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The Honolulu Advertiser

Posted on: Thursday, May 12, 2005

Kaka'ako investors get help

By Andrew Gomes
Advertiser Staff Writer

An association of local business interests yesterday received some federal government assistance to help develop a 300,000-square-foot life-sciences research center in Kaka'ako.

Honolulu-based Biotech Research Center LLC was awarded $11 million worth of tax credits to help attract financing for the estimated $150 million project.

Biotech Research was one of 41 organizations selected by the Treasury Department's New Market Tax Credit program to receive the credits intended to foster economic development in low-income communities.

"Ultimately, this project will continue to build up Hawai'i's high-tech business community and support the state's economic diversification," said U.S. Rep. Ed Case, D-Hawai'i.

The award is technically a $28 million "allocation": Investors who spend $28 million financing the project can claim a 39 percent, or $11 million, federal tax credit on their investment.

The award amount was just 19 percent of the $150 million allocation, or $58.5 million in tax credits, that Biotech Research had sought, but will help the group reduce the risk and cost to finance leasable research facilities for biotechnology, pharmaceutical, nutraceutical and other life-science fields.

Kevin Greenwell, director of financial analysis and planning for Biotech Research and an adviser to one of the entity's principal supporters and major Kaka'ako landowner Kamehameha Schools, called the award a "major advance" for the area and Hawai'i's life-sciences industry.

"Getting an award of any kind through this program is great news for Kaka'ako," added Kirk Belsby, Kamehameha Schools vice president for endowment.

There were 208 applicants seeking a combined $23 billion in allocations. The 41 awardees received allocations totaling $2 billion. Awards ranged from $5 million to $100 million. The average was $49 million.

The tax-credit program, established by Congress in December 2000, has made 170 awards for $8 billion in qualified investments to date. It is earmarked to make $15 billion of allocations representing about $6 billion in tax credits.

"By providing businesses with critical investments, job creation will be stimulated in communities that are very much in need," Treasury Secretary John W. Snow said.

Kaka'ako around the University of Hawai'i medical school qualifies as a low-income community under the 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, and a poverty rate above 20 percent.

Backers of building up Hawai'i's life-sciences industry have struggled to convince investors and developers that building leasable research space in Kaka'ako is a wise move.

Such facilities are generally expensive to build and maintain. Tenants are often development-stage companies more likely to fail or, if successful, move to the Mainland.

Behind the development effort as directors of Biotech Research are representatives from Bank of Hawaii, UH, industry association Hawaii Life Sciences Council, the Seattle nonprofit Institute for Systems Biology and Kamehameha Schools.

The planned facility is proposed for development on a 5-acre site at 711 Ala Moana owned by Kamehameha Schools and leased to Honolulu Ford, which is moving. The site is mauka of the medical school.

"The construction of leasable research space sets the stage for the development of public-private partnerships that will fuel the development of the life- sciences industry and fulfill the promise of Kaka'ako," said acting medical school dean Sam Shomaker.

Kamehameha Schools plans to send out a request for proposals next week to six experienced developers. A timetable for development will depend on financing and other factors.

Biotech Research has up to five years to raise investment money applied to the tax credit, which can be claimed over seven years.

Mainland projects that have received New Market Tax Credit awards include an airplane parts manufacturing plant, a charter school, a high-tech business incubator, shopping center redevelopment, housing construction and a sustainable forest project.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.