the total investment will be around $6 to $7 million between the lease and improvements.

Key to that investment is a five-year tax abatement from the City of Ann Arbor totaling $85,150, and $1.2 million in funding the company expects to receive from the Michigan Economic Development Corporation’s business development program. Both initiatives were announced in a news release on Wednesday.

“The incentive is definitely a strong contributing factor for us,” Heiney said. “It’s nice to have community partners going along with us; it’s icing on the cake for us.”

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Barracuda Networks is moving from its 12,000-square-foot office on Depot Street to 45,000 square feet in the former Borders building in downtown Ann Arbor.

Melanie Maxwell | AnnArbor.com

Barracuda is a privately owned firm that creates network security devices, provides email and web filtering products and phone system solutions, and monitors network attacks 24 hours a day, 7 days a week from its Ann Arbor office. It has more than 1,000 employees globally and does not report sales figures.

Fueled by growth in the information technology security industry, the company announced in June 2011 that it planned to create a “Silicon Valley-type campus,” likely in the downtown Ann Arbor area, that would employ 300 to 500 people and expand its footprint.

It currently occupies 12,000 square feet at its Depot Street office, and Heiney said the employees are “packed in like sardines.” It also only originally leased 40 parking spaces at the building.

After a year of searching for the right space — Heiney said they looked at more than 100 different locations — the iconic downtown Ann Arbor building was the most appealing. Both Ann Arbor SPARK and Colliers International’s Ann Arbor office worked with Barracuda on potential spaces.

First Martin purchased the 45,000-square-foot space on Maynard from Agree Realty Corp. in March. Because First Martin is Barracuda’s current landlord on Depot Street, the deal offered a smooth transition.

“We bought the space without this deal,” Teeter said. “But they’re moving to a space that’s four times bigger than their current space (with us). We’re excited to keep them as a guest and to have them downtown.”

Teeter said First Martin will now begin to market the 12,000 square feet Barracuda is vacating at the Depot Street building, which also houses planning and landscape architecture firm SmithGroupJJR.

Ann Arbor Mayor John Hieftje, Ann Arbor SPARK CEO Paul Krutko, Colliers’ Jim Chaconas and Heiney all said there was one aspect of the deal that was most critical: parking.

With the new 711-space public parking garage set to open next month on Fifth Avenue in downtown Ann Arbor, Hieftje said Barracuda was able to get access to all of the parking spaces they need at a discounted rate the Downtown Development Authority is offering.

The incentive, which applies to monthly permits, offers a $60-a-month savings for those who move over from the Liberty Square or Maynard garages. It’s also offered to new businesses that were not located in downtown before May 1.

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Barracuda is hiring at a rate of two people per week, said the company's director of new product initiatives Sean Heiney.

Melanie Maxwell | AnnArbor.com

“This just wouldn’t have happened without the parking,” Hieftje said. “Without the parking, companies weren’t willing to talk to us about coming downtown.”

Heiney said Barracuda will pay for a parking space for each employee.

If Barracuda’s office reaches 400 or more employees, it would rank as downtown Ann Arbor’s largest private sector employer. As of last summer, Google employed about 275 workers at its sales office at the McKinley Towne Centre at Liberty and Division streets, though Google has long said it plans to have 1,000 employees eventually.

Krutko of SPARK said bringing this sheer concentration of people to downtown Ann Arbor will create ripple effects in the community.

“This will create a completely new generator of customers for downtown businesses,” he said. “For somebody interested in opening retail, to have a growing workforce here is an attraction.”

Chaconas of Colliers, who’s marketing the front portion of the building that housed the former Borders retail store, said it will also play a key role in the redevelopment of that two-story, 44,000-square-foot retail space — which was recently leased long-term by Detroit-area developer Ron Hughes of Hughes Properties.

“You look at what’s coming here with Menlo (Innovations), Google and Barracuda: that old Borders retail site is going to be almost as hot as the Michigan Book & Supply building. It’s not just students, we’re going to have employees that work here in a concentrated area.”

He said Barracuda bringing hundreds of employees to the building also will help drive the retail — not just restaurant — market in the area.

Heiney said Barracuda is hiring all types of different employees to work at the Ann Arbor office, including engineering, support, sales and customer service. Those interested in applying can visit http://www.barracudalabs.com/recruit/.

Although some business executives lately have talked about the difficulty of finding the talent to fill job openings in Michigan, Heiney said he sees “no signs of the talent drying up,” which is the main reason Barracuda targeted Ann Arbor to expand.

“The main thing here is it has smart people,” he said. “Ann Arbor is also definitely an easier sell for someone out of state to come to than most cities. I’m not sure if, say, we were based in Cleveland, that we could get people from Silicon Valley to move out there.”

Lizzy Alfs is a business reporter for AnnArbor.com. Reach her at 734-623-2584 or email her at lizzyalfs@annarbor.com. Follow her on Twitter at http://twitter.com/lizzyalfs.

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