CENTRAL EASTSIDE LAB EXPERIMENT
Portland's IQ, or Innovation Quadrant, has been largely vaporware until now. The building boom has been in full swing for seven years, but the land around Oregon Museum of Science and Industry on the east side, stretching up to East Burnside Street, was supposed to become a hotbed of tech and biotech innovation.
That might finally be starting as Summit Development plans to build two bioscience buildings that could house biotech companies. One, which was announced in 2018, is called the Eastside Innovation Hub (EIH) at Southeast Eighth Avenue and Alder Street. The current three-story warehouse at 808 S.E. Alder St. will be renovated and become a four-story Innovation Hub, opening in the fall of 2019, with a $12 million budget.
The other, announced in April by Summit, is at Southeast Ninth Avenue and Stark Street and will be called the New Industrial Revolution. It will be two 10-story towers joined in an H-pattern with courtyards and eateries. The budget is $103 million and it will break ground in 2020.
Eric Myers, Summit's chief development officer, and project manager Shane Howe met with the Business Tribune recently to talk about their progress.
The EIH's anchor tenant will be Revelar, which develops breath tests for preventive care and personalized disease treatment. The method is cheaper and easier to use than swabs, scrapes or blood draws. The Oregon Translational Research and Development Institute's Bioscience Incubator will also be located in the EIH.
The building at Eighth and Alder has already been stripped inside and is awaiting its fourth floor. The thinking at Summit is that it's good for the neighborhood to keep the vernacular architecture of the central East Side intact.
"Unfortunately, we didn't realize how much more time and expense that would add," Meyers said.
He says Summit is a long-term hold company. "We look to not only what is the highest and best use of the site right now today but what is the highest and best use is 150 years from now."
As Myers explains it, the IQ is both a geography and an idea. "What we're looking for is proximity to the research institutions that develop a lot of this IP, and other ancillary businesses that feed that type of innovation, to service providers, to transportation, to housing, to transportation, to data. There's a large amount of dark data that's available on this side of the river that we can take advantage of." (Dark data is unused cable capacity.)
Possible tenants include companies that deal with large medical databases that, because of HIPAA laws, must be held within the company instead of the cloud but also need to be accessed by other companies such as health care providers around the globe.
"That requires a huge amount of bandwidth, so it's important for them to be in a district that's able to handle that level of data capacity," Myers said.
The location is good because a large data cable comes through and branches off in Southeast Portland. That guarantees data resilience. Coupled with resilient power sources such as Pacific Northwest hydroelectricity, this is a really good location.
Areas full of Class-A office space are too expensive for labs. "At a lot of The Works and other types of technology office uses, they're getting down to 175 square feet per person. Our users are one person for 500 or 750 square feet."
There are not many private companies that develop this kind of lab space.
"We are a little bit lucky in that (Chris Marsh) our principal owner is also the CEO of a biotech firm, (Revelar). And that allowed us kind of an inside track to what these companies need," Myers said.
Summit has three principals: Myers, Eric Saunders and Tim Hildebrandt. Its members come from technical backgrounds, from either construction, architecture or engineering. Only Marsh (Revelar) is from a finance or real estate background.
Summit was started to redistribute Marsh's real estate assets into longer term, full-time positions.
"Because he has a large network of high net worth individuals, but also institutional financing bodies that trust in him, we had a pretty good access to capital to do these projects," said Myers. "It's allowed us in four years to move from a company that was nonexistent to a company that is now doing over $200 million in development."
They are providing a "warm shell." Labs are complicated and need special electrical and plumbing, most of which is hidden behind the dry wall. The tenants have to bring everything that is on their side of the dry wall: flooring, benches, machinery, faucets, sinks, fume hoods, cabinets and other fittings.
Most bioscience companies rely on deionized (DI) water to clean their equipment. "The problem with pure water is every time it comes in contact with a mineral, it wants to grab onto it. So, in most buildings, those plumbing drops are cast iron, and deionized water eats through it like a chainsaw."
Some DI water is so pure it can't even come into contact with a stainless-steel sink. Companies doing genetic research, where they do cancer and blood biopsies, often use machines that require DI water cleaning.
"We build out the whole building with resilient polymer plumbing systems, and we can just pour DI water down the drain," Myers said.
Another lab-specific tweak is back-up power. Where a hospital might have one large back-up generator, small companies often each have their own back-up power supply. Myers said it was more cost effective to have every outlet in the building wired for standby power. That is, if the power goes out, the backup kicks in quicker than there is time to cause a computer — let alone a "Neg 80 (Celsius)" freezer full of samples — to go dark.
"So, we've tried to find all of those inefficiencies in traditional life science buildings and try to remove them in hopes of reducing our overall cost per square foot to our tenants," he said.
Innovation quadrant points the way
Scientists like to be around each other. "That is absolutely what we're trying to capitalize on, creating value through proximity. We have the benefit of our principal owner being a life science CEO. We're trying to learn what every other life science and digital health cluster throughout the nation came to realize is that there is value in these companies coming together, being close in proximity," Myers said.
Portland's life science and digital health communities are scattered across Hillsboro, Beaverton, along the periphery of Pilll Hill and the Highway 26 corridor.
"They're not benefiting from having lunch together. When VCs come in they see another name on the door of that same office building." Funding deals, as well as creative scientific ideas, can come about through simple serendipity.
"In my 20 plus years in the industry, that's the No. 1 thing, eliminating silos between companies and in between departments," Howe said. "In Portland right now, you may have a 30-to-45 minute drive between life science companies. So think about one of these large VCs, they schedule themselves down to the minute, and they don't have time to drive 45 minutes between companies to try and spread out that investment."
The smaller building will have an event space, especially for presenting science awards, but the larger NIR Center has the entire top floor set aside for that kind of thing.
They are big fans of Hennebery Eddy Architects.
"It is one of the most underrated design firms here in Portland. ... They're not sexy, they don't have the big marquee, but they are so technically proficient. And, you know, from our perspective, we're so different than other clients. I would say, as developers, because we all come from a technical background, what we appreciate in an architect is their mastery over the technical aspects."
The firm understands where to put the vertical shafts in the venting system, or the loading docks on the street.
"From a developer standpoint, especially a developer that comes from the construction-engineering background, we rely on that kind of proficiency so that we have better assurance and overall costs and deliverability of technically complex projects."
Howe's background is both in construction and architecture in the semiconductor business.
He talks about the current skilled labor shortage. A certain chip manufacturer building in Arizona right now has to pay electricians for 60 hours, 50 hours and 50 hours a week for three weeks and they're only working 40 hours a week. Plus, they raffle a Harley-Davidson motorcycle every month to get them to show up.
Here comes the neighborhood
When the NIR is built at Ninthth and Stark, they want to fit in, Myers said, but they want to bring life to the quiet streets of the Central East Side.
"Obviously, our rent's are higher than what the auto shop next door could afford. But we're not residential, we're not trying to push business people out. We're trying to incorporate employment in this district that's (consistent) with the types of new residential that's being built every day."
As well as a wet lab hub, Myers wants the Central Eastside to be a pedestrian-friendly, light-industrial zone, more white-coat than white-collar.
He continues: "I've lived here since 1996. I went to high school in Vancouver, Washington. As a high school student coming down here when there was underground concerts and things, it was a very gritty neighborhood. To see it now be revitalized is just so important to me. I grew up in a time period where people (were) moving away from the city, and now we're all moving back in. The people I went to high school with are moving down here. I live down here with two toddlers, a wife and a dog. It's so important to me to see people be able to live, work and thrive downtown because this is where we want to be. We don't want to be out in the suburbs."
NEXT LEVEL STUFF
The EIH and NIR will have biosafety Level 2 labs, according to the Occupational Safety and Health Association (OSHA) federal guidelines for researchers working in laboratories.
There are only seven Level 4 spaces in the country. Myers says that level applies to # places where people would be working on something like Ebola. "You'd be looking at things that could kill you if immediately exposed by air to those facilities. Most of the facilities actually exist on some islands where they could be decommissioned through thermal methods. You can incinerate the entire island if something goes wrong."
Biosafety Level 3 would be a place like the primate research center in Hillsboro, where scientists are dealing with life-threatening communicable diseases.
Biosafety Level 2 is where they might do HIV research. Level 2 encompasses the majority of what Portland has, where scientists are working with intellectual property derived from work at OSHA, PSU and the local universities. "So, we targeted BSL 2, # just because that was the highest and best use of a laboratory."
The lowest, Level 1, is a doctor or dentist space that could be put in a standard office building or mini mall.
Reporter, The Business Tribune
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