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Biotechnology Center Amendments
Prepared For:City Council Approval
Date: December 12, 2006
Prepared By:Myron Borys
Vice President, Economic Development
www.edmonton.comDecember 12, 2006
BBDC Amendment Page 2
The Opportunity – a recap
• A known gap in regional facilities exists creating a barrier to growth for emerging biotech companies.
• The biotech industry is a knowledge based growth industry
– Edmonton has 60 biotech companies employing 2,000 people – up from 17 companies ten years ago
– Global industry is $60 B, growing at 25% annually
• Demand exists in the Edmonton area– 2003 Market Feasibility Study showed demand for 68,000 sf– Six local companies have pre-leased 31,000 square feet of space in the BBDC
• Private sector developers see the Biotech sector as too risky without lease guarantee
U of A•ARC•Capital Health•Fed/Prov Gov’t
•Isotechnika•BioMS•Biomira•Virexx•Maxima
Multi-TenantWet LabFacilities
A window of opportunity exists to solve a critical industry need.A window of opportunity exists to solve a critical industry need.
RESEARCH COMMERCIALGAP
www.edmonton.comDecember 12, 2006
BBDC Amendment Page 3
Regional Positioning
As companies evolve their space needs change – the Edmonton region has a distinct gap after the incubator stage – a multi-tenant wet lab.
As companies evolve their space needs change – the Edmonton region has a distinct gap after the incubator stage – a multi-tenant wet lab.
www.edmonton.comDecember 12, 2006
BBDC Amendment Page 4
Recommendations
1. That the $1,017,000 allocated towards land be re-allocated towards building upgrades.• This is a condition of Provincial funding• Funds have been reserved since 2004 in Land Enterprise
and there is no budget implication
2. That Council accept the new budget profile for project 05-99-3002.• Project is in approved 2007 capital budget• Lower borrowing requirements for the City of Edmonton
will be reflected
www.edmonton.comDecember 12, 2006
BBDC Amendment Page 5
The Proposal
• Lease an existing building in the Edmonton Research Park from the Government of Alberta for 25 years– Nominal Rent ($1/year) for the first 5 years– 50/50 share of profits in the remaining 20 years– EEDC responsible for all capital upgrades– EEDC responsible for all operations and sub-leases– EEDC to negotiate sub-lease with potential tenants
• Total space available is comparable to original proposal– Proposed Building:
• 67,722 square feet overall• 50,769 square feet leasable (50/50 lab and office)
– Most recent design was for 67,000 square foot structure consisting of 12,000 square feet of shared lab and 55,000 square feet of multi-tenant space
www.edmonton.comDecember 12, 2006
BBDC Amendment Page 6
Since December 2004
• All conditions of the December 14, 2004 City Council approval have been met:
– Secured $2.5M in funding from Western Diversification
– Secured $2.5M in funding from Alberta Innovation and Science
– Pre-leased over 50% of the multi-tenant space
– City of Edmonton has allocated $1,017,000 towards land and secured up to $13,000,000 in loans towards the project
Tenants Committed – Dec. 2006
(square feet)
Potential Lead Tenant 28,000Helix BioPharma5,000Novokin6,000Sci-Med 5,000Scanimetrics 8,000KMT Hepatech 3,000Keystone Labs 2,000CanBiocin 2,000
TOTAL 59,000
Note: demand exceeds available space, but some tenants may drop off.
Tenants Committed – Dec. 2006
(square feet)
Potential Lead Tenant 28,000Helix BioPharma5,000Novokin6,000Sci-Med 5,000Scanimetrics 8,000KMT Hepatech 3,000Keystone Labs 2,000CanBiocin 2,000
TOTAL 59,000
Note: demand exceeds available space, but some tenants may drop off.
www.edmonton.comDecember 12, 2006
BBDC Amendment Page 7
Proposed Funding Breakdown
Funding Source Description ValueProvince of Alberta – Alberta Innovation and Science
Funding to be applied towards leasehold improvements
$2,500,000
Government of Canada - Western Economic Diversification
Funding towards building renovations
$2,500,000
City of Edmonton Funding towards leasehold improvements and building renovations
$1,017,000
Self-liquidating debentures and loan to EEDC
Funding towards all project costs. Includes $1,000,000 of contingency.
$6,483,000
TOTAL $12,500,000
www.edmonton.comDecember 12, 2006
BBDC Amendment Page 8
Expected Cash FlowsCash Flow Item Description First Full Year Values
Total Revenues (based on $10/sf plus operating and utilities)
Includes rent, management fee, common area expense, and utilities
$1,459,298
Operating costs Includes operating and maintenance, utilities, insurance, etc.
$996,637
Vacancy Allowances Rent and occupancy cost based on 5% vacancy
$71,661
Debt repayment Interest and principal on outstanding loan of $5,500,000 (excluding $1,000,000 contingency)
$391,000
Net Cash Flow $0 (Breakeven)
Capital Reserve Allocation over the course of 10 years to create a $2,000,000 reserve fund for expected capital upgrades.
$2,000,000
• In first full year of operation, Biotech Center expected to operate on a breakeven basis
www.edmonton.comDecember 12, 2006
BBDC Amendment Page 9
Justifications
• Demand exists– Pre-lease commitments exceed available space
• Economic Impact– Biotech Center will grow and retain companies in a key
sector– Commercialization of U of A research
• Fills Infrastructure Gap– Enterprise Center downtown cannot accommodate
certain tenants– Need for graduation facilities for incubators
• Too Risky for Private Sector– Without lease guarantees, private sector developers will
not build this type of facility
www.edmonton.comDecember 12, 2006
BBDC Amendment Page 10
Next Steps
• Revise funding agreements– City of Edmonton, Western Economic
Diversification, Alberta Innovation and Science
• Sign binding offers to lease with tenants
• Negotiate 25 year lease with Province
• Begin design and construction planning– Some urgency to spend WD funds