Doubts Growing About Viability of USC Biotech Park

Staff Reporter

A year ago, sponsors of a proposed biotech park near USC's Health Sciences campus in Boyle Heights were hopeful they could break ground as early as 2004.

Now it appears that the project, which would cost hundreds of millions of dollars to complete, may be stalled indefinitely.

A consultant's report that was supposed to lay out development plans raises serious doubts about the proposal's financial feasibility and the pace of establishing a governance structure.

The report, which was delivered to L.A. County officials in March, has yet to be released publicly. The Business Journal obtained a substantial portion that includes its executive summary and conclusions.

The 110-acre Los Angeles BioMedical Park, first proposed in 2000, is a joint venture of L.A. County and USC's Keck School of Medicine, and has the support of other leading academic institutions in the region, including UCLA and Caltech. It is envisioned as L.A.'s answer to San Diego, which has become a biotech stronghold through orchestrated efforts between local universities and governments.

The development plan calls for a three-phase build-out over at least a two-decade timeframe. In its third and final phase, it would entail moving a county-owned juvenile detention facility that sits in the middle of the park's footprint, at a cost of more than $200 million alone.

However, the report questions whether up to $70 million in public subsidies that would be required just to build the first phase are attainable at a time when governments at all levels are having financial problems.

Moreover, the project cannot move forward until USC and Los Angeles County reach agreement on a governing structure something they have yet to do and title of the underlying land, which has fractured ownership, is transferred to that entity, the report states.

It warns that delays are already costing the park potential tenants.

"The importance of the need for action has been underscored because of recent activities where potential tenants of the park may be lost if the project cannot be realized in a timely manner," the report states.

It was prepared by CR Schwartz Consulting of Hermosa Beach, and is dated March 6.

Delay discrepancy

Miguel Santana, an aide to Supervisor Gloria Molina, who represents the area, said the report hasn't been released because work is still being done on it.

However, the consultant who wrote the report, Carol Schwartz, said it has been completed and was submitted to the county in March.

County and university officials maintain they are making progress and hope to reach an agreement in the coming months on a governing structure that would further advance the project. But the report elicited only frustration from at least one prominent local biotech industry official.

"There is nothing in that report beyond rambling," said Ahmed Enany, executive director of the Southern California Biomedical Council, an industry trade group. "It doesn't really have any kind of a blueprint."

County officials sought the report last spring as the next step in advancing the project following an agreement reached between USC and Molina, who represents the area. It was first anticipated being released as early as last fall.

USC had wanted to build out a traditional low-rise biotech park in one phase, but agreed to a phased approach after Molina said the county had no money to immediately move the juvenile detention center.

Officials committed

Dr. Ronald Kaufman, an associate dean at USC's Keck School of Medicine who oversees the park's development, agreed the report lays out "obstacles that are going to have to be overcome." But he maintained the university was committed to the project.

"If you look at the development of the industry in San Diego, it grew up over 15 to 20 years," said Kaufman. "When you are working across agencies and organizations things take time."

Santana said Molina still wanted to see the park built and had met a few weeks ago with USC President Steven Sample to discuss it, though he acknowledged pressing issues such as the state and county budget crises have sometimes intervened.

"There have been larger issues going on in the county, but there is a lot of work being done (on the park,)" said Santana, who said both sides anticipated subsidies would be needed for the park.

The report states that starting work on the first phase of the park has been hampered because the county's 20 acres are actually owned by special districts for roads and flood control who must receive fair market compensation for any exchange of assets.

The complexity of the land ownership has prompted the county to hire another consultant to develop alternative ground lease structures for the first phase, but Kaufman said USC has yet to see the study.

The report also states that the park would need the assistance of a third-party developer but so far developers who have been contacted have not been interested in the project because they do not yet believe it will be built.

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