“We know that the state is in a very difficult financial situation at the moment.”
URI Next Year Will Ask State for Referendum To Pay for 30-Acre Campus Biotech Park
The University of Rhode Island next year will ask state lawmakers to float a referendum aimed at allocating an as-yet undecided amount of state capital to help pay for a 30-acre technology park the school wants to develop over the next decade at its main campus in Kingston.
URI hopes the park will anchor its ongoing effort to boost revenue from its research and to increase the quantity and quality of that work. The park could also enable the school to generate as many as 1,000 jobs at dozens of potential tenant businesses and university offices, according to a feasibility study submitted by a URI-hired consultant in August, and released by the university two months later.
URI has not yet decided how much money to ask for the three-phase project, said Peter Alfonso, the university’s vice president of research and economic development. What is known is that the park would be paid for partially by the state cash and through a partnership the school plans to pen with a developer.
However, a severe budget shortfall that has put Rhode Island “in a very difficult financial situation” could make it tough for the school to convince the state to reach for its checkbook at least into 2009.
Phase 1 of the project, entitled Resource Analysis and Market Feasibility, “will be one of our primary goals,” Alfonso told BioRegion News earlier this month. “The tech park actually is the interface between the university and the private sector. That’s the location where we want our research faculty working shoulder-to-shoulder with large corporations and small startup companies. That’s where we want to connect our research faculty with the private sector.”
According to the feasibility study, prepared by George Henry George Partners of McLean, Va., DC Lyndon and Associates, and Beta Group, the tech park would rise on a 30-acre site on Flagg Road. The school chose that site over three others because of its greater abundance of useable land for both the research park and other ancillary uses, its proximity to existing tech-transfer spin-offs, and a planned $65 million facility for the university’s pharmacy school.
The report also laid out a series of next steps: Hire a full-time director with “five to 10 years of successful research park experience, preferably in a similar university/park situation;” craft a statement of permitted uses and architectural and development standards; finalize a site plan for the first phase; secure infrastructure funding commitments; issue a formal request for proposals for a developer-partner; hammer out a development agreement; and team up with state economic-development officials to market the tech park space.
URI can expect to spend $935,000 in the first development phase and $1.7 million overall to extend the existing road, sewer, drainage, water, gas, and electric systems into the tech park site, according to the study.
The study cost $49,000. URI and the Rhode Island Economic Development Corp. each paid half, according to Alfonso.
Cash Crunch, Land Grab
URI is seeking the cash at a time when smaller-than-projected sales-tax receipts for the first four months of the state’s current fiscal year, which began Oct. 31, have left the state with a $150 million budget shortfall, or 2 percent of its total budget. That deficit, projected to rise to $450 million in the next fiscal year, forced the state earlier this month to lay off 153 workers and warn 330 others that their jobs could be abolished or privatized over the next few months.
“We know that the state is in a very difficult financial situation at the moment,” Alfonso said. “Our hope is that it will be clear to the majority of people that at these difficult times, we need to invest more carefully in those projects that will bring in a return on our initial investment.
“I think what we’re talking here is just an example of that,” he added. “We want to put our dollars where we have a good chance of creating new dollars for the state.”
The university views the campus as a key to fulfilling a goal of URI President Robert Carothers to grow its research revenue from the $60 million it currently generates to $100 million by 2010. Alfonso also said he hopes the park will help the university increase annual revenue from intellectual property, which has hovered around $1 million for the past seven years — better than most nearby schools but far below the $41 million in similar revenue generated in the year ended June 30 by the neighboring University of Massachusetts system.
In fact, URI hopes to tap into some of that revenue by convincing early-stage life-science businesses based in Boston or Cambridge, Mass., to relocate to the park, whose real-estate prices would be much lower.
Over the past year, asking rents for lab space in Cambridge have zoomed on average 30 percent from between $48 and $54 per square foot to $65 per square foot, according to the commercial real estate firm Jones Lang LaSalle. Biotech and other R&D tenants typically pay triple net rents in which tenants pay for utilities, taxes, and maintenance.
“The pricing of available space, rapidly rising to reflect both its desirability and scarcity, is a becoming a deterrent to occupants of all sizes,” agreed Boston-based brokerage Richards Barry Joyce & Partners.
Said Alfonso, given Kingston’s location, “I wouldn’t be surprised if we do have tenants from Massachusetts all the way to Connecticut.”
While Kingston may not have a lot of lab space now, filling that market demand wasn’t a primary reason for the tech park, he added.
George Henry George Partners’ 138-page feasibility study recommends building the tech campus in two phases over 10 years, allowing for the construction of between four and six 50,000-square-foot multi-tenant buildings, or between 200,000 and 300,000 total square feet, to be constructed one building at a time.
Tenant demand would determine the timing of new construction, though URI anticipates breaking ground on new space every 18 to 24 months. An on-site incubator would assist startups.
According to the report, the first segment of the first phase would be a 50,000-square-foot anchor building that would cost between $12 million and $15 million. The building would rise on “a prominent location” at the end of the tech-park entrance road and in view of the new School of Pharmacy building and science quad. URI would occupy half of the building, while “the remaining rentable space [would] be divided equally between office space (80 percent) and wet-lab space (20 percent) and be absorbed.”
The second building would be similarly split between the university and private users, with URI counting on private companies to fill most of the space at its remaining buildings
URI anticipates being able to lease an average of 20,250 square feet a year for the first 10 years of the life of the park. It said of this space 16,200 square feet would be rented by tenant businesses each year while the school would rent the remaining 4,050 square feet, according to the report. The amount rented by businesses compared with the university would be lower in the first three years, and higher in years seven to 10.
Demand during the first 10 years would result in private tenants leasing a total 164,400 square feet while the university rents 41,100 square feet, the report said. Those estimates will increase if the park can land as an anchor at least one “major” private or public tenant needing at least 40,000 square feet, as office parks nationwide have typically done.
Over time, private businesses are expected to dominate the park. “It’s hard to say what we’re going to see three, four years down the road,” said Alfonso. “But the university has a pretty fair amount of laboratory space. My estimation is that we’ll have a larger proportion of researchers from the private sector than we will from the university.”
While URI expects to pay for part of the park construction through private financing, the study warned that cash from this source could take years to emerge.
“Private sector investment can be expected to follow such public investments in a reasonable period of time if there is a clearly demonstrated commitment from the University and the State to carry the project through its startup phases, a process that is expected to take from [three] to [five] years],” the report said.
According to the report, the school has several sources of public funding to target, including:
Other sources of funding could come from the Rhode Island Industrial Facilities Corp. in the form of taxable or tax-exempt bonds, which could pay for the entire cost of infrastructure and buildings.
“However, at least in its initial development stages, any university research and technology park would have difficulty in meeting debt service requirements for such funding,” the report cautions.
The study said the tech park would be comparable to research parks developed by four universities of similar size: Rensselaer Polytechnic Institute, in Troy, NY; the University of Delaware; the University of Maryland, Baltimore County; and the University of Oregon.
Not studied in detail was the closest potential competitor to any technology campus developed by URI: the 11-acre Gateway Park emerging at Massachusetts’ Worcester Polytechnic Institute. In September, WPI celebrated the completion of Gateway Park’s first building, the $43 million, 125,000-square-foot WPI Life Sciences and Bioengineering Center at 60-68 Prescott St. [BioRegion News, Sept. 10].
WPI said it had leased the entire building the following month [BioRegion News, Oct. 29].
WPI’s plans for Gateway Park call for up to 800,000 square feet of life science, residential, and retail space. The institute hopes in part to grow its biomedical research and bioengineering programs by building on partnerships with the nearby UMass Medical School and private companies.
D’Anne Hurd, Gateway Park’s vice president for business development and general counsel, told BioRegion News via e-mail that URI’s plans for its tech campus bode well for Gateway Park “because it speaks to the vibrancy of the life sciences sector in New England today.”
Currently, Worcester and Boston/Cambridge “anchor one of the largest, most innovative life sciences clusters in the world,” Hurd wrote. “With Rhode Island stepping up, we are seeing the emergence of a life sciences triangle, and each corner of that triangle will have its own unique strengths and capabilities. The University of Rhode Island has many strengths, and I expect their program will be complementary to our work at Gateway.”
URI administrators will be selling legislators on the tech campus at a time when the university is busy constructing its $60 million Center for Biotechnology and Life Sciences, as well as planning a $65 million college of pharmacy, and additional new buildings for the university’s chemistry and nursing schools. Together, these new buildings and the tech park will comprise a “life sciences complex” URI wants to develop within the Kingston campus.
On the legislative front, the tech park will likely get a boost from two newly passed laws: one that exempts URI and two other schools from the state’s competitive bidding requirement “for research or research related activity funded with federal funds or other third-party funds,” while the other charters a new URI Research Foundation to support the tech park.
The first measure allows researchers from URI and from Rhode Island College and the Community College of Rhode Island to team up with businesses to seek project funding from the National Institutes of Health and other federal agencies without having to seek bids for private collaborators.
“This new policy opens the door wide for university/private sector collaborations and is important to future park marketing efforts,” the report states.
The research foundation described in the second measure will be chartered to manage the research park and all of the patents and other intellectual property currently overseen by the URI research foundation, while Alfonso would take over grants accounting work now handled by Robert Weygand, URI’s vice president for administration.
Overseeing the research foundation would be a board of between four and 13 members, including ex officio members Gov. Donald Carcieri, Alfonso, Weygand, and Frank Caprio, current chairman of the state Board of Governors for Higher Education.
Getting the tech park off the ground was the primary reason URI hired Alfonso. He came to the university in March from the University of North Dakota, where he was vice president for research for four years and served as creator and president of the UND Research Foundation for three.
The foundation shepherded the development of UND’s Center for Life Sciences and Advanced Technologies, a $14 million, 50,000-square-foot facility now under construction and set to be completed in March 2008.