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Developer Starts First Phase of 5M-Sq.-Ft., $100M Life-Sci Research Space Near Denver

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Forest City Science + Technology Group broke ground last week on the nearly $100 million first phase of a project to build more than 5 million square feet of new life-science research space in a suburban city of Denver by 2033.
 
Project developers and Aurora, Colo., officials also hope it will help revitalize a key commercial section of the city that has struggled in the 13 years since the US Army began shutting down its Fitzsimons Army Medical Center.
 
The first phase of the new Colorado Science + Technology Park at Fitzsimons will include a $16 million, 65,000-square-foot life-sci building; a 163-room Hyatt Place limited-service hotel/conference center; and a 175,000-square-foot office building. The projects are expected to be completed by the fall of 2010, according to the developer.
 
Long-term, Forest City will build a 6 million square-foot mix of uses, “a majority” of which will be life sciences space, Jim Chrisman, a senior vice president with the developer, told BioRegion News last week.
 
“I would guess that 85 to 90 percent” of the 6 million square feet, or between 5.1 million and 5.4 million square feet of space, “will be life science,” Chrisman said in an interview.
 
The developers will immediately begin constructing the office building and hotel, but not the life-sci building, which won’t start construction until the developer signs a lease with an anchor tenant. Forest City said it is in talks with several undisclosed anchor tenant prospects and hopes to begin building the life-sci facility by year’s end.
 
“If we get it off the ground this year, it would open next year. It would probably open in late 2009,” Chrisman said.
 
One potential source of additional tenants for the bio building, he added, is the cluster of some 20 University of Colorado at Denver spinouts and other startups currently housed in two existing buildings totaling 80,000 square feet managed by the Fitzsimons Redevelopment Authority, a partnership between the city of Aurora and the university.
 
Until the Colorado Science + Technology Park gets finished, companies that outgrow the Colorado Bioscience Park Aurora, completed in 1999, and the Bioscience East building, completed in 2006, typically relocate out of the city to wherever they can find R&D and lab space. To date their options are buildings west toward Denver or east along Interstate 70, closer to Boulder.
 
The best known startup to leave Aurora is the biopharmaceutical company GlobeImmune. In 2005, the firm moved out of a 10,000-square-foot space at Bioscience Park Center, its home since 2001, into 30,000 square feet in Louisville, 10 minutes east of the Boulder foothills.
 
“To the extent that buildings aren’t built, those incubators will have to grow or [companies] are going to move away,” Chrisman said. “That’s what we’re trying to prevent. We’ll be able to capture that growth out of the incubators and keep them on the campus, if that’s what they want to do.”
 
The more companies that stay, the better Aurora’s prospects for turning around its economic fortunes. Like many cities since the mid-20th century, Aurora first lost population, then businesses, to nearby suburbs, resulting in downtown blight that tarnished the image of the city’s main thoroughfare.
 
Portions of the city “remained disreputable from the 1960s through the 1990s” despite redevelopment projects such as a pedestrian plaza, Colfax Concourse, built in the 1970s, author Sherah J. Collins wrote in Images of America: Aurora (2008, Arcadia Publishing).
 
Even today, a decade into the city’s current, and most successful, redevelopment effort, Aurora continues to face challenges — most recently a budget shortfall that city officials project to be between $7 million and $15 million.
 
In July, city Councilman Larry Beer, a Democrat, proposed a “Business and Employment Economic Recovery” plan designed to return to city businesses more than the $15,000 maximum exemption in annual business personal-property taxes that now end up in the treasury of Aurora’s home county of Arapahoe.
 
The plan also would halve a state-mandated $4-per-month, per-job occupational privilege tax imposed on businesses by eliminating the $2 per month assessed on each employee in the state. But Beer’s Republican at-large council colleague, Steve Hogan, told the Aurora Sentinel that the Democrat’s tax-cut plan would inflate the city’s budget shortfall to between $12 million and $20 million.
 
Beer’s plan came a month after Araphoe’s Board of Commissioners, hoping to entice life-sci and other tech business owners, raised the business and personal property tax exemption from $10,000 and created a total “uniform” exemption for taxes collected on medical equipment and computers. That tax generates some $6 million for Arapahoe County.
 
Christine Shapard, deputy director of the Colorado BioScience Association, said the Forest City project is of huge significance to Colorado’s life-sciences industry. That industry is within three metro areas: Denver, which includes Aurora and UC Denver; Fort Collins, home of Colorado State University; and Boulder.
 
In addition to the universities, Colorado’s life-sci cluster includes about 430 businesses, among them biofuel startups and biotech, pharma, and medical device companies, according to CBSA.
 

“To the extent that we can bring a clinical-trial facility here, a drug-development center here, or any life-science amenity here — piece[s] of the puzzle that [are] missing — we’re going to try to do that, and we’re going to put it on this campus.”

Life-sci growth has helped propel the state’s overall tech sector to a third-place ranking, behind only Maryland and Massachusetts, in the Milken Institute’s annual State Technology and Science Index, released in June. Colorado ranked fourth last year among states generating the most economic activity per dollar of funding, according to Families USA’s Global Heath Initiative.
 
Intent on growing the state’s life sciences industry further, Gov. Bill Ritter in April signed into law a measure awarding $26.5 million over five years in grants to Colorado life sciences startups and research institutions seeking to commercialize their discoveries. Companies can receive up to a maximum $250,000 grant, while institutions are limited to $150,000.
 
“Out of our universities, we’re spinning out 15 to 20 companies a year,” Shapard told BRN. “There is startup space at the incubator at Fitzsimons, but once these companies grow to a certain size, there are not many places for them to go.
 
The Forest City project “will provide much, much needed lab space for the companies that have gotten their first rounds of capital,” Shapard added. “For the past 10 years, we have needed something like this.”
 
Forest City is pursuing three types of tenants: University startups that have outgrown their incubator space; expansion-minded regional bio businesses eager to locate across from the university; and international life-sci companies interested in a US presence
 
“We’re working all three of those angles,” Chrisman said. “They could be anywhere, probably, from a couple of thousand square feet up to 100,000 square feet.”
 
How quickly the life-sci building fills will determine how soon Forest City breaks ground on additional research space, according to Chrisman. Buildings will be mostly four to five stories tall, compared with the taller buildings Forest City has developed in more urban markets like its flagship University Park at MIT in Cambridge, Mass.
 
“We hope to build a couple of hundred thousand square feet a year on average,” Chrisman said. “Some years are going to be better than others; that’s why it’s kind of difficult to project what the build-out timeframe will be. But 200,000 square feet a year is a pretty healthy amount of space to build that is dedicated to life sciences.”
 
Fitzsimons’ life-science space will be primarily built for research use, though the Forest City site could accommodate smaller-scale “fill/finish” drug-production sites that fill and package therapeutics for drug makers. Large-scale manufacturing will not likely be pursued for the campus, Chrisman said.
 
Forest City, which owns more than 2 million square feet of life-sci and technology space nationwide and more than 8 million square feet in planning or development phases, may build additional incubator space in Aurora if there is market demand, Chrisman said. The project is being developed by a unit of Forest City Enterprises, a publicly traded $10.5 billion developer headquartered in Cleveland.
 
Asking rent for the Forest City project is in the $21-$22 range per square foot triple net, and a base $40 per square foot “tenant-improvement” allowance toward the cost of fitting out space for life-sciences work. Chrisman said the company will offer additional allowances depending on the tenant and how reusable the work is if the tenant leaves.
In addition to the life-sci building, the first phase, set to be completed by the fall of 2010, includes a $32 million Hyatt Place hotel/conference center; an 18,000-square-foot freestanding structure that the Fitzsimons Federal Credit Union will build for itself; and a $40 million, 175,000-square-foot office building.
 
Anchoring the office building will be University Physicians Inc., the business operations and administrative support unit for physicians at the UC Denver School of Medicine. While UP is expected someday to occupy the entire building, a small portion of it will be subleased short-term by the Children’s Hospital.
 
The CU system will also benefit from the first phase of the project through Hyatt Place, which would in part host university medical conferences. The hotel-conference center is being built by a separate developer, Gateway Hospitality Group of Twinsburg, Ohio. Future plans call for a “full-service” second hotel and “maybe a health club,” Chrisman said.
 
The research campus will be adjacent to around 18,000 square feet of small shops and 550 mid-rise residential units being developed by the Pauls Corp. as part of The Square at Fitzsimons. The Fitzsimons site is adjacent to the 4,700-acre Forest City Stapleton mixed-use redevelopment of the former Stapleton Airport, which closed in 1995 when the Denver International Airport opened.
 
The Stapleton site is master planned for 12,000 housing units; 3 million square feet of retail space; 1,117 acres of parks and open space; some 130 acres of recreational facilities; up to 10 million square feet of office space; and a new permanent home for the Denver School of Science and Technology, a public charter high school established in 2004.
 
“The Aurora project is very singular in its vision with life-science businesses. But those businesses need places to shop and eat, and their employees need places to live and recreate,” Chrisman said. “Stapleton provides all those things. We think of it really as one large project. They do share a common boundary.”
 
Forest City was selected by the redevelopment authority in November 2005 to begin talks to redevelop a 184-acre, authority-owned section of the 578-acre former Army medical center within a new “Fitzsimons life sciences district.”
 
Four months later, the authority and Forest City signed a 30-year memorandum of understanding allowing Forest City to lease land from FRA to develop life-science facilities. In return, the authority will receive fixed annual payments and an equity share of net cash flow from the buildings to be constructed.
 
Within the former Army med center, 230 acres are controlled by the university and consists of the Children's Hospital and the Anschutz Medical Campus, home to several medical facilities, including the University of Colorado’s schools of medicine, dentistry, pharmacy, and nursing; the University of Colorado Hospital; UC Denver’s Health Sciences Center; and research facilities.
 
Since the Army’s retreat, the university has moved several facilities of its Denver campus to the Fitzsimons site, making it the larger of UC-Denver’s two campuses. The university facilities are slated to be joined by a new US Department of Veterans Affairs hospital and nursing home for aging veterans, both now in planning phases.
 
“We have three major clinical complexes as well as a top-notch medical school and research university. That was the driver for the adjacent commercial property to be a life sciences park that is affiliated with that university use,” Jill Farnham, the authority’s executive director, told BRN.
 
Chrisman said the presence of those hospitals together with their potential for hosting clinical trials for new drugs, should help Forest City draw tenants to the Fitzsimons life-science campus.
 
“We will target companies that we believe will benefit by having close physical proximity to the university because of the correlation of the university strengths and what that particular company would be working on,” Chrisman said.
 
Indeed, Forest City said it believes that space for clinical trials is one of three local life-sci needs the project will address, along with a larger-scale vivarium, and fill/finish facilities.
 
“There are gaps within the industry in Colorado that we hope to fill in order to continue to grow it so that hopefully over time it will be comparable to the larger life-science communities like Boston, San Francisco, and San Diego,” Chrisman said.
 
“To the extent that we can bring a clinical-trial facility here, a drug-development center here, or any life-science amenity here — piece[s] of the puzzle that [are currently] missing — we’re going to try to do that, and we’re going to put it on this campus,” he added.
 
Aurora city officials expect the combined presence of the medical facilities and the research park to generate 20,000 jobs and more than $4.5 billion in economic activity by 2013. Those numbers will balloon to nearly 43,000 jobs and $11.5 billion in overall activity when the project is fully built out, which Forest City expects will happen between 2033 and 2038.
 
Those estimates, from a study for the authority by consultant Sammons/Dutton, were released by Aurora Mayor Ed Tauer last week at a ceremony marking the start of first-phase construction Sept. 3. On that day, workers demolished the 133-foot smokestack that had served the Army outpost for 90 years.
 
To spur development of Forest City’s bio campus, Aurora officials agreed to create a tax increment financing district covering most of the life-sci park. The TIF calls for Aurora to borrow about $160 million to pay for infrastructure improvements, and requires Forest City to repay the city the equivalent of net new tax revenues generated by the project.
 
Before Forest City got involved in the Fitzsimons project, the city spent some $20 million to build a road ringing the perimeter of the former 690-bed Army medical center, called Fitzsimons Parkway.
 
“We were in an economically declining neighborhood when this was a military base, and [the Fitzsimons redevelopment] has spurred significant activity in the surrounding area,” Fitzsimons Redevelopment Authority’s Farnham said.
 
Yet late last year, Aurora’s relationship with UC soured after the university’s board of regents in October voted to exclude Aurora from the name of the UC-Denver campus within Aurora. Ten state lawmakers, seven of whom represent portions of Aurora, made public a Jan. 29 letter to the board urging it to reconsider the decision.
 
“The name of the university represents a significant redevelopment and revitalization opportunity for Aurora, and we are concerned about the manner in which the name was determined and that the Aurora legislative delegation was not included in the naming process,” the letter said. “It is our hope that we can find a mutually agreeable resolution that respects the board of regents' charge to do what is in the best interest of the University of Colorado and addresses our concerns by furthering the redevelopment and revitalization of Aurora and honoring and respecting our partnership.”
 
Aurora City Councilman Bob FitzGerald, a Republican at-large member, was more blunt,calling the decision “a slap in the face.” His remarks, reported in the university’s student newspaper, the Silver & Gold Record, said, “It hasn't left a very good taste in our mouths, especially after we bent over backwards to make this all happen.”
 
Also helping make the project happen were Colorado state officials, who set aside $200 million in certificates of participation to finance the final phases of the university’s facilities at Aurora.

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