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HomeMy WebLinkAbout2011-11-08 PACKET 05.FROM: Danette Parr, Economic Development Director DATE: November 1, 2011 RE: Incubator Update Since the October Economic Development Authority meeting, two incubator proposals have been received and reviewed (attached). The two proposals are different in respect to cost and how services are provided. Meetings were held with representatives from both Genesis Business Centers /Management Matrix and Tapestry Management LLC. As the EDA may recall, staff has previously visited a Genesis Business Center /Management Matrix incubator. Thus, Ryan, Paul, and i visited an incubator that Tapestry Management LLC is affiliated with. The 125,000 sq ft incubator is located in Saint Paul and is known as UEL (University Enterprise Laboratories, INC). UEL is an incubator that is designed to support and grow early -stage bioscience companies (information attached). Currently, the building is at full occupancy with 25 different companies, and has a waiting list. The incubator offers well designed and maintained common areas, while offering a range of lab /office spaces to meet the needs of the tenant (some companies work out of very basic garage space for very low rent, while others work in "clean lab space" that has higher grade finishes and thus higher rents). UEL offers an environment that encourages a feeling of synergy between tenants by facilitating workshops, social gatherings, communal supplies and shared conference room spaces. After reviewing the proposed fee structure and services offered by each proposal, staff recommends that if the current Public Safety /City Hall becomes an incubator, that the City work with Tapestry Management LLC to market and manage the site. While Genesis Business Centers /Management Matrix offers a quality service as well, staff feels the Tapestry Management LLC proposal may be a better fit for the City at this time. Staff is asking for feedback from the EDA in relation to the level of interest to have the current Public Safety /City Hall become an incubator in the future, versus another use. If the EDA would like us to continue pursuing the incubator concept, staff would ask the EDA to authorize that staff negotiate with the management company of choice. If the EDA gives direction to staff to negotiate with either Genesis Business Centers /Management Matrix or Tapestry Management, the chosen company will be invited to make a presentation to the EDA at an upcoming meeting. If the EDA ultimately recommends the incubator concept and chooses one of the two proposals, the recommendation will be brought to the City Council for consideration. "TAPESTRY MANAGEMENT, LLC Solving problems. Serving people. October 11, 2011 Mr. Paul Poncin Associated Bank 171 Snelling Avenue North St. Paul, MN 55104 RE: Cottage Grove Business Incubator Dear Paul- Thank you for meeting with Greg LaSalle and me to discuss the potential of converting the existing Cottage Grove city hall into a business incubator. We are very enthusiastic about working on what could be an exciting project for the city of Cottage Grove. We would propose Tapestry Management to provide the day -to -day management as well as other support services through Tapestry Management's sister companies, The Accounting Department and TASK Home Services, as follows: Our Understanding of the Project Objectives, Goals and Tasks: The City of Cottage Grove intends to convert its existing 24,148 square foot city hall into a business incubator. The overall objective is to provide office space at a subsidized cost in order to attract new businesses to Cottage Grove. The incubator will not be industry specific with a focus on creating jobs rather than supporting one industry. Business incubators in Minnesota offer varying value propositions to attract tenants. After researching other incubators in the state, the model the City of Cottage Grove is considering is most similar to the Owatonna Business Incubator. The Owatonna Business Incubator program was established in 1988 and began providing space to startups in 1998 when they opened a 40,000 square foot manufacturing and office building. Since then, they've worked at least 250 new businesses. The incubator offers discounted rent with incremental increases over time. They also provide some business counseling services which are provided through the Small Business Development Center for Steele County. Tapestry Management works with the Small Business Development Center and can provide similar services at the Cottage Grove Incubator. Examples of other incubator models in Minnesota include: • Genesis Business Center — The Hopkins based Genesis Business Center is a for profit incubator which provides free space and access to business counseling services to companies working in high tech fields. The space and services are provided in exchange for an equity position in the company. 2001 Killebrew Drive, Suite 308 / Minneapolis, MN 55425 / Phone: 952 -854 -8800 / Fax: 952 -854 -4434 / web: wwwtapestrymanagementcom Equal OPVortontey Emplope� Mr. Paul Poncin October 11, 2011 Page 2 North Minneapolis Business Center —The North Minneapolis Business Center offers office, manufacturing and laboratory space at roughly $12 per square foot gross. Additional services include secretarial and receptions support, internet services and business counseling at a reduced fee. University Enterprise Laboratories (UEL)— UEL is located in St. Paul, in between the University of Minnesota's Minneapolis and St. Paul Campuses. UEL is a market rate facility offering access to high end wet lab space, as well as shared amenities which range from shared conference space to shared scientific equipment. Valley Technology Park — Valley Technology Park is located in Crookston and partners with the University of Minnesota, Crookston. They offer highly flexible lease terms and attractive pricing. Deliverobles to be Provided Tapestry Management will develop and implement a marketing plan, provide leasing services and management services, including accurate, timely reporting of leasing and financial activity to the City of Cottage Grove. We will work with City staff to develop a budget for marketing materials and initial budget for cash flow planning. Leasing and Marketing: Tapestry Management will market the advantage of highly competitive rental rates with a focus on working with various entrepreneur supporting organizations, such as Life Science Alley, The Minnesota Entrepreneurs, Inc., Minnesota Chamber of Commerce, Minnesota Department of Economic Development and entrepreneur programs within local universities. Accounting Services: The Accounting Department, LI.0 will provide leadership and day -to -day oversight of the accounting and financial reporting tasks for the City of Cottage Grove. Those tasks will include: • Maintain and track leasing of office space and parking in Yardi software system; • Maintain accounting records; • Process payables in a timely manner and obtain purchase discounts when available; • Process and pay payroll in accordance with Management policy; • Provide timely and accurate financial reports monthly. Monthly reports include Statement of Financial Position, Statement of Activities and Statement of Cash flows; • Provide timely and accurate budget forecasts and cash flow projections at least annually; • Prepare annual financial reports and coordinate with outside CPA firm for annual audit and issuance of statements, if applicable. • Other reports as required by the City of Cottage Grove. Mr. Paul Poncin October 11, 2011 Page 3 Maintenance Services: TASK Home Services will provide hourly general maintenance services on an "as needed" basis, including on call emergency services. Tapestry Management will outsource all specialty maintenance needs. Fee Structure and Invoicing: Tapestry Management will provide property management and accounting services based on 4% of rental revenue billed each month. Lease commissions will be charged on a percentage of the gross rent not to exceed 6 %. Our accounting services are included in the management fee. Fees are due on the first of the month for services within the month. The services will continue unless a 30 day notice has been given to terminate, at which time all books and records will be returned to the City of Cottage Grove. Maintenance services provided by Task, are charged for actual time worked and will be billed separately and included in operating expenses. Rates typically are $50 per hour or less, depending on the time and skill necessary for the job. Tapestry Management Experience: Tapestry Management has over thirty years of experience with property management, owner's representation, risk management, and real estate development. Our privately held firm offers management and financial consulting for private, non - profit, and public sector organizations backed with an outstanding reputation for integrity, industry knowledge, and customer service. We understand risk, operational and on -going maintenance concerns, and the importance of adhering to budgets and time frames. Tapestry Management's experience at University Enterprise Laboratories, Inc. (UEL) best exemplifies its ability to work with a non - profit focused on creating an environment promoting job growth. UEL is a non - profit organization that operates a biotech incubator which opened in 2005. Its mission is to attract high tech, life science startups to the Twin Cities. Tapestry Management has been the onsite property manager since UEL's origin. Since opening its doors, Tapestry Management has helped UEL increase its occupancy from 55% to 100 %, providing it with the financial stability to focus on its mission and graduating several tenants while maintaining high occupancy rates. In addition to providing oversight of UEL's day -to -day operation in property maintenance and leasing, Tapestry Management has been essential to UEL's success in organizing several tenant programs, such as internal tenant committees, Lunch and Learn sessions and other networking events. Mr. Paul Poncin October 11, 2011 Page 4 Owner Participation and Services: We find it most effective when the Owner designates one individual as the primary and consistent contact for the Owner Representative. This enhances communication and allows faster and more efficient decision making concerning the properties. We will meet as often as the Owner desires to review reports or operations. Additional reports will be developed as directed by Owner. We look forward to working with the City of Cottage Grove to provide the services and are available to start as soon as directed. Sincerely, Jut $t Susan M. Michaletz President c: Danette Parr Ryan Schroeder Greg LaSalle Tom LaSalle University Enterprise Laboratories The Initial Concep Provide laboratory space to early -stage bioscience companies, some of which are launched by U of faculty. The Initial Financine $19.1 million mortgage debt (also secured by City of St. Paul $6 million LOC) $9.6 million donations (half from the University of Minnesota Foundation) UEL Sponsors Included; • City of St. Paul • Xcel Energy • Allina • 3M • Boston Scientific • University of Minnesota • Ecolab • Guidant • Medtronic Foundation • Dorsey & Whitney • University of Minnesota Foundation • Surmodics The Result 126,000 gross square feet of laboratory and office space leased to 2$ tenants employing 250 people. More than a Building UEL offers several distinctive amenities to its biotech tenants: • Shared autoclaves, centrifuges, and glass washing equipment • Reverse osmosis /deionized water • Shared digital copier /scanner, color printing, fax machine • Shared conference rooms Planned Expansion • 40,000 square foot expansion • Up to 30 separate lab /office spaces • Will generate 200+ construction jobs and + 125 biotech jobs ).il,l. G RA lli.i.- I -,v Graduates of UEL are tenants that began as early -stage bioscienee companies which have grown into viable entities that require larger facilities. Harland Medical Systems; OrthoCor Medical; Segetis; and Twin Star Medical are all UEL Graduates, The UEL "Garage" is meant to provide a "no- frills ", easily accessible and cost - effective space for entrepreneurs seeking to develop new technology that need access to lab space and other technical facilities. The 3,700 square foot facility provides space at a cost of less than $12.00 per square foot along with six month lease terms. Garage tenants also benefit from shared amenities, such as conference space and shared scientific equipment. Amboo Bioceuticals; Aria, CV; Biomedical Frontiers, Inc.; Ecell Innovations, LLC; MRI Robotics; and Loose River Research are ail UEL "Garage" T enants. 1 -011 UFAAT"NANTS Apothekon, Inc. Ativa Medical Berg- Johnson Ceilectis ChRi Laboratories Cima Nanotech, Inc. Ewald Consulting Group, Inc. Exosome Diagnostics, Inc. Gel -Del Technologies, Inc. Innovative Surface Technologies, Inc, (ISurTec) Kingfisher Biotech McRoberts Real Estate Minnesota Lions Eye Bank Optomee, Inc. Phibro EPG Prism Research, LLC The Shaw Group Syntiron, Inc. University of Minnesota Institute of Child Development University of Minnesota Licensing Center University of Minnesota Office of Technology Commercialization (OTC) University of Minnesota venture Center Upsher -Smith Laboratories, Inc. VWR i THE COTTAGE GROVE CITY HALL SCOPE OF SERVICES OVERVIEW The Management Matrix and joint venture partner Genesis Business Centers Ltd is a Management Organization offering asset and property management services for income property in transition. Two different partners with two different network sets: The Management Matrix with the real estate traditional brokerage industry Genesis Business Centers with the entrepreneur's network Our experience and knowledge in property management has been acquired over 30 years of experience. We take pride in good customer service; Through a strong team effort, projects have moved toward the goals established; Understanding management principles and creatively seeking solutions leads accomplishes the tasks; Our reputation has been built on for 30 years; Goals and objectives are developed in order to enhance the value and aesthetics of the property; We see three phases to this project: Phase I, the preoccupancy marketing period of January to October. This would involve reviewing existing documents to plan smaller space possibilities; Determining site benefits to use in marketing the spaces; Determining if there are optional benefits to offer such as preferential financing; Determining competition from other cities and buildings; Developing a marketing program to attract small businesses; Build visibility of the proposed incubator program and generate a buzz among members of the entrepreneurial community including both the inventors /entrepreneurs as well as the professional service providers such as patent attorneys, securities counsel, investors and the like; We would do special marketing of services and conduct not less than four quarterly programs to be held in cottage Grove where entrepreneurs would be convened to get them on the ground and comfortable with the city and the facility; We will assist in developing a website for the purpose of promoting the city and its incubator spaces; Determine the likely market support for the proposed project; Understanding the Cities vision expectation; Understanding the Cities financial expectations; Developing a budget for the build out period and 2012; Selecting preferred vendors for architectural, legal contracts and construction; Prelease spaces to businesses in anticipation of October 2012; Phase II, the relinquishing of the space by the city and readying for small business occupancy. Phase II importance will be more on property management which will coincide with marketing; The Management Matrix will accept day to day property management responsibilities; Learning the idiosyncrasies of the building; Design and construction oversight of leased space; Continued marketing to promote the building for lease; Monthly accounting reports to building owners; Monthly building reports to building owners; Handling of maintenance and repairs as needed; Phase III, maintaining a stabilized leased building to maximize the cities ownership. Phase II importance will be more on property management services to maintain customer satisfaction in order to retain tenants; The Management Matrix will continue the day to day property management responsibilities; Design and construction oversight of leasing space as tenants vacate; Continued marketing to promote the building for lease; Monthly accounting reports to building owners; Monthly building reports to building owners; Handling of maintenance and repairs as needed; Timelines: Phase 1 10 months starting January 1, 2012 Phase II 14 months starting October 1, 2012 Phase III ongoing starting January 1, 2014 Proposed cost of Services: Phase I: Genesis Business Centers Ltd $1000 per month for 10 months; The Management Matrix $ 500 per month for 10 months; Marketing costs Genesis The quarterly marketing promotional is included in the above costs; Transportation costs Genesis $250 monthly maximum calculated a $30 cents per mile for the purpose of commuting to the facility and meeting with potential users as well as commuting to the quarterly programs; Leasing Commission Mgt M 7 °/d 1't year, 6 %/ 2 "d year, 5 %/ 3` year, 4 %/ 4th year, 3 %/ 5 year, 2 %/ 6 year and 1% remaining years; Lease Commission Genesis As additional incentive, the City of Cottage Grove agrees to compensate Genesis 25% of the rental income charged to and collected from the incubator tenants, (those tenant companies first identified by and brought across the threshold by Genesis) above a base line of $8 per square foot net rent; Phase II: Genesis Business Centers Ltd $1000 per month for 14 months The Management Matrix 6% of the rents with minimum monthly management fee of $1000. Marketing costs marketing costs for the quarterly promotion is included in the above costs. Transportation costs $250 monthly maximum calculated a $.50 cents per mile for the purpose of commuting to the facility and meeting with potential users as well as commuting to the quarterly programs; Leasing Commission 7 1 year, 6 %/ 2 nd year, 5 %/ 3 rd year, 4 %/ 4 year, 3 %/ 5 year, 2 %/ 6 year and 1% remaining years. Option to purchase the building, by The Management Matrix, between months 24 to 36 at an option price of $1,800,000.