Attachment 1 Biotech Center Business Case Biotechnology Business

Attachment 1: Biotech Center Business Case Biotechnology Business Development Center Business Case Prepared For: Prepared By: City Council Approval Myron Borys Date: December 14, 2004 BBDC - Business Plan Vice President, Economic Development

Attachment 1: Biotech Center Business Case Previous Studies Date Report Cost 1991 Technology Business Development Center Study (EDE) est. $75 K 1998 Feasibility Study and Business Plan for the Creation of an Alberta Biotechnology Development Center Est. $30 K 1999 Proposal for Biotech Development Center – ASRA Biotech Task Force Est $30 K 2000 Greater Edmonton Competitiveness Strategy $2 M 2001 Edmonton Life Sciences Institute – Preliminary Prospectus Est. $75 K 2002 Biotech Cluster – Human Resources Best Practices Study Est. $25 K 2003 Feasibility study for a Multi-Tenant Wet Lab Facility $50 K 2004 Biotechnology Business Development Center Business Case $70 K Nearly $360, 000 has been spent directly on the issue of lab space to date. We do not need more studies, but action – the industry need is clear! BBDC - Business Plan 2 2/24/2021

Attachment 1: Biotech Center Business Case Biotechnology Industry Profile • 45 Biotechnology companies in Edmonton directly employing 1, 100 people • 74% of Alberta’s 61 Biotech companies are located in Edmonton • Edmonton is the 4 th largest regional cluster in Canada • Alberta Companies generated $275 M in revenues in 2003 • 13 publicly traded companies in Alberta • Alberta companies raised $87 M in financing in 2003 With 74% of the industry in Edmonton, a facility is becoming a necessity to BBDCretain - Businesscompanies Plan 3 2/24/2021 grow and people.

Attachment 1: Biotech Center Business Case Previous Findings “If the region is able to harness its capacity to perform leading edge research and put its intellectual wealth to work in regional ventures that will help move activity from R&D to production and distribution, then the cluster will flourish. This may all be possible, but it will take considerable new thinking and action by regional stakeholders. ” (2000 Greater Edmonton Competitiveness Strategy) • • • 2003 Feasibility Study Showed: 72% of surveyed companies expect to grow in next 2 -3 years. Lab should be built as a flexible shell structure to accommodate shifting demand. Growth will require 63, 000 – 78, 000 square feet of new space. The mix of space is 57% Lab/R&D, 27% production, 16% admin. 78% of surveyed companies prefer Research Park as location. Tenants are willing to pay market rent for space and prefer to lease BBDC - Business Plan 4 2/24/2021

Attachment 1: Biotech Center Business Case The Opportunity Research Labs • U of A • ARC • Capital Health • Fed/Prov Gov’t Multi-Tenant Wet Lab Facilities ? ? ? Corporate Facilities • Isotechnika • Bio. MS • Biomira • Cytovax • 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 45 biotech companies – up from 17 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 – Letters of intent have been received from 5 biotech companies requesting 46, 000 sf of space • Private sector sees sector as too risky without lease guarantee A window of opportunity exists to solve a critical industry need. BBDC - Business Plan 5 2/24/2021

Attachment 1: Biotech Center Business Case Recommendations 1. That City Council approve the business case for the Biotech Center subject to EEDC being able to secure: • • The proposed financing from the Provincial and Federal governments. Minimum tenant commitments for 50% of the flex space before construction begins $8 M in mortgage financing by the City of Edmonton Access to the necessary City owned land in the Edmonton Research Park BBDC - Business Plan 6 2/24/2021

Attachment 1: Biotech Center Business Case The Proposal • Construct a 71, 000 sf structure adjacent to the ATC consisting of: – 10, 000 sf of fully equipped shared wet lab – 55, 000 minimum sf of flex lab space to be customized to tenant requirements – 5, 700 sf of entrance, common area, coffee shop/light food space. • Shared lab available on a breakeven basis to Edmonton biotech companies. • A high quality building envelope with high flexibility to accommodate various tenants. • Total development cost of approximately $14. 2 M to be financed as $1. 2 M value in kind (Cit land, EEDC services), $5 M in grants, and $8 M as a City mortgage. BBDC - Business Plan 7 2/24/2021

Attachment 1: Biotech Center Business Case The Proposal – Plan view BBDC - Business Plan 8 2/24/2021

Attachment 1: Biotech Center Business Case Design Principles • Based on client needs and consultation • Key elements: – Provide access to shared wet lab space – Make core structure flexible – Do not pre-configure office space – let tenants customize own space and provide a Tenant Improvement allowance – Provide 28 ft. high ceiling to accommodate production space – Provide competitive rental rates and terms – Provide opportunities to interact and access to shared facilities at the ATC • Process was industry driven and inclusive – 2003 Feasibility study surveyed 18 firms – Design team consulted with several biotech firms looking for space in 2004/05 – Steering committee representation – Involvement of Biotech Cluster leadership team and Bio. Alberta BBDC - Business Plan 9 2/24/2021

Attachment 1: Biotech Center Business Case Demand Assessment • Letters of intent for a total of 46, 000 sf received from “A” list: – KMT Hepatech: 7, 000 sf – Ceapro: 18, 000 sf – Virexx: 5, 000 sf (may be taking Cytovax space) – PBR: 6, 000 sf – Kinetana: 10, 000 sf – Big Bangwidth: B list company expressing need • Over past two years, Isotechnika, Altachem Pharma, Cytovax and Zed-I Solutions have absorbed 65, 000 sf in the Edmonton area (only half in the ERP) Target tenant profile developed: “A” list criteria • Local Biotech companies • Demonstrates potential to grow • Becoming financially viable • Second stage company • fully developed business plan • Need for space matches BBDC offer • Typically require 5, 000 sf or more “B” list – includes other technology companies with similar characteristics Companies are waiting for EEDC to act – they will eventually go elsewhere. There is a defined window to take advantage of current demand. BBDC - Business Plan 10 2/24/2021

Attachment 1: Biotech Center Business Case Value Proposition • Why locate in the Edmonton Research Park? – Critical mass- proximity to other biotech companies to potentially share services and reduce cost – Avoid the time and cost to retrofit warehouse space – Rents are comparable or lower – Proximity to Alberta Research Council – Shared wet lab provided at extremely low cost – Availability of other services – meeting space, coffee shop, etc. – Close to International Airport – Able to handle tenant growth (ATC and RC-1) and contraction (sublet to other tenants) Locate at the center of Edmonton’s growing biotech cluster in a facility specifically targeted for your unique company needs, with access. BBDC to a- Business well. Plan equipped 11 lab. 2/24/2021

Attachment 1: Biotech Center Business Case Tenant Example • What would a customer pay (10, 000 sf example): – Building rent, including TI: $13. 75/sf • Tenant gets a TI allowance of $300, 000 towards fit up – – Utilities and taxes: paid by tenant direct: $7/sf Operating costs: $2. 55/sf TOTAL: $23. 30/sf Shared lab, if required: $20/sf inclusive of operating costs, utilities, lab equipment maintenance. Competitive rates for new construction in the City, plus subsidized lab space available at half the cost of commercial space. BBDC - Business Plan 12 2/24/2021

Attachment 1: Biotech Center Business Case Regional Positioning U of A RTF BBDC ARC Space < 5, 000 sf 5, 000 – 10, 000 sf Limited company space Lease Terms Short term, flexible, all inclusive price Flex Space – longer term, Shared Lab – short term Contract drive R&D – use of facilities as required Lab Basic, shared Shared space or customize your own space Pilot plant, test facilities Location On U of A campus Edmonton Research Park Adjacent to Edmonton Research Park Target Tenant Early stage U of A researchers and spinoff companies Second stage growth companies Growing and mature larger companies The BBDC occupies a unique position in the Edmonton region and fills a distinct gap that exists. Letters of support from the U of A and from the Alberta Research Council have been received. BBDC - Business Plan 13 2/24/2021

Attachment 1: Biotech Center Business Case Industry Positioning As companies evolve their space needs change – the Edmonton region has a distinct gap after the incubator stage – a multi-tenant wet lab. BBDC - Business Plan 14 2/24/2021

Attachment 1: Biotech Center Business Case Financial Model Assumptions • Construction estimate verified by independent cost estimator comparing recently awarded projects in the Edmonton region: – Agrivalue Food Processing Business Incubator in Leduc – Agri-food Discovery Place, U of A campus • • • City provides land for project at no cost All City permits and fees paid by project budget No revenues from potential coffee shop 50% pre-leased at completion of construction 5. 4% cost of borrowing (City 25 year rate) Total development cost of $13 M (not including $1. 2 M in land) BBDC - Business Plan 15 2/24/2021

Attachment 1: Biotech Center Business Case Financial Analysis - Results The likely case shows a breakeven business case in line with EEDC’s nonprofit objectives. BBDC - Business Plan 16 2/24/2021

Attachment 1: Biotech Center Business Case Funding Proposal • Leverage City contribution of land services to secure Industry and Provincial/Federal funding of approximately $5 M to create a unique regional resource: the Shared Lab Facility. • City provides land EEDC provides value in kind of approximately $1. 2 M • Western Diversification provides a $2. 5 M grant towards the construction of the Shared Lab facility • Province of Alberta provides matching grant of $2. 5 M towards construction of the Shared Lab facility • Potential corporate sponsors purchase naming rights to new BBDC building or other sponsorship • EEDC would rent space in Flex Lab portion of building at market rates to avoid undercutting private sector development in Park. • EEDC would make Shared Lab available to all companies in the region, not just companies located in the Park, at subsidized rents. • EEDC and ARC to partner in operating Shared Lab as a regional resource. BBDC - Business Plan 17 2/24/2021

Attachment 1: Biotech Center Business Case Why it will work Government Perspective • Seen as providing key regional infrastructure facility to stimulate growth of a strategic industry • Accessible by all firms in the Edmonton region • All three levels cooperating – leverages City contribution • Creates critical mass of biotech companies in Research Park Private Sector Potential Tenants • Solid sponsorship • Relieves pent-up demand opportunity in a high for multi-tenant wet lab traffic, high visibility facility location is appealing. • Access to fully equipped • Developers will not be and managed Shared Lab undercut and will at a very low cost: $20/sf continue to build in the vs $40+/sf. Park. • Access to a new facility • Taxpayers are not with a prestige address subsidizing companies which they can customize directly but are creating as required, at market regional infrastructure. rates or just below. • Tenants are too risky for private developers, so competition with private developers is not perceived. This is a win-win for all parties involved – a much needed regional resource can be created. BBDC - Business Plan 18 2/24/2021

Attachment 1: Biotech Center Business Case Risks • Funding approval not secured – WD, Province, City and Private sector do not step up – Have started lobbying process early – all levels of government are working on the project – Project size and scope can be adjusted to be viable at lower investment levels than$14. 2 M • Industry demand may not materialize – Demand is dynamic – plan to reach full lease-up by end of year 2. – RC-1 and ATC have been at 99% occupancy for a sustained period and were fully leased within 2 years of opening. – B-list companies increase pool of potential tenants in the short term • Cost over-runs – All costs were verified against existing projects in the Park and recent construction elsewhere – Necessary contingencies have been factored in – Complex interior finishing will be financed by tenants BBDC - Business Plan 19 2/24/2021

Attachment 1: Biotech Center Business Case Next Steps • City Council approval – December 14, 2004 • Solidify demand – intent to lease – Tenants waiting for EEDC and City approvals to commit – Target 50% pre-lease of flex space before construction starts • Secure financing – Target year end 2004 confirmation from all levels of government – City approves $8 M loan in early 2005 – final bylaw reading • Begin detailed design – Early 2005 for Q 1/Q 2 2005 construction start BBDC - Business Plan 20 2/24/2021

Attachment 1: Biotech Center Business Case Financial Analysis - Sensitivity The model is most sensitive to the number of total square feet leased (same shell cost spread over more rentable area) and the rent per square foot. The model is less sensitive to variable interest rates BBDC - Business Plan 21 2/24/2021