asu-scottsdale innovation center, (skysong - named for the architectural design

Team PresentationFebruary 14, 2005

ASU-Scottsdale Center for New Technology and Innovation

Higgins Development Partners + The Plaza Companies

Act Locally – Connect Globally



“La Rambla del Siglo Veinteuno”

http://www.pbase.com/ralf/bcn_rambla

Agenda



Project Overview

• Team Resources• Development Strategy• Planning and Design• Community Development

Financial/Business Plan

• Business Structure• Financial Performance• Marketing, Leasing and Technology

Team Resources



Team Resources


• 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, 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


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


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


Higgins Development Partners + 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



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



SKYSONG

RAMBLA

RAMBLA PLAZA

INSTITUTE RAMBLA PLAZA

Community Development






“Act Locally – Connect Globally”


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


“La Rambla del Siglo Veinteuno”



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



“… as ASU research expands around the globe and reaches the heavens, so do our opportunities and responsibilities at home.”


- Dr. Michael M. Crow President of Arizona State University

Business and Financial Plan




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


• 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

Business Structure


Development Phasing and Absorption


• 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


Detailed Absorption Schedule


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


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


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


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


Axis Portal – $0.03 – $0.12 psf

CBRETS

Risk Management

Procurement

Global quality standards

Training and Development

Defining the Unique Selling Propositions


• 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


• 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


• 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


• 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


• 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


• 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


• 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


• 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


• 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


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


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


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


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

asu-scottsdale innovation center, (skysong - named for the architectural design

Real Estate

development company

development value

local development experience

new technology

plaza companiesact

design management

plaza companies national

plaza companiesplaza