The University of South Carolina dedicated it's new Arnold School of Public Health Friday afternoon. The new facility is the cornerstone of the university's Innovista research campus. It is on the corner of Assembly and College streets.
Overly optimistic timeline and downturn in economy have slowed construction
USC is scrambling to re-energize its Innovista research campus after a series of setbacks.
Two taxpayer-funded buildings are under construction, but:
• Two privately funded research buildings expected to be completed last year are still on the drawing board.
• Efforts to attract a major high-tech firm fell through in 2006.
• And recruiters still have not found major private-industry tenants for the budding campus.
University officials say they are “dissatisfied” with the progress of their private partner, N.C. developer Craig Davis, who was supposed to build the two other buildings and help recruit high-tech companies.
Davis and the university are working to bring in new partners to help them build Innovista, touted by boosters as Columbia’s high-tech economic future.
“The buildings are not coming out of the ground, and we need to look at other options,” said Rick Kelly, the university’s vice president for business affairs and its chief financial officer.
Added Don Herriott, head of global operations for Roche chemical company and chairman of the USC Research Campus Foundation: “We’re all disappointed. We clearly thought we would be further along than we are today.”
Part of the problem is that Davis and USC officials thought they had landed a high-tech, Fortune 100 company for the campus, but the deal fell through in 2006.
They refer to the company only as a “single-use prospect that didn’t materialize,” but numerous sources have identified it as Santa Clara, Calif.-based computer giant Intel.
Intel spokesman Chuck Mulloy confirmed the company had been a exploring a “small” project with the university “that didn’t come to fruition.”
Intel underwent a major restructuring in fall 2006, reducing its work force by 10,000 employees. Sources said its presence in Innovista would have been as a research and development partnership involving fewer than 25 employees.
Mulloy noted that Intel already has a plant in the Columbia area, a design center in the St. Andrews area that employs 200 people.
Since the Intel deal fell through, Davis and the university haven’t attracted another major firm. But the contract Davis and USC signed in 2005 does not carry a penalty if Davis failed to meet the 2007 target.
The contract gives Davis carte blanche to be the private developer partner for the campus, so he must agree to any changes in the deal, including bringing in a partner or partners.
Now, the university and Davis are caught in a bit of a Catch-22. Without tenants, finding financing for the buildings is a challenge. Without buildings, it’s hard to attract tenants.
Davis initially said he could build the buildings without tenants — called a “spec,” or speculative, building. But because of the downturn in the economy and the tightening of credit by banks nationwide, his ability to take on the buildings by himself has been diminished.
Adding monied partners is a way to bring in more capital and more leverage with the banks.
Davis declined comment last week, saying only that he was committed to seeing the project through.
Davis spent big money trying to land Intel, sources said, including designing a customized space. He can’t recoup that investment if he bails out or is forced out of the Innovista project.
The options Davis and the university now are working on include bringing in two other developers or financiers, sources said — one local and one with a more national reputation. Neither USC officials nor Davis would name the prospects.
“We’re rapidly working on a solution,” Innovista director John Parks said.
University officials said that while Davis failed to deliver the buildings, they raised the public’s expectations for Innovista too high, too soon. Most of that was driven by early excitement over the prospect of landing Intel.
Harris Pastides, the university’s vice president for research and health sciences, has said on numerous occasions that the research campus could take 10 to 20 years to build.
But at the same time, the university announced construction benchmarks for the project that were not met, contributing to worries that Innovista is failing.
“If we could start over, we would adjust our schedule further out,” Kelly said.
The hitch did not surprise businessman Herriott, however.
“Your most optimistic goals will always fail,” he said. “From a business standpoint, this is the way things work more often than not.”
Parks, who arrived just last year to jump-start recruitment of private companies to the campus, has said he is working numerous prospects who are interested in being in the research campus.
Parks said he and other university staff as well as Davis and state and city business recruiters are working to reel in researchers and private businesses.
Using its share of the $180 million in endowed chairs funding from the General Assembly — funds also available to Clemson University and the Medical University of South Carolina — USC has attracted leading scientists in its designated fields of research into fuel cells, alternative fuels, nanotechnology and health sciences.
Two of the half-dozen endowed-chair professors USC has recruited are slated to move into the academic building at Blossom and Assembly streets, called Horizon I.
Those scientists are bringing with them teams of researchers who are slated to occupy the university buildings in Innovista, university officials said.
Some of those researchers had expected to occupy new, custom-built labs in the Horizon I building this fall. That schedule is unlikely to be met.
Horizon I, like Discovery I, its sister academic building near the Colonial Center, will open in stages, as research teams come on board.
USC also has lined up three venture capital companies in the FirstMark Capital LLC group — headed by Columbia entrepreneur Larry Wilson — as potential tenants for the private Horizon II building that Davis agreed to build next to Horizon I.
Wilson has grown impatient with the lack of construction progress. But the three Columbia insurance services startup companies — EagleEye Analytics, Dovetail Insurance Corp. and Duck Creek Technologies — all say they still would like to locate in Innovista.
Kelly, the university’s CFO, urged patience as those efforts move forward.
“This has been a learning process,” he said. “There isn’t a book on how to build a research campus. ... You have to understand the magnitude of what we are trying to do.”
Staff writer James T. Hammond contributed to this report.
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