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HomeMy WebLinkAboutDMCC Resolution No. 165-2025 (Approving Request For Private Development Funding (BioLabs Rochester Project))DESTINATION MEDICAL CENTER CORPORATION RESOLUTION NO. 165-2025 A RESOLUTION APPROVING REQUEST FOR PRIVATE DEVELOPMENT FUNDING (BIOLABS ROCHESTER PROJECT) The following Resolution was offered by Randy Schubring, seconded by Kim Norton. BACKGROUND RECITALS A. Under Minnesota Statutes, Section 469.41, subdivision 13, a project must be approved by the Destination Medical Center Corporation (“DMCC”) before it is proposed to the City of Rochester (the “City”). The DMCC must review the proposed project for consistency with the Development Plan, adopted by the DMCC on April 23, 2015, as amended (the “Development Plan”). B. The Development Plan established certain goals and objectives of economic development, which include creating approximately 35,000 – 45,000 new jobs, leveraging the public investment to attract private investment, attracting new business, and expanding existing businesses, as well as implementing strategies to attract, retain, and foster the development of a highly skilled workforce. The Development Plan also directed a comprehensive strategy to address all facets of building and sustaining the development district boundaries as adopted in the Development Plan (the “Development District”). C. The Development Plan further states that the Destination Medical Center (“DMC”) funding should provide gap financing to support extraordinary growth in the market. D. The DMCC approved the 2025 Five Year Capital Improvement Plan (the “2025 CIP”) on September 26, 2024 and approved the projects set forth in the first year of the 2025 CIP as public infrastructure projects within the meaning of Minnesota Statutes Section 469.40, subdivision 11, and consistent with the Development Plan. The 2025 CIP was later approved by the City. E. The 2025 CIP provided funding for a Strategic Development Fund, which was first approved in the 2021 Five Year Capital Improvement Plan. The Destination Medical Center Economic Development Agency (the “EDA”) has informed the DMCC that a portion of the funds from the Strategic Development Fund are available for allocation. As set forth in Exhibit A, the EDA requests that the DMC allocate funds in an amount not to exceed $8,000,000 from the Strategic Development Fund to the Proposed Project (as hereinafter defined), subject to the conditions set forth in this Resolution. F. The DMCC is charged with evaluating whether a proposed project (i) is consistent with the DMC vision, goals and objectives; (ii) is consistent with the Development Plan and any updates; (iii) is consistent with adopted strategies, phasing and capital improvement planning; (iv) is financially viable; and (v) complies with or support the economic-fiscal goals and objectives of the DMC initiatives (collectively, the “Evaluation Criteria”). 2 G. On April 11, 2025, Rochester 2 Associates, LLC (the “Applicant”), an affiliate of the developer of Two Discover Square, submitted a joint funding application (the “Request”) for funding to facilitate the construction of a professionally operated shared lab in Two Discovery Square (the “Proposed Project”). H. Staff from the City and the EDA have reviewed the Proposed Project in light of the Evaluation Criteria. I. The EDA has recommended approval of the Proposed Project based on the summary and recommendations attached hereto as Exhibit A. The recommendation of approval is based on the application of the Evaluation Criteria. J. As set forth on Exhibit A, the Proposed Project sufficiently advances the goals of the Development Plan. K. The DMCC has considered the recommendation of the EDA and based on the materials submitted, has independently evaluated whether the Proposed Project is consistent with the Development Plan and the goals of the DMC. RESOLUTION NOW, THEREFORE, BE IT RESOLVED, by the DMCC Board of Directors, that the DMCC approves the Request based on the following findings of fact: 1. The Proposed Project meets the definition of a public infrastructure project within the meaning of Minnesota Statutes, Section 469.40, subdivision 11. 2. The Proposed Project lies within the Development District. 3. The Proposed Project is consistent with the goals and priorities set forth in the Development Plan. 4. The Proposed Project may not proceed without the public funding, and the requested DMC funding will provide gap financing to support extraordinary growth in the market, as contemplated in the Development Plan. 5. The level of public funding requested is consistent with the economic goals contained in the Development Plan related to public and private investment. The economic development opportunity provided by the Proposed Project will be unprecedented in the region, creating a unique economic driver and job creator. 6. The Proposed Project, as the only BioLabs location in the Midwest, will serve as a regional destination for high-growth Health Tech companies, filling a market need within the region and catalyzing new interest in the DMC as a destination for development and investment. 7. The Proposed Project will generate approximately sixty (60) new jobs, and up to eighty (80) new jobs by its fifth year of operation, contributing to economic growth and workforce development in the region and sustaining the City as a global destination medical center. 3 8. The Proposed Project will serve as an anchor within the subdistrict for the successful establishment and clustering of new start-ups, diversifying the local economy and broadening the public tax base. 9. The infrastructure investment included within the Proposed Project has the potential to provide returns at levels in excess of other investments. 10. The Proposed Project will make optimal use of existing infrastructure within the Two Discovery Square project, consistent with the City’s objectives for sustainable urban development and efficient land use. 11. The Proposed Project will incorporate elements of sustainability in line with goals set forth in the Development Plan, building upon the previous developments within Discovery Square. 12. The Proposed Project will serve as a catalyst or anchor development in the subdistrict. 13. The Proposed Project will support Two Discovery Square and the activation of the area which was achieved through Two Discovery Square by the introduction of commercial space and building amenity uses on street level. 14. The Proposed Project has provided sufficient evidence of financial viability. 15. The Proposed Project supports the economic strategies of the Development Plan by providing uses and amenities that support strategic growth in the DMC Development District and/or specific business development and economic development strategies that are adopted as part of the Development Plan. BE IT FURTHER RESOLVED, that the DMCC Board of Directors approves allocating funds reserved for the Strategic Development Fund to the Proposed Project in an amount not to exceed $8,000,000 subject to the following conditions: 1. The Applicant must provide evidence of financing for the Proposed Project satisfactory to the DMCC Board of Directors, such evidence to be presented within such time period as set forth in the City’s approved development assistance agreement. 2. The Proposed Project must meet all City requirements, including, without limitation, execution of a development assistance agreement by and between the Applicant and the City. 3. Applicant must meet all requirements of DMC funded projects, including, without limitation, paying prevailing wage, committing to targeted business and workforce utilization and the use of American-made steel, and energy and sustainability standards. 4. Applicant must commit to preserving the as-built and furnished space of the Proposed Project, as a “shared lab” for a period of not less than ten years (120 months). 4 a. “Shared Lab” is defined as collaborative, multi-user space designed to support research, innovation, and company formation across a wide variety of life science, MedTech, and healthcare disciplines. b. In addition to technical and scientific equipment, the “Shared Lab” must sponsor a variety of engagement activities (i.e. networking, mentoring, and education) and play host to an assortment of ecosystem partners that provide critical expertise across a diverse group of business, education, and service provider categories. c. Should the Applicant fail to preserve the shared lab as described above, the Applicant will provide the DMCC an amount equal to $66,667 for each month short of the expected ten-year operating period. d. Applicant must afford DMCC the opportunity to approve the operator, as well as any subsequent changes in operator (the “Operator”). 5. The Operator must provide four (4) no-cost office spaces to business recruitment and retention partners, including, but not limited to: the EDA, Medical Alley Association, Greater MSP, Mayo Clinic, RAEDI, and the University of Minnesota. Partners for the four (4) spaces will be determined by the EDA on an annual basis. 6. Any DMC funded investments within the Proposed Project may not be removed from the Proposed Project. 7. The EDA, on behalf of the DMCC, shall have the right to seek an independent third- party evaluation of estimated project costs before any agreement is finalized by the Applicant. 8. The DMCC shall not provide additional capital for operations or maintenance of the Proposed Project. 9. Applicant must provide, at the reasonable request of the DMCC, EDA, or City, financial and operating progress reports to ensure the Proposed Project, as-built, is consistent with the Proposed Project as-approved in this Resolution. 10. Any modification to the scope of the Proposed Project, as set forth in Exhibit A, will be subject to subsequent approval by the DMCC. 11. The DMCC Board of Directors shall receive periodic updates from the EDA as to the status of the satisfaction of the conditions set forth in this resolution, the Proposed Project expenditures, and the ongoing status of development of the Proposed Project. BE IT FURTHER RESOLVED, that the DMCC Board of Directors hereby authorizes the EDA to act as its representative and agent, with periodic updates from the EDA to the DMCC Board of Directors, in any entity or body created by or in connection with the Proposed Project for the purpose of overseeing various operational components of the Proposed Projects “shared lab” including, without limitation, tenant selection and review, facility alterations and improvements, or other general oversight of the shared lab. 5 BE IT FURTHER RESOLVED, that DMCC Resolution No. 51-2017 is incorporated fully herein by reference. BE IT FURTHER RESOLVED, that the Chair or the Treasurer of the DMCC is authorized to transmit this Resolution to the City, and to take such actions as are necessary and appropriate to effectuate the findings and approvals of this Resolution. 31605562v3 The question was on the adoption of the Resolution and there were YEAS and NAYS,as follows: BOARD OF DIRECTORS Destination Medical Center Corporation YEA Douglas M.Baker,Jr. James R.Campbell Kim Norton Randy Schubring Mark Thein Pamela Wheelock Paul D.Williams OPTED on May 22,2025. ATTEST:~----~----- ela Wheelock,Chair Destination Medical Center Corporation NAY OTHER 7 0 X X X X X X X EXHIBIT A Discovery Square Infrastructure: BioLabs Rochester To: DMCC Board of Directors From: DMC EDA Date: May 16, 2025 Request of the Board of Directors: Designate the proposed project as a DMC “public infrastructure project” consistent with the DMC Development Plan and approve DMC support for BioLabs-Rochester not to exceed $8M for the construction of shared lab infrastructure in Two Discovery Square. Reasons for Action • Awareness of Rochester as a life sciences innovation destination is low (31%) o Partnering with a global innovation incubator will help us introduce Rochester to industry in a new way. • Our market is perceived as being small, isolated, and unknown o Creating a world-class innovation incubator in this market will make us competitive with the bigger, coastal markets. • 90%+ of expanding life science companies don’t consider Rochester when making a location decision. o Turn-key space lab makes the potential move to Rochester easier, safer, and faster. Vision: BioLabs-Rochester is envisioned to be a collaborative, multi-user laboratory space designed to support research, innovation, and company formation across a wide variety of life science, MedTech, and healthcare disciplines. Values: Robotically-optimized, Affordable, High-quality, Flexible, Collaborative, Dynamic Goals and Metrics of the Shared Lab (by year 3) • Collaborations (clinical trials, know how agreements, joint development agreements, etc): A minimum of 10 active collaborations with Mayo Clinic entities at all times. • Robotic automation: 200% increased efficiency in lab activities. • Knowledge Sharing (mentorship, workshops, networking, fund raising): A minimum of 24 shared lab-hosted events annually. • Revenue Generation/Fundraising (dilutive and non-dilutive): Total annual lab tenant follow-on funding of at least $10M annually. • Lab Space Utilization (% occupancy): Occupancy rates of 80%+ • Employment (total headcount of tenants): Total lab employment of 50 FTE. Primary Customer Groups for Discovery Labs 1. Mayo Clinic Innovator 2. International Innovator 3. Regional Innovator (+/- 100 miles) 4. Strategic Acquirers & Ecosystem Partners BioLabs Track Record • Over 1,600 start-ups supported • More than $30B of external funding by tenants • More than 30 IPO’s of tenant companies • More than 50 mergers & acquisitions of tenant technology Five Things That Make This Opportunity Extraordinary • Revenue Effect – we are investing in infrastructure that has the potential to return at levels far beyond other DMC investments. • Global Innovation Brand – Rochester will become part of a global network of innovation hubs, dramatically increasing the exposure this market receives. • Center of Gravity – Rochester will be the lone Midwest BioLabs location, creating a regional destination for high-growth HealthTech companies in our area. • Defensive Position – As the lone Midwest BioLabs location, we will increase our chance of retaining local innovations that have historically left this market. • Talent Attraction and Retention – Having in innovation engine like BioLabs, facilitating the creation of new technology companies, creates an additional draw in this market for in-demand talent to come, and to stay. • Employer Diversification – BioLabs can generate new employers in this region, creating alternative employment opportunities at a greater scale than we have historically experienced. MEMO To: DMCC Board of Directors From: City of Rochester, Administration Date: April 17, 2025 Subject: Consideration of Shared Lab Project in Two Discovery Square GSIA Request The City of Rochester provides the following update on the proposed Shared Lab Space Project at Two Discovery Square. Mortenson Properties (the "Applicant") has submitted the concept for consideration as a potential DMC Public Infrastructure Project, and the City finds that the project aligns with the Destination Medical Center (DMC) vision and the shared goals of both the City and DMC. The City is supportive of the project's alignment with key DMC goals, particularly in fostering the growth of the biosciences sector and enhancing the innovation district in downtown Rochester. This shared lab space has the potential to contribute meaningfully to the ongoing development of Discovery Square and the broader DMC vision. Project Overview: The proposed project involves the development of approximately 16,000 square feet of shared lab space on the 3rd floor of Two Discovery Square, located at 415 2nd Avenue SW (parcel 64.02.12.085691). Mortenson Properties owns the building and leases the land from Mayo Clinic under a Ground Lease dated October 15, 2020. The project will offer a flexible environment for startups, growing companies, and researchers. BioLabs is expected to secure a master lease for the entire shared lab area, subleasing to individual lab occupants. BioLabs-Rochester Vision: BioLabs-Rochester is envisioned as a collaborative, multi-user laboratory space designed to support research, innovation, and company formation across a wide variety of life science, MedTech, and healthcare disciplines. Key characteristics include: •Robotically-optimized •Affordable •High-quality •Flexible •Collaborative •Dynamic Projected Success Metrics: Based on successful BioLabs operations in other locations, by Year 5, BioLabs- Rochester is projected to achieve: •24 tenant companies •80 tenant employees •$40M annual external funding •2 exits or acquisitions •5 graduations to larger space •50 total companies incubated •17 clinical trials Alignment with DMC Goals: Our preliminary review suggests that the project aligns with several of the DMC Development Plan's goals: •Center of Gravity: As the lone Midwest BioLabs location, Rochester will become a regional destination for high-growth HealthTech companies •Job Creation: The development will generate approximately 60 jobs initially, with projections showing up to 80 employees within tenant companies by Year 5, including professional and technical positions, which will contribute to economic growth and workforce development in the region. •Economic Growth: The infrastructure investment has potential to return at levels far beyond other DMC investments. •Efficient Land Use: The project will make optimal use of existing infrastructure within the Two Discovery Square building, consistent with the City's objectives for sustainable urban development and efficient land use. •Sustainability: We anticipate that the project will incorporate elements of sustainability in line with DMC goals, building on the principles established in previous developments within the Discovery Square area. •Global Innovation Brand: Rochester will become part of a global network of innovation hubs, dramatically increasing market exposure. Financial and Development Support The City acknowledges that Mortenson Properties is seeking $10 million in General State Infrastructure Aid (GSIA) to support the development of the BioLabs Shared Lab Space Project. The total projected cost for build-out and operations is approximately $16.5 million, with additional funding contributions from Mortenson, Mayo Clinic, and BioLabs. Two Discovery Square, the proposed site for this project, was approved by the DMCC Board and the City’s Economic Development Authority (EDA) in 2020. This 5-story, 123,920-square-foot bioscience facility represents a $45 million capital investment. To support the project’s financial feasibility, the City and DMCC approved up to $7.3 million in “Pay As You Go” tax increment financing (TIF) over 15 years. Following a collaborative review of the project's financial structure, the City recognizes the value and potential impact of the proposed GSIA support. The City is supportive of continued conversations around investing GSIA Redevelopment funds to help close the remaining funding gap. The Applicant has clearly demonstrated alignment with the Destination Medical Center (DMC) initiative, particularly in fostering innovation, driving economic development, and promoting sustainable growth. The City views the BioLabs project as a catalytic opportunity to strengthen Discovery Square and advance the broader goals of the DMC vision. City Staff Recommendation: After reviewing the project proposal, financial documentation, and alignment with DMC Development Plan goals, City Staff is in alignment with the recommended allocation of up to $8 million in Strategic Redevelopment funds from General State Infrastructure Aid (GSIA) for the BioLabs Shared Lab Space Project. This recommendation reflects the strategic importance of this project to the continued development of the Discovery Square district and its potential to serve as a catalyst for additional bioscience investment in downtown Rochester. Approval of this project by the DMCC Board as a DMC Public Infrastructure Project is required before the City Council can take action. Any DMCC approval should be contingent upon future approval by the City of both the Development Assistance Agreement (DAA) and the final assistance amount. The City of Rochester looks forward to continued collaboration with the DMCC Board, DMC EDA, and Mortenson Properties as the BioLabs Shared Lab Space Project progresses. As the proposal develops, the City remains committed to working with all partners to ensure the project's alignment with our collective vision for downtown Rochester. Sincerely, Josh Johnsen Strategic Initiatives Director City of Rochester DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY MEMORANDUM To: Chair Pam Wheelock and the Destination Medical Center Corporation Board of Directors From: Dr. Clark Otley, President of the Board of Directors Patrick Seeb, Executive Director Destination Medical Center Economic Development Agency Date: May 16, 2025 Re: Rochester 2 Associates, LLC (Shared Lab) DMC Funding Recommendation Dear Chair Wheelock and members of the DMCC Board of Directors: The DMC legislation provides that the DMC EDA must assist the DMCC by “evaluating proposals for development and evaluating and making recommendations to the (DMCC) and the city regarding those proposals.” Accordingly, please find enclosed with this letter the DMC EDA staff evaluation of the DMC Joint Funding Application submitted by Rochester 2 Associates, LLC on April 11, 2025 for development of a shared lab in Two Discovery Square. Following our evaluation, the DMC EDA board of directors recommends that the DMCC board of directors approve up to $8 million in DMC General State Infrastructure Aid (GSIA). This figure is less than the amount requested by the applicant ($10 million). We provide this recommendation following thorough consideration of the project as described in the Joint Funding Application and the evaluation prepared by staff, the priorities expressed by the DMCC, and the goals and objectives of the DMC Development Plan. The evaluation report details our analysis of the proposed project. In addition to our project-specific evaluation, other factors may weigh in your independent consideration of this funding request and our recommendation. These factors may include: •Public Benefit. The development of this infrastructure ensures that: o Rochester and Olmsted County will gain an asset that does not exist anywhere else in our state or region, filling a market need and catalyzing new interest in DMC as a destination for development and investment. o Rochester is positioned to propel the creation, growth, and retention of the next generation of Minnesota med-tech professionals and companies. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY o A new anchor for the successful establishment and “clustering” of new start-ups diversifies the local economy and broadens the public tax base. o New and different employment opportunities in the fields of life science and med-tech research and development could help attract and retain the workforce we will need to sustain Rochester as a global destination medical center. o A strong business, operating, and management partner who brings a history of successful experience with this model. •Unique Economic Opportunity. This funding recommendation certainly represents a significant allocation of DMC resources. Acknowledging that, we also note that the economic development opportunity provided by the shared lab will be unprecedented in Minnesota, or even elsewhere in the United States outside a few major metropolitan areas, creating a unique economic driver and job creator. •A World-Class Operator. BioLabs is an international shared lab operator with facilities in major cities and innovation centers around the world, including Boston, Dallas, Hew Haven, San Diego, Paris, and more. Combined, these facilities exceed 600,000 s.f. and are home to more than 400 companies. Additionally, tenants of Rochester’s shared lab may be considered for venture investment by a one-of-a-kind program being neogtiated by Mayo Clinic and Mission BioCapital, the venture capital parent firm of BioLabs. •Shared Risk and Combined Resources. With DMC support, the other shared lab partners will commit significant resources to the successful build-out and operation of the shared lab. The shared lab will offer competitive pricing to startups and small biotech firms, increasing the likelihood of steady occupancy. Shared resources—such as lab equipment and administrative services—will lower overhead costs, also improving affordability. Our evaluation report also outlines several conditions we recommend be applied to the project to ensure that DMC interests are protected and goals are met. For the reasons noted above and in our report, the DMC EDA board of directors respectfully submit our funding recommendation. Thank you for your consideration. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY Respectfully, Clark Otley, M.D. Patrick Seeb President of the Board of Directors Executive Director DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY Shared Lab Evaluation Report May 1, 2025 EXECUTIVE SUMMARY / RECOMMENDATION STATEMENT OF RECOMMENDATION: Based on information provided by Rochester 2 Associates, LLC (the “Applicant”), the shared lab (the “Proposed Project”) aligns with the Destination Medical Center (“DMC”) vision and is consistent with the DMC goals, objectives and values. Development of the Discovery Square subdistrict as a center of life science industry growth and community economic benefit is among the highest priorities identified by the DMC Corporation Board of Directors and Rochester City Council. The following report evaluates the Proposed Project on all criteria required by the Development Plan. Based on these criteria, the Destination Medical Center Economic Development Agency (“DMC EDA”) would categorize the Proposed Project as a high priority DMC project that has immense potential to help realize the vision, goals and objectives of the DMC initiative. The DMC EDA recommends support for the project in an amount of up to $8 million of DMC General State Infrastructure Aid. Summary of DMC EDA Due Diligence Analysis: o A shared lab located in the Discovery Square sub-district is consistent with the DMC Development Plan. ▪Bio-med-tech industry growth is an identified priority of the DMC Development Plan. ▪There is a market-driven need for affordable, high-quality lab space. o Development of a shared lab located in the Discovery Square sub-district is an applicable public infrastructure project pursuant to Minnesota Statutes Section 469.40, subdivision 11, including, but not limited to, rehabilitation and build- out of an existing building. o The DMC EDA recommends that the DMCC and Rochester City Council consider approving up to $8,000,000 in General State Infrastructure Aid (“GSIA”) to build-out and develop a shared lab facility in an existing building located in Two Discovery Square. This report seeks to ensure that the proposed shared lab meets the required DMCC findings to approve the use of DMC funds for the project. If approved, the funding would be used to make DMC-eligible investments in the physical assets necessary to build-out and develop a shared lab facility in an existing building located in Two Discovery Square. Summary of DMC EDA Analysis for Consistency with DMC Development Plan In order to approve the use of DMC funds, the DMCC is required to find that the proposed shared lab project is consistent with the DMC Development Plan. The DMC EDA and City staff reviewed the DMC Development Plan to determine whether a proposed shared lab is consistent with the goals and priorities of the DMC initiative as defined by the DMC Development Plan. Our review found the following: o In accordance with Minnesota Statutes Chapter 469, Sections 40 through 47 (the “DMC Act”), the Development Plan includes strategic planning consistent with a destination medical center in the core areas of commercial research and technology. A summary of the key findings of this strategic planning states “[r]esearch suggests that a mixed-use research park would offer the best format to develop biomed-tech in the DMC Development District and create the jobs-driver needed to support a larger development concept. The research cluster should present a collaborative physical and program structure that emphasizes proximity to Mayo Clinic and cutting-edge research.” o Preparation of the Development Plan was informed by a set of Guiding Principles which are consistent with the proposed project. These principles include: ▪Sustain Rochester and Southeast MN as a Destination Medical Center and Economic Engine for the State. ▪Technology and Innovation to Promote a Globally Competitive Destination. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY o The Development Plan declares the economic value of a growing and diversified bio-med-tech industry and defines several business development objectives which are consistent with the Proposed Project. Funding Recommendation Conditions The DMC EDA recommends that, if approved, final distribution of DMC funds for the Proposed Project be conditioned upon several other important actions that must be completed by other project stakeholders, including the Applicant, proposed operator, the City, and Mayo Clinic. The recommended conditions include: 1.Applicant must execute development agreement with the City of Rochester. 2.Applicant must meet all requirements of DMC-funded projects, including paying prevailing wage, committing to targeted business and workforce utilization and the use of American-made steel, and energy and sustainability standards. 3.Applicant must commit to preserving the as-built and -furnished space as a shared lab for a period of not less than ten years (120 months). a.“Shared Lab” is defined as collaborative, multi-user space designed to support research, innovation, and company formation across a wide variety of life science, MedTech, and healthcare disciplines. b.In addition to technical and scientific equipment, the “Shared Lab” must sponsor a variety of engagement activities (ie networking, mentoring, and education) and play host to an assortment of ecosystem partners that provide critical expertise across a diverse group of business, education, and service provider categories. c.Should the applicant fail to preserve the shared lab as described above, the applicant will provide to DMC an amount equal to $66,667 for each month short of the expected ten-year operating period. d.Applicant must afford DMC the opportunity to approve the operator, as well as any subsequent changes in operator. 4.Operator must provide four (4) no-cost office spaces to business recruitment and retention partners, including but not limited to: DMC EDA, Medical Alley Association, Greater MSP, Mayo Clinic, RAEDI, and the University of Minnesota. Partners for the four spaces will be determined by the DMC EDA on an annual basis. 5.DMC-funded investments in the shared lab may not be removed from the space. 6.The DMC EDA shall have the right to seek an independent third-party evaluation of estimated project costs before any agreement is finalized. 7.DMC will not be expected to provide additional capital for operations or maintenance of the shared lab. 8.DMCC authorizes the DMC EDA to act as its representative and agent in any body or entity created to review and select tenants, make facility alterations or improvements, or that otherwise provides for oversight of the shared lab. 9.Applicant must provide, at the reasonable request of the DMCC, DMC EDA, or City, financial and operating progress reports to ensure the project as-built is consistent with the project as-approved. STATEMENT OF ELIGIBILITY: Based upon information provided by the Applicant the Proposed Project meets the definition of “public infrastructure project” under the DMC Act, is consistent with the DMC Development Plan, and falls within the DMC Development District boundaries (Discovery Square Subdistrict). PROJECT SUMMARY: The Applicant Team intends to construct and operate approximately 16,000 square-feet of shared lab space designed to support a diverse range of research needs. This space will include wet labs, dry labs, and office areas, providing a flexible and collaborative environment for startups, growing companies, and researchers. The shared lab is intended to foster innovation by offering access to high-quality infrastructure, allowing tenants to focus on advancing their scientific work without the burden of building out dedicated lab facilities. The shared lab would be developed on the third floor of Two Discovery Square, a 124,000 Sq Ft science and technology building in the Discovery Square subdistrict developed with DMC support. Shared lab construction and operation is intended to bolster the city’s tax base, increase the number of non-Mayo Clinic employers, diversify the downtown economic ecosystem, broaden the regional talent base and facilitate entrepreneurship and innovation. The need for a high-quality, low-cost shard lab was identified in DMC’s 2022 life science awareness and perception survey, and the construction this space is likely to enable Discovery Square to achieve its potential as a new hub for life science research in the United States and cement Rochester’s status as America’s City for Health and Wellness. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY RELEVANT PROJECT HIGHLIGHTS: The following list outlines relevant project highlights for consideration: •General Project Information o Located in Two Discovery Square o 16,000 gross square feet o Activates the third floor with collaborative space and a rentable tenant space o Project will provide quality, high density innovation and lab space within a priority DMC subdistrict •Job Creation The Applicant states that the Proposed Project will generate 70 permanent, on-site jobs. Given that the Proposed Project will consistently seek to develop new early-stage companies, the job creation potential of this space could be significant. If so, the shared lab will meaningfully contribute to local workforce development and retention efforts. •Energy & Sustainability o When proposing Two Discovery Square, Mortenson Development provided the following energy and sustainability information for the entire building: ▪Project projected to perform 20% below energy code (ASHRAE 90.1 – 2010) ▪Project will have interior and exterior bike racks as well as a shower facility for occupants ▪Development will accomplish storm water management through the contemplative use of site materials and vegetation ▪Project committed to sharing utility data through 2030 ▪Project will pursue LEED certification under version 4 of their rating system •Financial Details o Shared lab funding sources are requested to include: ▪DMC Funding: Up to $10M contingent on final design and approved DMC eligible costs ▪Mayo Clinic: Up to $4.5M for equipment and operations ▪BioLabs: $2.11M for equipment and operations ▪Mortenson Development: $2.1M for construction and operations o When proposing Two Discovery Square, the Applicant provided the following building financial information:: ▪Total project cost: $45 million ▪Tax capacity will increase from $23,758 to a proposed $953,907 per year EVALUATION REPORT SECTION 1.0 PROJECT OVERVIEW The Proposed Project will include 16,000 square-feet of shared lab space designed to support a diverse range of research needs. This space will include wet labs, dry labs, and office areas, providing a flexible and collaborative environment for startups, growing companies, and researchers. The shared lab is intended to foster innovation by offering access to high-quality infrastructure, allowing tenants to focus on advancing their scientific work without the burden of building out dedicated lab facilities. The shared lab would be developed on the third floor of Two Discovery Square, a 124,000 Sq Ft science and technology building in the Discovery Square subdistrict developed with DMC support. SECTION 2.0 MINIMUM ELIGIBILITY REQUIREMENTS OF DMC ACT Check the following that apply to the Project: ✓"Public Infrastructure Project" ✓General Infrastructure Project ✓Within DMC Development District Boundaries DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY For a project to be eligible for DMC Funding, the project must be (1) a “public infrastructure project” and (2) within the DMC Development District Boundaries. Per Minnesota Statutes, Section 469.40, Subdivision 11, a “Public Infrastructure Project” is described as a project financed in part or in whole with public money to support Mayo Clinic’s development plans, as identified in the DMC Development Plan, the Proposed Project would qualify as a “Public Infrastructure Project” as required by the DMC Act. The Applicant has identified the following definitions of “public infrastructure project” for consideration: o Install, construct, or reconstruct elements of public infrastructure required to support the overall development of the destination medical center development district including, but not limited to, streets, roadways, utilities systems and related facilities, utility relocations and replacements, network and communication systems, streetscape improvements, drainage systems, sewer and water systems, subgrade structures and associated improvements, landscaping, façade construction and restoration, wayfinding and signage, and other components of community infrastructure; o Install, construct or reconstruct, furnish, and equip parks, cultural, and recreational facilities, facilities to promote tourism and hospitality, conferencing and conventions, and broadcast and related multimedia infrastructure; The Proposed Project is within the DMC Development District Boundaries. SECTION 3.0 EVALUATION CRITERIA The DMC EDA’s recommendation for the project outlined herein was formed in consideration of the following criteria: 3.1 DMC Vision, Goals and Objectives / Development Plan Strategies 3.2 Consistency with Development Plan and Other Planning Documents 3.3 Financial Viability 3.4 Consistency with Adopted Strategies, Phasing and Capital Improvement Planning 3.5 Targeted Business Enterprise Strategies 3.6 Compliance with Economic---Fiscal Goals and Objectives 3.7 Other Project Policy Considerations SECTION 3.1 DMC VISION, GOALS AND OBJECTIVES / DEVLOPMENT PLAN STRATEGIES Does the project include a plan for achieving the DMC vision, goals and objectives and is it critical to driving the strategies included in the Development Plan? Is the project consistent with the stated DMC Goals & Objectives and specifically contributing to job creation? •Does the project meet one or more of the goals and objectives established for the Development Plan? The Proposed Project builds off the momentum of One and Two Discovery Square, as well as Mayo Clinic’s Bold. Forward. Unbound. in Rochester. expansion. The Proposed Project will facilitate economic development and workforce growth. Is the project consistent with the DMC Vision? •Is the project part of a bold and aspirational concept for the future? Yes. Successfully executed, the Proposed Project significantly contribute to the sustainment of Rochester, MN as a healthcare hub and catalyze new med-tech economic development. •Does the project fit with the principles of the vision? A Guiding Principle of the DMC Development Plan is to provide “technology and innovation to promote a globally competitive destination, going on to state: “Technology and innovation is core to the DMC economic strategy. Our vision is to promote an economic development structure that fosters advancement and growth of the medical, research, innovation, education, entrepreneurial and general business environment in Rochester. In addition to the business strategies, our vision DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY integrates technology strategies into the land use, transportation and infrastructure planning to support a connected, collaborative community for businesses, residents and visitors.” •Does the project provide a framework for growth in this sub-district? Yes. By developing the shared lab space, the Applicant will provide an affordable solution or startups and small biotech companies that might otherwise establish themselves in competing markets. By attracting these companies to Rochester, the funds create long-term economic and job growth, reinforcing the city’s position as America’s City for Health. Does the project build infrastructure to support growth and drive investment? •Would the investment occur without the public infrastructure to be funded? Without this support, it is likely that the Proposed Project would not move forward, as the costs of developing and operating a high-quality Shared Lab space would be prohibitive. DMC funding ensures that a critical market gap is filled. •Is the proposed public infrastructure solely for the benefit of the project or does it also support the broader vision of the DMC District? The Proposed Project supports the broader vision for the DMC development district. The Development Plan includes several statements declaring the economic value of a growing and diversified bio-med-tech industry. These statements include: o “The primary economic driver for the greater Rochester-Olmsted area, as well as for the DMC, is Mayo Clinic. The DMC business and economic development strategy aligns with the strength of Mayo Clinic by focusing on biomed-tech clusters to maximize the competitive advantage that already exists in Rochester.” o “The proximity of the downtown to Mayo Clinic, physicians, researchers, doctors and scientists makes it an ideal location to attract private research, bio-medical, bio-technology and related businesses. Discovery Square is the focal point for the new workplace environment of the DMC business community…(t)his community must attract the best and brightest in order to achieve the project goals of becoming a nationally and internationally recognized address for Health Science Research.” •Will the public funding accelerate private investment in the Development District or applicable sub district? Yes. The Proposed Project is intended to support the creation, retention, and recruitment of new start-ups and workforce opportunities. Does the project provide a catalyst for/or anchor for an approved strategy? •Can the project reasonably be expected to catalyze or anchor development in one of the six sub districts? Yes. A Guiding Principle in the creation of the DMC Development Plan was to “Sustain Rochester and Southeast MN as a Destination Medical Center and Economic Engine for the State”, further stating that “Rochester and its largest employer, Mayo Clinic, are critical components of the regional and State economy. Rochester, particularly its downtown core, needs to maintain an economic concentration, expand its business base and enhance the diversity of its economy. The DMC Development Plan promotes strategies that are focused on a broad range of opportunities, giving special consideration to strategies that support and leverage Mayo Clinic’s growth to enhance and expand the economy of Rochester and Southeast Minnesota. These strategies will promote the growth of new businesses, investment, entrepreneurship, and targeted businesses locally and within the region.” •Can the project reasonably be expected to catalyze necessary transportation/transit strategies? N/A DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY SECTION 3.2 CONSISTENCY WITH DEVELOPMENT PLAN, OTHER PLANNING DOCUMENTS Does the project include a plan for achieving consistency with the Development Plan (and any updates thereto) and o t h e r relevant planning documents? Is the project consistent with the DMC Planning Documents? •Is the project consistent with the current DMC Master Plan, Transportation Master Plan, and/or Infrastructure Master Plan? The Proposed Project would substantially advance the vision of DMC, Rochester, and Olmsted County as an economic engine for Minnesota. High-quality, low-cost lab space is essential to the success of the Discovery Square subdistrict. •Is the project consistent and/or supportive of the Finance Plan, Business Development Plan and other Implementation strategies of the DMC? The Proposed Project would advance many business development objectives noted in the DMC Development Plan: o Leverage Mayo Clinic to ignite the med-tech economy and catalyze development in Discovery Square. o Foster entrepreneurial enterprise and innovation and ensure continued economic health and growth of existing small businesses in the Development District. o Develop recruitment and retention strategies to address the potential workforce gap and meet private business hiring needs through workforce development in targeted sectors. o Develop strategic connections/leverage opportunities with Mayo Clinic o Attract partners, companies and technology to the market. o Work with Mayo Clinic to facilitate connections between clinicians and business/venture capital groups. o Create a platform for entrepreneurs. o Identify space for start-up businesses. o Partner with business leaders, service organizations and educational institutions to provide a range of low-cost or discounted services for early stage start-ups… o Reserve DMC Funds to support and attract investment and catalytic development projects. o Facilitate an environment of collaboration with integrated facilities and shared public space. o Coordinate business development strategies with other DMC strategies to improve livability, accessibility and economic opportunity in Rochester to attract and retain top tier talent. Is the project consistent with the City/County Planning Documents? •Is the project consistent with the RDMP Plan or City Comprehensive Pan? The Proposed Project is not inconsistent with either plan. •If a Transit/Transportation project, is the project consistent with the ROCOG long---range Transportation Plan? N/A Does the project support sustainability principles as a core objective in the development and operations of the project? The Proposed Project is an interior fit-out in Two Discovery Square. When applying for funding for Two Discovery Square, the applicant noted the following: o Energy Efficiency – Based on early energy modeling efforts, the project is on track to meet the project energy goal included in the DMC Plan of a 20% reduction below ASHRAE 90.1-2010, Minnesota’s energy code. Through a combination of a highly efficient envelope and HVAC systems, the building is showing a considerable reduction below a baseline building built to current code standards. o Sustainable Site Selection – As a means to connect the second facility to One Discovery Square, the project focused on landscaping and the user experience around the building. Through native vegetation selection that negates the need DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY for a permanent irrigation system, on-site storm water storage, outdoor seating, among other strategies, the project incorporates numerous strategies to reduce its environmental impact and create an active street. o Indoor Environmental Quality – Offices will have access to natural daylight and views through expansive glazing. o Materials and Resources –The building includes a dedicated area for collection and removal of recyclable materials and the project has committed to sharing waste and recycling data throughout the construction process. Further, the project is committed to explore materials that will promote the health of building occupants and visitors. o Water Efficiency – The project will reduce its burden on municipal water supply by including the use of low-flow consumption fixtures and fittings. o Third Party Green Building Certification – The project is committed to pursue LEED certification. o Building Operation – The project is committed to share utility information through Rochester’s Voluntary Energy Benchmarking program through 2030. SECTION 3.3 FINANCIAL VIABILITY [Form may vary based on size/scope of project] Does the project include a plan that is financially viable? ✓Project Summary (e.g. concepts, detailed program, project team, etc.) ✓Total Project Budget ✓Sources of funding, demonstrating a verifiable gap that justifies DMC Funding Project Operating Pro Forma including an overview of any operations and maintenance funding that may be required ✓A Project Plan and/or Market Study supporting the demand/need for the project ✓Demonstration of financial capacity to support the project Is the project supported by current market conditions and comprehensive feasibility studies? Yes. The 2023 DMC Rochester Awareness & Perception Study confirmed that Rochester needs to improve its visibility among bio- med-tech innovators and investors and build the start-up infrastructure. One of the key recommendations from the study was to establish turn-key lab space that lowers the barrier to entry for companies exploring opportunities in the region, especially those looking to collaborate with Mayo Clinic. A 2024 market demand study was commissioned by Mayo Clinic to assess the local market for lab space demand and explore the current state of, and make recommendations for, improving the health of Rochester’s innovation ecosystem to facilitate the creation, growth, and attraction of high-growth and high-value companies that will benefit the economy.” The key recommendation of this study was: Offer affordable, ready-to-go wet and dry lab space in Discovery Square. Almost every study interviewee focused on the need for affordable, ready-to-go lab space with short-term/flexible lease option, next to Mayo Clinic. DMC was recommended to: o Approve fit-out costs and ensure affordable rent for early-stage companies at Two Discovery Square to retain current early- stage companies and attract more from outside the market o Incorporate short-term and flexible space for companies exploring collaborations with Mayo Clinic. Feasibility is also supported by the proposed operator, BioLabs, which operators more than a dozen such facilities across the world. Does the project leverage additional private funds, maximizing the use of DMC Funds? Yes. The Applicant will contribute to a portion of the shared lab construction, while other project partners will contribute furnishings, equipment, and operating capital. Is the preliminary project finance plan comprehensive and viable based upon Project Team and financial capacity? Yes. The financial plan presented is comprehensive and viable but only with the proposed public assistance of up to $10 million. In addition to DMC funding, which is contingent on final design and identification of DMC-eligible costs, funding includes up to $4.5 Million in pre-launch and equipment funding and operational gap funding, well as $800,000 in build-out support from the Applicant. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY Is the project inclusive of an Operation and Maintenance pro forma? Yes. The project pro-forma accounts for estimates of operating costs against expenses. Importantly, the other non-DMC project partners are negotiating to cover the forecasted early-year operating losses. Is there a verifiable gap for funding based upon a reasonable return on private investment? Yes. The DMC EDA staff have reviewed current market data related to lease rates, occupancy, and expected market rates of return. The Applicant has agree to lease the space to the proposed operator as below-market rates, preserving affordability for start-ups and small companies. Is the proposed operating structure sustainable? Yes, we believe the operating structure is sustainable. The proposed operating partner, BioLabs, is an international shared lab operator with facilities in major cities and innovation centers around the world, including Boston, Heidelburg, Hew Haven, San Diego, Paris, and more. Combined, these facilities exceed 600,000 s.f. and are home to more than 400 companies. Does the Project impose any financial obligations on the DMC or City for ongoing operational or maintenance support? No; The City and DMC would have no on-going responsibilities for operational or maintenance support. Has the project applicant agreed to execute the DMC Development Agreement? If approved for funding the Applicant has stated that they will agree to execute the DMC Development Agreement. SECTION 3.4 CONSISTENCY WITH ADOPTED STRATEGIES, PHASING, AND CAPITAL IMPROVEMENT PLANNING Is the project consistent with adopted strategies and/or one or more projects for the current implementation phase of the DMC initiative? Is the project part of an approved strategy and current focus? Is the project outlined as an approved strategy for the project within the Development Plan? The proposed project is consistent the DMC priority to develop Discovery Square as a world-class life science research park in close proximity to Mayo Clinic. Is the project recommended as a focus for the particular phase of the project in the Development Plan? Yes; development of the Discovery Square ecosystem and life science infrastructure has been a key long-term priority identified in the DMC Development Plan. Specifically, in the plan adopted in 2015, the following key finding was noted: “Research suggests that a mixed-use research park would offer the best format to develop biomed-tech in the DMC Development District and create the jobs-driver needed to support a larger development concept. The research cluster should present a collaborative physical and program structure that emphasizes proximity to Mayo Clinic and cutting-edge research.” Is the project consistent with the DMC CIP? •If public, is the project specifically listed in the DMC---CIP? Or is the project necessary to facilitate a DMC related strategy? N/A •If private, is the project otherwise compatible with the planned public improvements in the DMC---CIP? DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY Yes. SECTION 3.5 TARGETED BUSINESS ENTERPRISE STRATEGIES [Form may vary based on size/scope of project] Does the project include a plan for achieving Local Business, S/M/WBE Project Requirements and other project requirements, as applicable? Yes; the Applicant is committed to supporting the goals outlined in the DMC’s policies related to Local Business participation and S/M/WBE. The development team has committed to working closely with contractors and vendors to ensure meaningful efforts are made to identify and engage qualified local and S/M/WBE firms throughout the project lifecycle—from pre-construction and procurement to construction and ongoing operations. The development team achieved the highest DMC project WMBE participation percentage that the DMC has seen to date on the Two Discovery Square core/shell project, demonstrating a proven track record of meeting and exceeding DMC’s equity and inclusion goals. SECTION 3.6 COMPLIANCE WITH ECONOMIC---FISCAL GOALS AND OBJECTIVES Does the project include a plan to comply with or support the economic---fiscal goals and objectives of the DMC initiative? Does the project generate substantial economic-fiscal gain based upon job projections? The shared lab is expected to directly support the creation of approximately 70 post construction jobs, providing critical entry points for local talent and early-career professionals. Overall, the development of Two Discovery Square was estimated to result in 800 temporary construction jobs and 531 new permanent jobs. Does the project maximize the opportunity for investment by attracting other private capital? Yes; with DMC support, the other shared lab partners will commit significant resources to the successful build-out and operation of the shared lab. The shared lab will offer competitive pricing to startups and small biotech firms, increasing the likelihood of steady occupancy. Shared resources—such as lab equipment and administrative services—will lower overhead costs, also improving affordability. Is the project required (e.g. public works) to continue to seed investment in the DMC District? Yes; if approved, the economic development opportunity provided by the shared lab will be unprecedented in Minnesota, or even elsewhere in the United States outside a few major metropolitan areas, creating an economic driver and job creator for our city, region, and state. Does the project support the economic strategies of the project by providing civic/cultural uses and/or public amenities that support strategic growth in the DMC Development District and/or specific business development and economic development strategies that are adopted as part of the DMC Development Plan? Yes; the shared lab would exist within Two Discovery Square, a building that added new, publicly accessible collaboration space, contributes to the sense of place surrounding Discovery Walk, and meets DMC design guidelines. SECTION 3.7 OTHER PROJECT POLICY CONSIDERATIONS Is the project inside the DMC Development District? Yes, it would be located within the Discovery Square subdistrict. If the project is not inside the DMC Development District, are they asking for a boundary change? DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY N/A Does the project include any distinctive social and/or community benefits that are not specifically required by the DMC Act? Yes, specifically: o Rochester and Olmsted County would gain an asset that does not exist anywhere else in Minnesota, filling a market need and catalyzing new interest in DMC as a destination for development and investment. o The shared lab is intended to propel the creation, growth, and retention of the next generation of Minnesota med-tech professionals and companies. o The successful establishment and “clustering” of new start-ups diversifies the local economy and broadens the public tax base. o New and different employment opportunities in the fields of life science and med-tech research and development could help attract and retain the workforce we will need to sustain Rochester as a global destination medical center. o Tenants of Rochester’s shared lab may be considered for venture investment by a one-of-a-kind program being neogtiated by Mayo Clinic and Mission BioCapital, the venture capital parent firm of BioLabs.