Biotech group seeks $58.5M tax credit
By Andrew Gomes
Advertiser Staff Writer
An association of local business interests working to develop life-science research facilities in Kaka'ako has turned to a relatively new $15 billion federal tax-credit program designed to foster economic development in low-income communities.
Biotech Research Center LLC late last year applied for a 39 percent federal tax credit available this year on $2 billion in qualified investments under the U.S. Treasury Department's New Market Tax Credit program.
Biotech Research is seeking a $150 million "allocation" that would provide $58.5 million in tax credits to investors in a proposed $150 million research facility in Kaka'ako for biotechnology, pharmaceutical, nutra-ceutical and other life-science fields.
Awards are expected to be announced in May and could benefit technology companies, Kaka'ako landowners and developers in their effort to attract capital to build leasable life-science research space.
"BRC hopes to facilitate a significant advance in the development of life sciences in Kaka'ako — and, ultimately, the diversification of Hawai'i's economy," said Kevin Greenwell, director of financial analysis and planning for Biotech Research and an adviser to major Kaka'ako landowner Kamehameha Schools.
Biotech Research is an independent entity with directors from Kamehameha Schools; the Hawaii Life Sciences Council, an industry association; Bank of Hawaii; the University of Hawai'i; and a Seattle-based institute.
The entity faces stiff competition for New Market tax credits, which in the past have been awarded to roughly 20 percent of applicants that undergo a rigorous selection process.
The tax-credit program, established by Congress in December 2000, has made 129 awards for $6 billion in qualified investments over two previous allocation rounds.
No Hawai'i-based applicants have received awards. One entity affiliated with the owner of Ko Olina Resort & Marina sought tax credits last year to help finance development in West O'ahu, but was unsuccessful. Pacific Gateway Center, a local small-business lender, applied in 2002 but did not receive an award.
The tax-credit program is one of several recent tacks that life-science industry backers have taken to make it more attractive for investors to finance research space construction in Kaka'ako.
Local economic development organization Enterprise Honolulu and the University of Hawai'i have sponsored symposiums to showcase successful projects to develop life-science lab space in other markets.
Last year industry supporters also backed a bill in the Legislature to make $100 million in low-interest bond financing available to private developers for building biotech lab space near the UH medical school in Kaka'ako. The bill did not pass and was not reintroduced this year.
Kamehameha Schools for several years has pondered plans to develop a $100 million high-tech office complex on its property next to the UH medical school. It went so far as to present conceptual plans in 2001, but has not moved forward.
Developers and lenders have hesitated to take the multimillion-dollar investment risk on space generally because it is expensive to build and maintain while tenants are often development-stage companies more likely to fail or, if they become successful, move to the Mainland.
Under the New Market tax-credit program, taxpayers who invest in projects selected for tax-credit allocations receive a credit equal to 39 percent of their investment paid back over seven years.
Examples of previous projects on the Mainland have involved charter school funding, brownfield redevelopment, housing construction, business loans, shopping center development and manufacturing startups.
Kaka'ako around the UH medial school qualifies as a low-income community under the tax-credit program because census tracts covering the area have a combination of median family income that is 80 percent or less than the greater area's median family income, and a poverty rate above 20 percent.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
