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Leasing First Building at Gateway Park Life Science Campus, WPI Looks to Fill Three More

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WORCESTER, MASS. – Worcester Polytechnic Institute and the city’s private, nonnprofit economic development group are in talks with biotech companies interested in filling the second, third, and fourth new buildings planned for a life sciences campus taking shape in a former industrial section north of the city’s depressed downtown.
 
Planning for the buildings has become possible now that the first building within Gateway Park will soon be fully leased. WPI and the Worcester Business Development Corporation told BioRegion News they were days away from signing a tenant business for the remaining 6,000 square feet at 60-68 Prospect St., a 125,000-square-foot building that is the first to rise at the campus.
 
D’Anne Hurd, WPI’s vice president for business development at Gateway Park and general counsel, declined to disclose the tenant’s name pending an announcement expected later this week. Hurd did say, though, that the business will occupy 3,000 square feet of office space on the building’s street level and an equal amount of lab space on the third floor.
 
More importantly for WPI and Gateway Park, Hurd said, the business will occupy its space temporarily for 18 to 20 months pending completion of a 100,000 square-foot building planned for the campus. She said the business plans to grow enough to serve as the anchor tenant for the building.
 
The 100,000-square-foot building is one of three buildings planned for Gateway Park; the other two contain 80,000 square feet and 140,000 square feet of space, respectively. Talks are also in progress with prospective anchor and smaller tenants at the other two buildings, Hurd said.
 
One sign of possible progress: WBDC is seeking a developer to build the 100,000- and 140,000-square-foot buildings, then maintain an ongoing relationship with the partners, possibly through a ground lease. “We think it’s likely that those will be the next two buildings that are developed. That’s what we think is the most logical next phase, and we’re in discussions with a developer right now,” WBDC President David Forsberg told BioRegion News.
 
Both buildings would occupy a corner parcel at Concord and Lincoln streets, forming a “quad” with the 80,000-square-foot building, 60-68 Prescott, and a 645-car parking garage and adjacent 137-space parking lot, both completed in May.
 
The buildings are part of an eventual 800,000 square feet of life science, residential and retail space planned for 11-acre Gateway Park upon full development. Unlike most buildings built by nonprofit entities, 60-68 Prescott will pay full taxes to the city of Worcester — $168,902 this year and $329,800 in 2008, Forsberg said in the interview.
 
And when Gateway Park is fully built out, the campus expects to generate $1.4 million a year in city taxes. Through their entity, Gateway Park LLC, WPI and WBDC have crafted a master plan for the campus that also includes:
  • A site on Concord and Grove streets that could accommodate 80,000 square feet of office and lab space for life sciences companies, or a 120,000-square-foot building with 61 market-rate condominiums. What gets built, Forsberg said, will hinge on market demand: “It’s probably not going to want to do condos right now.” The site is now occupied by the machine shop building of the old Worcester Vocational High School, which WPI and WBDC have begun to demolish.
  • A site at Concord and Salisbury streets now occupied by the three buildings, totaling 119,000 square feet, comprising the shuttered Worcester Vocational High School. The school closed last year following the opening of the new $90 million Worcester Technical High School. Part of the old school now on the National Registry of Historic Places would be renovated and converted to residential buildings with 85 market-rate condos, while the school’s non-historic buildings would be razed for parking. The WPI-WBDC partnership is in talks to buy the site from the city, Forsberg and Timothy McGourthy, Worcester’s director of economic development, told BRN.
  • Retention of four commercial buildings, totaling 348,300 square feet, owned by private owners other than the WPI-WBDC partnership and leased to a variety of businesses. The partnership holds a 25-percent stake in one of the buildings, the 100,000-square-foot 85 Prescott St., owned by Prescott Holdings.
  • 93 market-rate condos on a Grove Street parcel.
  • 13,200 square feet of retail space on an adjoining Grove Street parcel. “There might be a little more than that. The market is going to control some of where this goes,” Forsberg said.
Hurd disclosed the forthcoming lease signing and tenant interest in the campus while joining with Eric Overström, director of WPI’s Life Sciences and Bioengineering Center at Gateway Park, in showcasing 60-68 Prescott for BioRegion News. Completed last April at a cost of $43 million, 60-68 Prescott will be formally dedicated by officials from WPI, WBDC, and elsewhere on Sept. 17.
 
60-68 Prescott consists of two connected structures — a renovated manufacturing building now serving as office space, and a newly constructed building that primarily houses lab space. A cafeteria, to be named “Pi,” is set to open by next month — no small amenity given the campus’ presence in a former manufacturing zone, with only a handful of eateries within a 10-minute walk of Gateway Park.
 
WPI occupies 80 percent of the space at 60-68 Prescott, where it houses four departments: Biology and biotech, biomedical engineering, chemistry and biochemistry, and chemical engineering. The four departments account for the 27 faculty members, more than 50 graduate students, and about 25 staffers now based at the building, Overström said.
 

The master plan for the Gateway Park District
 
The remaining space includes 7,500 square feet overseen by Massachusetts Biomedical Initiatives, the Worcester-based nonprofit operator of three incubators within the city. The incubator at 60-68 Prescott is the newest of the three, and is occupied by three startups: The contract research organization Blue Sky Biotechnology, Coley Pharmaceutical Group, and biopharmaceutical Targeted Cell Therapies.
 
The three are among 18 companies that occupy a total 27 labs among MBI’s three incubators, which employ a total 80 people, Kevin O’Sullivan, president and CEO of MBI, told BioRegion News.
 
Other startup companies at Gateway Park include biomedical instrumentation company Advanced Body Sensing; Active Surface Technologies, the developer of a hand-held renal failure detector; CellThera, which focuses on restoring digits, limbs and other tissue damaged or lost due to traumatic injury; and ECI Biotech, a pathogen detection company now based at 85 Prescott St. but waiting for space either across the street at 60-68 Prescott or in one of the three future buildings. AstraZeneca, Abbott, and Millipore are among 17 biotechs that use degree and certificate training programs developed with WPI’s corporate and professional education center, also housed at 60-68.
 
“Our mission is to house the whole continuum of product development, from academic germination and basic research to discovery, to development and then implementation,” Hurd said. “We will have small companies, startups, that will go into the incubator and they’ll hatch. Hopefully, they’ll stay at Gateway Park for a while. Then we’re definitely going to have large companies that are very anxious to locate there.”
 
Beating Cambridge Prices
 
For large and small life science companies, Hurd said, a key draw of Gateway Park will be economic: “The whole premise of Gateway Park is the fact that a company from overseas or California or wherever can be close to Cambridge, but not pay Cambridge prices.”
 
According to CB Richard Ellis, the average “asking” rent sought by brokers for lab space in Cambridge climbed 27 percent in the year ending with the second quarter, to $51.25 per square foot triple net. Industrial space in Worcester, about 40 miles west of Boston-Cambridge, by contrast typically leased at an average asking rent of $5.26 per square foot triple net, while office space goes for $17.99 per square foot gross, CBRE says.
 
Worcester has long used its lower cost of commercial space as a selling point to companies seeking to save on rising rents in Boston and Cambridge. O’Sullivan said tenants at MBI’s incubators could still find in Worcester laboratories ranging from $500 per month for the smallest 400-square-foot labs, up to $4,000 per month for the largest labs, and leases of as little as a year — versus the three- to five-year leases and much higher per-square-foot rents common to Boston-Cambridge.
 
As of last year, the latest available figure, the city and surrounding towns had drawn some 100 biotech businesses with 7,500 employees and more than a billion dollars in annual revenues. Worcester’s emerging cluster was cited last year by the state’s then-secretary of economic development, Ranch Kimball, as a main reason why Bristol-Myers Squibb agreed to open a $750 million, 400,000-square-foot biologics-manufacturing plant now under construction in nearby Devens, Mass.; the company received $60 million in economic incentives and received state and local approvals in lass than six months.
 
But companies drawn to Worcester by its lower cost of business have also found the city and surrounding towns lack the concentration of local talent beyond a few professors or students at WPI or the nearby University of Massachusetts Medical Center. O’Sullivan said most of the scientists and staffers of his incubators’ tenant businesses don’t live in Worcester. And over the years, only one of four or five tenants has stayed in Worcester once they’ve outgrown the incubators.
 

“The most important thing has been credibility on the science side. From the very beginning, this was a mixed-use strategy, but we wanted it to be special and we wanted to find a niche. And the niche is WPI’s reputation and expertise in the life sciences, because that’s what is driving the park.”

“Brains travel. Brains come from all over Massachusetts and New Hampshire. My attitude is, we’ve been in Worcester, but we’re Massachusetts-based. Our goal is to grow organizations and keep them in the state,” O’Sullivan said.
 
McGourthy told BioRegion News that Worcester plans to address that problem by attracting more developers interested in building new homes and apartments. Over the past six months, he said, 150 new market-rate housing units have been completed within the city — an accomplishment, he said, of the city’s ongoing redevelopment effort. And market rate in Worcester is lower than in much of the state; the median price of a single-family house is $232,000; a single-family condo fetches $175,000.
 
McGourthy said that effort has generated a development pipeline the city officially estimates at $1.3 billion, but says is probably higher. Next month, a new $180 million state courthouse will open, the Downtown/Lincoln Square Regional Justice Center, with the side goal of boosting downtown by drawing lawyers and other legal-system professionals.
 
However, the anchor project in the redevelopment effort has struggled to get past the drawing board. Last month, the city Planning Board offered a second one-year extension of an approval granted in 2005 to Berkeley Properties for its proposed 2.2 million square-foot mixed residential-retail-office project, including 650 apartments, intended to return shoppers and businesses to a downtown depressed in the generation since manufacturers deserted New England’s second largest city with a population of 175,898 (2005 US Census estimate).
 
The $563 million CitySquare project would rise on the site of the shuttered Worcester Common Fashion Outlets, a 1970s low-rise mall that all but gutted Front Street by driving established stores and restaurants out of the city’s commercial hub.
 
The city’s ups and downs with redevelopment help explain why Worcester has been more willing than many to encourage projects co-developed by local colleges, said the head of a consortium that links the city’s government and business community with the 13 colleges and universities that hold classes in and around Worcester. The schools draw some 40,000 students to Worcester — a sizeable potential future workforce for the city, Armand Carriere, executive director of the Worcester UniverCity Partnership, said.
 
Carriere said Gateway Park is one example of a successful college-driven economic redevelopment project: “Gateway Park represents great foresight and vision on [WPI’s] part. It’s the right thing to do at this time.” He cited two other examples: Massachusetts College of Pharmacy & Health Sciences brought some 400 students to the heart of downtown after creating a campus there in 2000. Last year the school assembled parcels for an entire city block and completed a $25 million, 175-bed expansion of its dormitory.
 

The new $43 million Life Sciences and Bioengineering Center of Worcester Polytechnic Institute at 60-68 Prescott St. The 125,000-square-foot building is the first of several new life science buildings planned for the Gateway Park life sciences campus being developed by WPI and the Worcester Business Development Corporation.

More recently, Clark University teamed up with the city and Main South Community Development Corporation to build 80 affordable housing units, a $9 million Boys & Girls Club facility, and athletic fields for the university’s sports teams.

 
To develop Gateway Park, WBDC brought in WPI as a 50-50 partner after concluding it could not afford to redevelop the former manufacturing area alone, Forsberg said.
 
“WPI has brought us huge financial expertise and resources and commitment,” Forsberg said. “The most important thing has been credibility on the science side. From the very beginning, this was a mixed-use strategy, but we wanted it to be special and we wanted to find a niche. And the niche is WPI’s reputation and expertise in the life sciences, because that’s what is driving the park.”
 
The WBDC-WPI partnership has secured $7.3 million in government subsidies: a $2.5 million federal Economic Development Administration grant; $2.2 million in funds from the federal Intermodal Surface Transportation Efficiency Act for road and traffic improvements; $600,000 from the US Environmental Protection Agency to clean up contamination from a former metal plating business; and a $2 million state Public Works Economic Development grant for infrastructure improvements.
 
Seeking Biotech Growth
 
As the partnership’s managing partner overseeing initial master planning and marketing strategy, WBDC had sought to redevelop Worcester’s onetime manufacturing mecca into a biotech hub, after noting the success of the Massachusetts Biotechnology Research Park in the city.
 
Opened in 1985, the 1 million-square-foot, 105-acre campus has some 20 tenant employers — including ViaCell, Advanced Cell Technology, and SelectX Pharmaceuticals — that employ more than 2,000 people, generate $3 million a year in taxes for the city and has attracted nearby the Abbott Laboratories’ 370,000-square-foot Bioresearch Center. The research park is owned by Alexandria Real Estate Equities, the Pasadena, Calif., real estate investment trust specializing in life sciences properties.
 
WBDC moved to acquire parcels from the city and numerous manufacturers, notably Parker Metal Company and Ziff Paper Company, and hammered out a strategy to demolish the old manufacturing buildings and clean up the sites where they stood for new development.
 
The biotech project is in addition to WBDC’s traditional focus on downtown projects such as its project management of the $25 million renovation of the old Grand Palace Theater in Federal Square into the 2,300-seat Hanover Theater for the Performing Arts. “We feel we’re building a community that extends the vibrancy and the viability of the downtown,” Forsberg said.
 
At Gateway Park, WBDC and WPI have drawn a total $85 million in investment, most of it private money, with the goal of expanding the city’s life science cluster in what had been the city’s manufacturing hub.
 
“It was the locus of jobs for a couple of communities that ring the area, and we think there’s some nice symmetry to the fact that we’re actually doing now the new economy, and in those same areas, and again creating jobs,” Forsberg said.

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