business

Can an elk farm ignite a biotech boom in southern Minnesota?

Tower Investments, a California-based real estate investment firm, is planning an ambitious 1.7 million-square-foot biotech research and manufacturing facility on an elk farm off Hwy. 52 near Pine Island, about 15 minutes north of Rochester. Construction of the bioscience park, the first of its kind in Minnesota, is scheduled to begin in mid-2008.

Tower executives and state and local officials say such a facility, part of a massive multiuse development called Elk Run, could help establish a biotech corridor along Hwy. 52, which connects the Mayo Clinic, the University of Minnesota Rochester, and IBM Life Sciences research and development labs with the U's Twin Cities campus and the major medical companies in the metro area.

As envisioned by the developer, companies could test and manufacture biotech products such as medical devices, pharmaceuticals and animal vaccines at Elk Run.

Elk Run "will provide a home to [bioscience] businesses that are coming to Minnesota," said John Pierce, a Tower vice president.

While some are skeptical that a real estate development is the best way start a biotech boom, the city of Pine Island has applied for a $175,000 grant from the Department of Employment and Economic Development. Tower, in turn, will spend $1.25 million on the facility. The city will also request that the state approve a $3.25 million bond next year for infrastructure improvements, including water and sewer lines.

The 1,170-acre Elk Run development also envisions a healthy living campus, residential homes, hotels, retail, office space, schools, and an assisted-living facility.

But success is far from certain. Since purchasing the land in 2006, Tower has yet to sign any tenants for the biobusiness park, and one expert wonders if the state's nascent biotech market justifies the project.

"To start with, a real estate proposition for a biobusiness park may not be realistic," said Randy Olson, general manager of University Enterprise Laboratories, a St. Paul-based bioscience incubator. "So many factors have to be present for bioscience companies to be launched and evolve, such as the caliber of technology, the experience of the management team, and access to capital. It's challenging in a [metro] market of this size for bioscience companies to be founded and can be an even tougher sell in a rural market."

Although Tower is not working directly with Mayo and the university, the two institutions play key selling points in the company's plan to attract tenants. A Tower brochure states the biotech park will be "developed in cooperation with a local major medical center and the University of Minnesota." A Mayo spokesman says the hospital has held discussions with Tower but "there is no formal partnership." A U spokesman said the school is not involved with the project.

Bioscience was Plan B

Founded in 1989, Tower Investments is owned and operated by the Marks family of Northern California. The company invests its own capital and manages a diverse portfolio of real estate and debt instruments secured by real estate in the United States and Canada, according to the Tower website.

Tower's portfolio includes 100 real estate projects, including a 100,000-square-foot office building in Little Rock, Ark., a 280-acre equestrian ranch in Elk Creek, Calif., and a waterfront community in Nashville.

Building a bioscience facility wasn't initially part of Tower's plan to build homes, retail and office space. The land, which sits opposite of Pine Island on Hwy. 52, is mostly known for the 350 elk that still roam the property formerly owned by brothers John and Karl Hoehne. The elk will remain on the land.

After purchasing the property in August 2006, Tower unsuccessfully lobbied the state for infrastructure improvements, said Rep. Tim Mahoney, DFL-St. Paul, chair of the state Biosciences and Emerging Technology Committee. Tower's project also comes at a time when developers are finding it tougher to obtain financing because of the weak credit markets.

"What [Tower] needed were sewer and water lines, but they ran into some opposition," Mahoney said. "They retooled [the plan] to include bio manufacturing."

Pierce of Tower says the company's thinking on a biotech facility "evolved after we saw the property."

The idea has met with enthusiasm from some of the state's biggest biotech supporters.