Guest Column | May 27, 2024

The Emergence of University/Developer Partnership Projects In Life Sciences

By Grayson Mann, PMA

University_Developer Partnership GettyImages-638313230

It may have seemed unlikely during the pandemic life sciences boom, but in today’s economic climate marked by rising interest rates and more selective venture capital, the growth of life sciences developments within the sector has slowed. Consequently, securing funding for life sciences projects through conventional channels has become increasingly difficult. However, there’s is an alternative path emerging that can benefit life sciences companies, developers, and society at large: public-private partnerships (P3s) between property developers and public universities.

Unlike the speculative nature of private sector life sciences projects, which typically require building first in the hopes of securing tenants in the future, university partnerships offer a more stable and direct path to capital through state funding and endowments. These collaborations aim to fund initiatives focused on the research and development space, often manifesting as incubator programs for startup life sciences companies, which not only offer universities growth opportunities but also expose them to a broader scope of potential profit through intellectual property licensing deals with the startups they nurture.

These kinds of P3 projects serve as catalysts for the rapid growth of promising life sciences companies. By providing access to space, tools, and equipment at an affordable cost, universities facilitate the grueling process of developing and commercializing a product. In doing so, they both support the growth of these ventures and position themselves to benefit from the companies’ intellectual endeavors.

Funding Advantages In University Projects

Access to capital is perhaps the most significant advantage that university projects have over corporate initiatives. Supported by state funding and endowments, P3 projects typically boast substantial budgets and are given the greenlight to move quickly without the financial risks that plague the private sector.

Driven by immediate needs, universities are less conservative about filling space with student labs or incubator programs. Additionally, universities are often actively looking for developers to either retrofit an existing campus building or send out a development RFP to envision a new one—and they have the capital in hand to do it.

Simply put, as universities aren’t beholden to loans and profit margin-driven investors, they can move forward when funding sources may face roadblocks, making them attractive partners for developers looking for stable and viable projects.

Challenges And Opportunities

While the path to P3 collaborations with universities is lined with opportunities, it's not without its hurdles. Developers working on P3 projects face a more rigorous procurement process, which includes complex compliance measures, strict diversity requirements, and the long chain of decision-making that comes with bureaucracy. However, these challenges are counterbalanced by the potential for stable, long-term investments. The P3 model, which blends private innovation with public resources, is becoming increasingly popular for developing tech and science spaces, offering a compelling opportunity for developers to engage in these partnerships.

Overall, the benefits outweigh the obstacles. Developers have a tangible opportunity to get assets on the ground and partner with public entities on securing long-term leases for a safer, longer play. Universities, through these partnerships, can establish and expand programs, diversify their offerings, augment resources, and attract the next generation of life sciences professionals, thereby boosting enrollment, tuition, and strengthening their local communities to create new jobs. In turn, small-scale life sciences users have a place to work on groundbreaking projects without having to worry about funding for the expensive items required to operate a lab such as a fume hoods, cold storage equipment, process utilities, and emergency generators to provide backup power for their team’s safety, as well as their product testing and storage.

University Incubator Projects

The recent popularity of life science incubator projects at universities around the country drive home the benefit of P3 partnerships to both small life sciences companies and universities alike. This operational model provides private companies the opportunity to enter partnerships with the public entity to lease space, with the university acting as the landlord responsible for owning and operating the facility. This arrangement helps attract lab users to a publicly owned, privately managed incubator, which not only fulfills the specific requirements of the life sciences companies involved, but also aligns with broader university objectives such as expanding educational programs, increasing student populations, and boosting local employment opportunities.

There’s also the opportunity for the university to profit from the research and intellectual property generated by these companies. While universities may not generate significant revenue simply by leasing out space, they stand to benefit immensely from the potential innovations and discoveries made within their incubator facilities. Additionally, universities often have policies in place to claim ownership or a stake in the IP generated by a student or member of the faculty, which could translate into licensing deals, royalties, or even equity stakes in spin-off companies that commercialize university-developed technologies.

The Strategic Advantage For Developers

University partnerships in the life sciences sector represent a promising avenue for developers, particularly in the current economic climate. Developers should view these partnerships as a key component of their growth strategy, capitalizing on the stability and resources of public institutions to build and expand in the life sciences sector. These projects offer a more reliable and secure investment path, with the added advantage of accessing unconventional funding streams and participating in projects with both immediate and long-term impacts.

For those prepared to navigate the unique challenges of these partnerships, the potential rewards can be substantial. The combination of secure funding, immediate needs, and the prospect of long-lasting impact positions university partnerships as beacons of opportunity for the sector, fostering innovation and growth in an otherwise challenging market environment.

About The Author:

Grayson Mann is a senior project manager at Project Management Advisors, Inc., specializing in tenant improvement and ground-up development for biotech, pharma, and the distribution industries.