asu-scottsdale innovation center, (skysong - named for the architectural design
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Team PresentationFebruary 14, 2005
ASU-Scottsdale Center for New Technology and Innovation
Higgins Development Partners + The Plaza Companies
Act Locally – Connect Globally
ASU-Scottsdale Center for New Technology and Innovation
Higgins Development Partners + The Plaza Companies
“La Rambla del Siglo Veinteuno”
Agenda
ASU-Scottsdale Center for New Technology and Innovation
Higgins Development Partners + The Plaza Companies
Project Overview
• Team Resources• Development Strategy• Planning and Design• Community Development
Financial/Business Plan
• Business Structure• Financial Performance• Marketing, Leasing and Technology
Team Resources
ASU-Scottsdale Center for New Technology and Innovation
Higgins Development Partners + The Plaza Companies
Team Resources
Higgins Development Partners + The Plaza Companies
• National and local development experience with ownership perspective
• Significant financial capacity and financing capability
• World-class architects/engineers with a strong local base
• International and local technology/research marketing and leasing experience and capability
• International technology transfer expertise
• Strong local construction management capability and capacity
• Proven local community and governmental relations capabilities
• Ability to attract and leverage venture capital
Team Resources
Higgins Development Partners + The Plaza Companies
Higgins Development Partners, Developer
• National Real Estate Services Company
• Managed more than $4 Billion in Development Value Since 1980
• Company Senior Management Team in Place for more than 15 Years
• Public and Private Sector Experience
• Matrix Organization with Resources in Design Management, Construction, Finance, Management and Operations
• Extensive Phased Campus Development Experience
Team Resources
Higgins Development Partners + The Plaza Companies
Plaza Companies, Co-Developer
• Arizona Based Real Estate Services and Development Company with a Long Standing Dedication to the Local Community
• Managed and Developed in Excess of $400 Million
• 27 Year History and Reputation in Arizona
• NAIOP 2003, Large Developer of The Year
• BOMA, 2001 & 2004, Building of The Year
• Organization Resources and Specialization in Design Management, Construction, Finance, Marketing and Leasing, Management and Operations
Team Resources
Higgins Development Partners + The Plaza Companies
Pei Cobb Freed & Partners - Architects
DMJM Design - Architects
Sundt Construction – Construction Management
C.B. Richard Ellis – Marketing and Leasing
ANGLE Technology Group – Technology Transfer
Denise Resnik and Associates - Communications
Snell and Wilmer – Legal Counsel
Development Strategy
ASU-Scottsdale Center for New Technology and Innovation
Higgins Development Partners + Plaza Companies
Development Strategy
Higgins Development Partners + The Plaza Companies
• Partnering with ASU and Scottsdale to create a world wide destination
• Creating world class design
• Providing international marketing and leasing
• Connecting with global technology transfer
• Making cultural and economic contributions to the community
• Listening and responding to the community context
• Attract creative capital
• Developing an economically viable project for all parties
• Creating a place where people want to be
Development Strategy
Higgins Development Partners + The Plaza Companies
Critical Components of the Development Management process:
• Active ownership participation
• Long term senior management commitment
• Single point of accountability
• Developing an effective matrix organization
• Work Breakdown Structure planning
• Significant up-front planning and intervention
Urban Planning / Architectural Design
ASU-Scottsdale Center for New Technology and Innovation
Higgins Development Partners + The Plaza Companies
Community Development
ASU-Scottsdale Center for New Technology and Innovation
Higgins Development Partners + The Plaza Companies
Higgins Development Partners + The Plaza Companies
ASU-Scottsdale Center for New Technology and Innovation
“Act Locally – Connect Globally”
Higgins Development Partners + The Plaza Companies
Addressing Community Objectives:
• Visually stimulating high quality design
• Scale sensitivity to the south
• Creation of a community accessible vibrant public open space
• Linkage to Indian Bend Wash and Papago Park
• Accessible retail
• Reinforcing the Scottsdale Road corridor in the first phase
• Adding to the cultural heritage of Scottsdale
Community Development
Higgins Development Partners + Plaza Companies
“La Rambla del Siglo Veinteuno”
ASU-Scottsdale Center for New Technology and Innovation
Higgins Development Partners + The Plaza Companies
Creating Linkages with the Community:
• Community College / ASU Program for Higher Education• Scottsdale Unified School District Programs• Development of the “Innovative Pavilion Center”• Strong Community and Faculty Connections through
Internship Programs and Hiring Practices
• Creation of a strong on-going public communications program (locally and globally)
• Significant outreach program during construction
ASU-Scottsdale Center for New Technology and Innovation
Higgins Development Partners + The Plaza Companies
“… as ASU research expands around the globe and reaches the heavens, so do our opportunities and responsibilities at home.”
ASU-Scottsdale Center for New Technology and Innovation
- Dr. Michael M. Crow President of Arizona State University
Business and Financial Plan
ASU-Scottsdale Center for New Technology and Innovation
Higgins Development Partners + Plaza Companies
Higgins Development Partners + The Plaza Companies
Business structure was designed to achieve ASUF’s goals:
• Provide class-A office and research space to ASU at market rental rates
• Generate revenue from the development of the ASU Scottsdale Center
• Obtain control over the land and improvements in the long-term
The Development Teams’ objectives are:
• To be a long-term development partner with ASUF• To create value for the joint venture with ASUF• To develop and manage a state-of-the-art, one-of-a-
kind research and innovation park
Goals and Objectives
Higgins Development Partners + The Plaza Companies
• Pursue long term value creation strategy in partnership with ASUF
• Maximize benefit from land and infrastructure value by deferring repayment
• Create the most efficient financial structure for each development phase and the portfolio as a whole
• Bring strong venture capital relationships to provide funding for innovation and technology transfer
• Define long term exit strategy for the ASUF/Development Team to maximize value and profit
Development Team’s Strategies and Abilities
Development Phasing and Absorption
Higgins Development Partners + Plaza Companies
• The Development Phasing and Absorption assumptions are based on the following concepts:
• Buildings are designed and built on an on-going basis to ensure availability of space at all times
• Phase I and II will define the corridor from Scottsdale Road to the Indian Bend Wash
• Phase III and IV will introduce structured parking to the site
• Phase V completes the development
• Base case proforma assumes a 9-year development horizon
• Average absorption assumption is 137,000 per year
Phase 1: 210,000 GSF Office and 46,000 GSF Retail
Higgins Development Partners + The Plaza Companies
Phase 2: 240,000 GSF Office and 40,000 GSF Retail
Higgins Development Partners + The Plaza Companies
Phase 3: 252,000 GSF Office and 11,000 GSF Retail
Higgins Development Partners + The Plaza Companies
Phase 4: 211,000 GSF Office and 11,000 GSF Retail
Higgins Development Partners + The Plaza Companies
Phase 5: 190,000 GSF Office and 24,000 GSF Retail
Higgins Development Partners + The Plaza Companies
Detailed Absorption Schedule
Higgins Development Partners + Plaza Companies
BEG END DUR (mo) BEG END DUR (mo) BEG END DUR (mo) BEG END DUR (mo)
Phase 1 3/1/2005 1/1/2006 10.00 11/1/2005 3/1/2007 16.00 3/1/2007 1/1/2008 10.00 3/1/2005 1/1/2008 34.00
Phase 2 1/1/2006 9/1/2006 8.00 7/1/2006 1/1/2008 18.00 1/1/2008 1/1/2010 24.00 1/1/2006 1/1/2010 48.00
Phase 3 8/1/2007 8/1/2008 12.00 5/1/2008 1/1/2010 20.00 1/1/2010 11/1/2010 10.00 8/1/2007 11/1/2010 39.00
Phase 4 8/1/2008 7/1/2009 11.00 5/1/2009 11/1/2010 18.00 11/1/2010 11/1/2012 24.00 8/1/2008 11/1/2012 51.00
Phase 5 7/1/2010 5/1/2011 10.00 5/1/2011 11/1/2012 18.00 11/1/2012 1/1/2014 14.00 7/1/2010 1/1/2014 42.00
OFF RET TOTAL % OFF RET Total OFF Rem SF/Month RET Rem SF/Month Months
Phase 1 210,000 46,000 256,000 80.0% 168,000 36,800 204,800 42,000 4,200 9,200 920 10.00
Phase 2 240,000 40,000 280,000 30.0% 72,000 12,000 84,000 168,000 7,000 28,000 1,167 24.00
Phase 3 252,000 11,000 263,000 80.0% 201,600 8,800 210,400 50,400 5,040 2,200 220 10.00
Phase 4 211,000 11,000 222,000 30.0% 63,300 3,300 66,600 147,700 6,154 7,700 321 24.00
Phase 5 190,000 24,000 214,000 50.0% 95,000 12,000 107,000 95,000 6,786 12,000 857 14.00
Size Pre-Leasing Absorption
Design Construction Lease-up Total Phase
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Phase 5
Phase 4
Phase 3
Phase 2
Phase 1
Design Period Design & Construction Construction Period Lease-up period Operating Period
Pro-Forma Assumptions
Higgins Development Partners + Plaza Companies
Market Rental Rates: 2006 $27.00 per sf +7% growth rate2007 $28.89 per sf +7% growth rate2008 $30.91 per sf +3% growth rate2009 $31.84 per sf +3% growth rate2010 $32.79 per sf +3% growth rate2011 $33.78 per sf +2% growth rate2012 $34.45 per sf +2% growth rate2013 $35.14 per sf
Lease Rent Escalations: 3% annual bumpsOperating Expense stop: $8.50 per sf General Inflation: 3%TI Allowance: $45 per sfAssumed Exit Cap Rate: 8.00%
Pro-Forma Results
Higgins Development Partners + Plaza Companies
Total Invested Equity: $34.4 millionTotal Third Party Debt: $275.4 millionTotal Project Budget $309.8 million
Overall Leveraged Project IRR: 12.43%Overall Profit Multiple: 2.4x
Repayment of $81.4 million to the City of Scottsdale over 10 years
ASUF Consulting Fee: 1% of gross income ($2.0 million in 10 yrs)
ASUF Profit: $2.9 million (after “waterfall” distribution)PLUS free and clear long-term ownership
Sources and Uses of Funds
Higgins Development Partners + Plaza Companies
in million of dollars:
Sources Uses
Construction Loan $275.4 Construction Costs $309.8Equity $34.3 Land Lease Payment $81.4Net Operating Income $67.7 Consulting Fee ASUF $2.0Property Sales $355.5 Loan Payback $255.9
Equity Repayment $34.3Profit $49.5
Total Sources $732.9 Total Uses $732.9
CB Richard Ellis Asset Services
Higgins Development Partners + Plaza Companies
Axis Portal – $0.03 – $0.12 psf
CBRETS
Risk Management
Procurement
Global quality standards
Training and Development
Defining the Unique Selling Propositions
Higgins Development Partners + Plaza Companies
• Detailed analysis of the core strengths of the University– Key departments, research groups, etc.– Where do these map onto industry trends on local, regional,
national, international scales?– How do these link in to the existing industry base and the
economy of the locality / region?– What existing external relationships are there which can be
leveraged (research funding, licensing agreements, etc.)
• Identify where there are opportunities for synergy, and development of compelling marketing messages, supported by concrete data and analysis
Marketing
Higgins Development Partners + Plaza Companies
• Development of a detailed marketing plan based on the preceding analysis.
• Focus on promoting relationships rather than ‘selling space’
• Leverage the extensive national and international relationships of the team, combining:– Relationships with many parks, innovation centers,
incubators, companies, trade groups, development agencies, etc. around the world
– Direct experience of marketing and managing successful research parks on an international basis
– Undertaking successful technology transfer and commercialization projects on an international scale
– Creating and growing technology-based companies
Marketing
Higgins Development Partners + Plaza Companies
• Using a wide variety of tools, including:– Industry and market research– Trade shows– Direct marketing, based on carefully-targeted
populations– Promoting to the wider corporate relocation industry– International networks
• Operating a coordinated marketing and sales process– Highly responsive, personal selling to prospective
tenants based on their actual needs
ANGLE Technology
Higgins Development Partners + Plaza Companies
• Specialist international consulting and Venture Management company - bases in US, Europe, Middle East (Qatar)
• All aspects of technology commercialization– Strategy / policy, feasibility, review, investment appraisal, etc.– Operational management – research parks, incubators, companies– New ventures – direct creation of new companies, partnering with owners of
intellectual property (Government Agencies, Universities, Private Sector Companies – UK Ministry of Defence, University of Virginia, British Telecom)
• Clients – private sector, government, universities, economic development agencies
• Professional staff – entrepreneurs, corporate finance, public and private sector management
• Vast global network – research parks, incubation programs, economic development agencies, trade groups, companies, etc
ANGLE Technology
Higgins Development Partners + Plaza Companies
• Directors of 20+ research parks, 15+ incubation programs, often from start-up to maturity
• Unparalleled experience– technology-based economic development– research park creation, marketing, management– university research commercialization– creation and growth of technology-based companies– Creation and management of regional innovation initiatives
• Different operating modes:– Consulting – fee for service, directly time-based– Management contracts – fee for service, primarily based on resource
costs– Principal partner in new venture creation – at ANGLE’s expense, returns
generated through capital gains
Research Park Marketing and Management
Higgins Development Partners + Plaza Companies
• Creation, marketing and management of a successful research park requires a clear focus on:– The objectives of the University– The objectives and needs of tenants– Design and delivery of value-added services to tenants - not
just real estate– Integration with the core activities of the university and the
wider business community– Innovation, Technology Transfer and Commercialization as a
two-way process that can benefit the University and tenants in a variety of ways
Objectives
Higgins Development Partners + Plaza Companies
• Clearly define the objectives and deliverables (with time scales) - e.g.– Construction, space leased, numbers of tenant companies– Tech transfer, research funding, etc. agreements between
tenants and the university– Location of / partnerships with key regional players– Successful attraction of tenants on a national / international
basis– Number of new companies created based on university
technology, attraction of venture capital by tenants, etc.– Faculty consulting, graduate recruitment, internships involving
tenant companies
Management
Higgins Development Partners + Plaza Companies
• Managing the Center as an integrated entity– Operating the Center as a focal point in the regional
innovation system – not just as a real estate development.– Careful planning of space to reflect the tenants needs –
detailed occupancy models linked to the marketing program– Development and delivery of services to support and facilitate
the innovation process, based on ongoing analysis of the local and regional conditions
– Working with the University and other providers to achieve seamless service delivery to tenants and other stakeholders
– Ensuring that financial and development targets are met
Tech Transfer / Commercialization
Higgins Development Partners + Plaza Companies
• Defining the role of the Center in the regional innovation system:– Leveraging the existing assets, AzTE, Arizona
Technology Council, the finance and professional services communities, companies
– Mapping the overall innovation process and positioning the Center as the venue and facilitator, and as service provider where appropriate
Tech Transfer / Commercialization
Higgins Development Partners + Plaza Companies
New Venture Creation
Management Support
Infrastructure Projects
High growth technology-
based businesses
Technology• Universities• Govt.• Companies
Finance• Individuals• Venture Cap.• Institutions
Infrastructure• Research Parks• Incubators• Support
programs
ManagementBusiness / Technical
Expertise & Resources
Conclusions
Higgins Development Partners + The Plaza Companies
Critical Factors:
• A strategic partnership with ASUF and ASU
• Leveraging ASU’s distinctive competence and strategic relationships
• Committing to world-class design which stimulates imagination and creativity
• Personal commitment of the development principals
ACT LOCALLY – CONNECT GLOBALLY
Marketing and Leasing
Higgins Development Partners + The Plaza Companies
Critical Factors:
• Strategically based target marketing based on ASU’s distinctive competence
• International and local leasing expertise, resources
• Existing ASU, CBRE, and ANGLE Technology relationships with a broad range of potential technology based tenants
• Strategic relationships with technology transfer resources
Technology Transfer
Higgins Development Partners + The Plaza Companies
Critical Factors:
• A strategic partnership with ASUF and ASU
• Leveraging ASU’s distinctive competence and strategic relationships
• A Coordinated approach with marketing and leasing plan
• A world wide approach to technology transfers
• Superior start-up management expertise
• Access to venture capital