University Enterprise Laboratories (UEL)

A Wild Success or a Disaster?

It all depends on who you ask. And whether you are willing to learn from experience, or continue to believe that new buildings alone are the answer to all of our problems...

From the Star-Tribune:

The $20 million facility in St. Paul, which opened with great fanfare in 2004, has been struggling to forge a new identity amid a severe economic recession and a diluted, if not ambiguous, relationship with the University of Minnesota.

For one thing, none of the 25 or so companies that inhabit the UEL originated from university research, even though the building is home to the school's Office of Technology Commercialization and the U contributed $2 million to the project.

Minnesota has long flirted with the idea that incubators can stimulate a bioscience industry. In 2007, the Mayo Clinic and the university inaugurated a $25 million, three-story genomics research facility at a Mayo building in Rochester. There have been a few licensing deals, but no companies have yet emerged from the partnership.

The U is also spending $233 million over the next decade to construct four major bioscience buildings in "Discovery Square" on its Minneapolis campus, just a few miles from UEL.

Experts caution it takes time for biotechnology start-ups to develop. Still, the experience of University Enterprise Laboratories offer a cautionary tale that buildings alone can't create companies and industries.

"It's natural to [construct buildings] because that's what you can see," Bianco said. "It's the physical embodiment of our hopes and dreams. But we don't have the talent or capital here."

[Peter] Bianco was the first CEO of the UEL before he resigned in 2005. He was an enthusiastic supporter of the project at first, but in hindsight said the project lacked some ingredients crucial to a successful incubator. To facilitate easy interactions with students, researchers and faculty with companies and investors, a university-related incubator should be located on or next to the campus, he said.

[Au contraire, says U Dean Bob Elde...]

Elde says the facility, at University Avenue and Hwy. 280, is ideally located between the St. Paul and Minneapolis campuses.

"It's the hub of very critical activity and the desired spot for start-ups to be there," Elde said.

[So which is it folks?]

"Without a doubt, the board is very satisfied," LaFrence [Andrew LaFrence, a partner at KPMG and chairman of UEL Board of Directors. said.] "UEL has been wildly successful."

[The glass is very, very full!]

...the incubator has not met its initial expectations, said Dale Wahlstrom, CEO of BioBusiness Alliance of Minnesota.

"... it has not stimulated the bioscience industry the way that we hoped," such as developing spinoff companies from the U and Mayo Clinic.

[Ah, no - the glass is not even half-full.]

The incubator also faces some serious financial challenges. Though the building generates positive operating cash flow, it remains heavily dependent on donations, which accounted for nearly 60 percent of its revenue in 2007, according to financial documents.

Most importantly, UEL faces a 2012 deadline to repay a $13.8 million bond it primarily used to fund the renovation of what was a Target Corp. distribution center. The board is trying to refinance the bond but given the weak commercial real estate market, LaFrence says he's not sure what will happen. There's been speculation that the UEL shopped itself to the university, but LaFrence said there were no serious discussions.

As a result, UEL is trying to cut costs. It laid off its general manager and hired a real estate firm to manage day-to-day operations.

Wildly successful?

Time for some straight talk about UEL and its implications for Discovery Center?

I didn't think so...