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HomeMy WebLinkAboutDSD-20-178 - Make it Kitchener 2.0 - Health Innovation Partnership & Business CaseREPORT TO: Finance and Corporate ServicesCommittee DATE OF MEETING: November 2, 2020 SUBMITTED BY: Cory Bluhm, Executive Director Economic Development 519-741-2200 ext. 7065 PREPARED BY: Brian Bennett, Manager Business Development 519-741-2200 ext. 7230 WARD (S) INVOLVED: Ward 9 DATE OF REPORT:October 27, 2020 REPORT NO.: DSD-20-178 SUBJECT: Make it Kitchener2.0 – Health Innovation Partnership & Business Case ___________________________________________________________________________ RECOMMENDATION: That up to $8.5M from the Kitchener Economic Development Investment Fund 2.0 be allocated to support the renovation of the University of Waterloo’s buildinglocated at 280 Joseph St W, to expand the Downtown Kitchener Health Sciences Campustohouse the University of Waterloo’s Velocity program and new Health Innovation opportunities, in accordance with report DSD-20-178; and further, That the Mayor and Clerk be authorized to execute all documentation required to complete the transaction, in accordance with report DSD-20-178, with said documentation to be to the satisfaction of the City Solicitor. EXECUTIVE SUMMARY: As a key action in the City’s Corporate Strategic Plan, in 2019, City Council directed staff to undertake a business case for an incubator/accelerator/co-working space to support health/med- tech industries. Throughout the communityengagement that lead to the creation of Make It Kitchener 2.0, health innovation was identified as a top growth priority for our local economy. The University of Waterloo(UW), in partnership and collaboration with the City of Kitchener (COK), is proposing to develop a new, 8,360 square metre(90,000 square foot)healthinnovation facility.For detailed information, please refer to the University of Waterloo, Velocity Heath Innovation Partnership, Business Case as contained in Appendix A of this report. The University of Waterloo Board of Governors approved proceeding with a partnership with the City of Kitchener at their October 27, 2020 meeting. (Refer to Appendix B) As the proposed new home for UW’s Velocity Program, the facility would be focused on the incubation of medical technology companies,deep science technology and multi-disciplinary *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 2 - 1 research. With a focus on technology and innovation based solutions to health challenges, the proposed facility would be unlike any other in Canada. Located on the UW Health Sciences Campus, in Downtown Kitchener's Innovation District, the new facility would becomethe centre point of the region’s growing health industry, leading to long-term growth of local companies, industry diversificationandemployment opportunities.Lands and buildings throughout the Innovation District, could accommodate new office developments, emerging companies andnew jobs. Together, the UW School of Pharmacy, McMaster DeGroote School of Medicine, the proposed health innovation facility and surrounding employmentlands have the potential to become a globally significant centre for health innovation. Globally and provincially, the health industry is expected to experience significant growth over the next 20+ years. Based on past trends, the Kitchener community will be challenged to compete for job growth unless significant investments, such as this, are made. This is evident based on feedback from stakeholders who have noted that the lack of wet lab space in our region, for example, will lead to the loss of entrepreneurs and companies to other communities. The costs associated with the development of the proposed facility are estimated at $35 million. Staff propose the City would provide a contribution of up to $8.5 million (25% of the capital costs). It is anticipated that the balance of capital costs would be shared by the University, and senior levels of government. If built as proposed, every dollar contributed by the economic development investment fund would be matched by at least 3 dollarscontributedfrom other sources. As part of the partnership, UW would lease 5,000 square feet of space to the City for $1 for use by the Waterloo Region Small Business Centre, to ensure local entrepreneurs and small business owners can access the facility and collaborate with Velocity companies and UW researchers. COVID-19 has reinforced that we need to become more self-sufficient locally, regionally and national in health technologies and life sciences. The expanded Health Sciences Campus with the proposed health innovation facility will provide innovators, startups, scaleups and local Small and Medium Enterprises (SME) the infrastructure, mentorship and resources they need to succeed in today's competitive global health industry. This proposal is a long-term investment in the community’s future, providing a transformational opportunity to become a global leader in medical technologyand life sciences. BACKGROUND: For detailed background information, refer to section 2.0 of the Business Casewithin Appendix A. In 2006, the City of Kitchener partnered with the University of Waterloo to establish the Health Sciences Campus in Downtown Kitchener in the Innovation District. The initial phase was centred aroundUW’s School of Pharmacy supported by a $30M investment from the City of 2 - 2 Kitchener, followed by the McMaster DeGroote School of Medicine. A vacant 90,000 sq ft warehouse remained on the campus with the intent for it to be repurposed over time. In 2016, the City of Kitchener (COK) invested $500,000 in the University of Waterloo’s Velocity program, an incubator for startups and scaleups.With a shortage of wet lab space in the Region, the investment doubled Velocity’s capacity to 36,000 sq ft in the Tannery. Although Velocity focussed on more technological hardware applications, as a result of the wetlab space, more companies have emerged focussed on medical technologyand deep science. In 2019, as part of the City’s Corporate Strategic Plan, City Council directed staff to develop a business case for an incubator/accelerator/co-working space to support health/med-tech industries. In 2019-2020, through engagement leading to the development of Make It Kitchener 2.0, residents, business owners and business leadersidentifiedhealth innovation as a top priority and opportunity for new economic, company and job growth for our community.Similarly, the City’s Economic Development Advisory Committee identified health innovation as the top opportunity for industry growth. For more information, refer to report DSD-20-056. The health industry is now poised for significant growth throughout North America, driven by three key factors: the needto respond to the COVID-19 pandemic; an aging population; and, a societal focus on personal health and well-being. Without significant investments locally, our City and Region could be unfavourably impacted while other communities emerge as leaders. However, our community is uniquely positioned to leverage strengths in technology, data, talent, research, and commercialization to play a unique role in the growth of health industry. REPORT: The Opportunity The University of Waterloo, in partnership and collaboration with the City of Kitchener, is proposing to develop a new, 90,000 square foot innovation facility focused on health innovation, medical technologyand deep scienceon the UW Health Sciences Campus located in Kitchener's Downtown Innovation District. The proposed facility would include: Refurbishment ofa 90,000 square foot vacant warehouse already owned by UW on the Health Sciences Campus; The new home for UW’s Velocity program, Canada's most productive incubator, expanding from their current size of 36,000 square feet; Multi-use biosafety, clinical, instrumentation, product development and wet lab space for SME’s, entrepreneurs and innovators; Co-location with the Region of Waterloo's Small Business Centre to support health related companies grow their business; and, 2 - 3 Co-location with various health related, interdisciplinary research from UW’s main campus. For additional informationon the opportunity see section 1.0 Executive Summary of the Business Case in Appendix A. Growth of the Health Industry The health industry is poised for significant growth globally. Ontario is no exception. While COVID- 19 has put a spotlight on, and placed pressure upon our health system, our rapidly aging population will put additional significant strain on health resources well beyond the pandemic. If today’s per capita public health costs were to remain the same, health care costs could double by 2041. Already today, the growth of the global health industry is outpacing overall economic growth. As a result, our community has an opportunity to play a role in future growth of this industry by i) supporting companies actively looking to capitalize on local, provincial and global growth; and ii) supporting innovation and startups focused on providing a range of innovative health and medical technology solutions. For more detailed information, refer to section4.0 Economic Impact Analysis of the Business Case. Local Need The University of Waterloo (UW) Velocity lab located in Downtown Kitchener at the Tannery, has been so successful it is operating at capacity while community users are being turned away. Local industry stakeholdershave all identified the shortage of lab space in the region. Too often, health innovators, startups and SMEs struggle to grow their businesses because building their own technical infrastructure requires significant capital, distracting their resources from necessary growth functions, such as attractinginvestment, increasingproduction and enteringnew global markets. Without such facilities, our community will lose emerging companies and talent to other regions who can offer a fully equipped functioning lab. The expanded Health Sciences Campuswill provide health innovators, startups, scaleups and local Small and Medium Enterprises (SME) the infrastructure, mentorship and resources they need to succeed in today's competitive global economy. This proposal is a long-term investment in the community’s future, providing a transformational opportunity to become a global leader in medical technologyand life sciences for decades to come. COVID-19 has reinforced that we need to become more self-sufficient locally, regionally and national in health technologies and life sciences. The proposed facility and anticipated spin off growth would drive local industry growth while strengthening Canada’s health care system. 2 - 4 The Importance of UW Velocity Velocity is a leading entrepreneurship and incubator program at the University of Waterloo. From idea to product development to commercialization, Velocity provides the knowledge, tools, lab space, mentoring and network that startups, scaleups and entrepreneurs require for commercialization and success. The Velocity Downtown Kitchener program located at the Tannery, has evolved from software to hardware, and now med tech and deep science. UW is recognized for their leadership in technology, entrepreneurship, programming, research excellence and innovation. Velocity benefits from UW’s intellectual property policy which remains creator owned, meaning the entrepreneur/creator retains the intellectual property developed with the opportunity to commercializetheir ideas, and is not owned by the University The Velocity program has transitioned to focus on advanced technologies and deep science companies emerging from extensive research, currently with 13 health tech and med tech companiesand 26 deep science companies. Since 2016, Velocity affiliated companies have raised $750M in investment, of which health tech companies have raise $68M. Since 2008, overall Velocity programming hasincubated 400+ companies, with $1.3B in investment and 2,600+ jobs created.Over the first 5 years of the new facility, the University projects the following outputs of health tech companies: Startups: Incubation of 50-75 high growth health tech start-ups $20M in private sector investment 150-225 highly skilled jobs created Scaleups: Support for 50 health tech scaleups $75M of private sector investment 500-600 highly skilled jobs created Proposed Initial Capital Investment The conversion of the warehouse includes both interior and exterior renovations, including new HVAC, plumbing, electrical, ventilation, labs, exterior cladding and landscaping. Environmental testing needs to be completed onsite. The conversion will adhere to environmental standards with a LEED Silver Certification.The proposed agreement and funding would be structured as follows: 2 - 5 Total Capital Contribution – 280 Joseph St Original Purchase Cost for 280 Joseph St $5M Warehouse Conversion Costs$30M Total Costs$35M Proposed Funding COK (25%)$8.5M UW(33%) $11.5M Senior Levels of Govt (42%) $15M Total Funding$35M The COK funding would be for25% of capital and outstanding construction costs payable in quarterly installments over 5 years. UW would beresponsible for any cost overruns. The project could be phased depending on the timing of external funding, however the initial phase would be the build out of 45,000 sq ft and all of the lab space. Partnership Details: COK Investment:up to $8.5M COKFunding:25% of Capital/Construction Costs incurred quarterly over a 5 year term Operating Costs:$1.8M annually to be funded by UW Facility Term:Minimum 15 years from completion of construction. Should the facility cease to operate as an incubator/lab before the end of the 15 year term, the City’s investment is to be repaid on a pro-rata basis COK Space:5,000 sq ft to be provided to the City forthe Small Business Centre for 2 ten year terms. Common Area Maintenance Fees for the 5,000 sq ft are to be shared equally between the City and UW Operating Expenses: Velocity Programing costs are the responsibility of UW Small Business Centre is responsible for programming costs and 50% of Common Area Maintenance Fees for 5,000 sq ft, expected to be $17,500 annually 2 - 6 Long-term Opportunity Since the inception of the UW Health Sciences Campus, the Innovation District hasbecome an epicentre of employment growth for our community. The proposed facility would onlyincrease the viabilityanddevelopability of lands within the District, including increasing thevalue of adjacent City-owned lands (Bramm Yards).For example, based on current zoning, the Bramm Yardscould accommodate up to 650,000 square feet of new development. As noted in the City’s Strategic Plan, staff will engage the community in a visioningexercise to develop a master plan for the Bramm Yards. Benefits for Residents The proposed partnership and long-term opportunity providesa variety of benefits to the broader community, including potential improvements to healthcare, new company and job growth, increased tax assessment, and the overall growth of the City’s attractiveness and economic competitiveness. For a comprehensive list, see section 5.0 Community Benefits of the Business Case. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The proposed partnership delivers on a key action of the City’s Corporate Strategic Plan and advances the community’s ambitions as identified inMake It Kitchener 2.0. For more information, see section 6.0 Strategic Alignment of the Business Case. FINANCIAL IMPLICATIONS: The City’s proposed contribution would be up to $8.5 million from the Economic Development Investment Fund 2.0(EDIF 2.0), provided over 5 years between 2022 and 2026. With the re- issuance of debt for EDIF 2.0 to begin in 2022, sufficientcash flow will exist within the fund to allocate to the proposed investment. The City’s contribution would represent 25% of the total estimated capital cost of $35 million. The City would be provided 5,000 square feet of space for a 20 year period, to be utilized by the Waterloo Region Small Business Centre. With the exception of the above noted Cityspace, UW would be responsible for operating costs associated with the facility. COMMUNITY ENGAGEMENT: CONSULT AND COLLABORATE – Throughout 2019 and 2020, Economic Development staff have been engaging stakeholders, the community and Council through a series of in-person discussions, an online survey and idea board, a major community symposium – Ideas of the Brave, advisory committee discussions,etc., with more than 950 total touch points. Throughout this process participants scored investment in health innovation in the top quartile. For the City’s Economic Development Advisory Committee, Health Innovation was identified as their top recommended priority. 2 - 7 ACKNOWLEDGED BY: Justin Readman, General Manager, Development Services Division Appendix A: Business Case, University of Waterloo Velocity Health Innovation Partnership Appendix B: Letter from the University of Waterloo outlining the partnership opportunity 2 - 8 OCT 28 2020 Make It Kitchener 2.0 Economic DevelopmentInvestment Fund 2.0 Business Case University of Waterloo VelocityHealth Innovation Partnership 2 - 9 Table of Contents 1.0Executive Summary......................................................................................................................... 2 2.0 Background....................................................................................................................................... 3 3.0 The Opportunity................................................................................................................................ 5 4.0 Economic Impact Analysis.............................................................................................................. 6 5.0 Community Benefits.......................................................................................................................10 6.0 Strategic Alignment........................................................................................................................ 12 7.0 Environmental Scan....................................................................................................................... 13 8.0 Capital and Operational Impacts.................................................................................................. 14 9.0 Conclusions and Recommendaitons........................................................................................... 16 BUSINESS CASE – KING STREET MASTER PLANPAGE 2 - 10 Executive Summary 1 Overview of the Opportunity The Health Industry is poised for significant growth throughout North America, driven by three key factors: our ability to respond to the COVID-19 pandemic; an aging population; and, a societal focus on personal health and well-being. Without significant investments locally, our City and Region could be unfavourablyimpacted while other communities emerge as leaders.However, our community is uniquely positioned to leverage our strengths in technology, data, talent, research, and commercialization to emerge as a global centre for health innovation and medical technology. The University of Waterloo(UW), in partnershipand collaboration with the City of Kitchener (COK), isproposing to develop a new,90,000 square foot health tech and deep tech hub on the UW Health SciencesCampus located in Kitchener's Downtown Innovation District. The proposed facility would include: Refurbishmentof a90,000 square foot vacant warehouse already owned by UW on the Health Sciences Campus; The new home for UW’s Velocity program, Canada's most productive incubator expanding from their current size of36,000 square feet; Multi-use biosafety, clinical, instrumentation, product development and wet lab space for small and medium-sized enterprises (SME’s), entrepreneursand innovators; Co-location with the Region ofWaterloo's SmallBusiness Centre to supporthealth related companies growtheir business; and, Co-location withvarious health related, interdisciplinary researchfrom UW’s main campus. TheUniversity of Waterloo Velocity lab located in DowntownKitchener at the Tannery,has been so successfulit is operating at capacity whilecommunity usersare being turned away. UW, potential users,and the Medical Innovation Exchange (MIX) - an organization of professionals and innovators in the medical technology industry - have all identified the shortage of lab space in the region. Too often, health innovators, startups and SMEs struggle to grow their businesses because building their own technical infrastructure requires significant capital.Withoutsuchfacilities, our communitywill loseemerging companies and talent to other regions who can offerfully equippedfunctioning labs and manufacturing space . The expanded Health Sciences Campus will provide health innovators, startups, scaleups and local Small and Medium Enterprises(SME) the infrastructure,mentorship and resources they need to succeed intoday's competitive global economy. This proposal is along-term investment in the community’s future, providing atransformational opportunity tobecome a global leader in medicaltechnologyand life sciences for decades to come. The City’sproposed contribution wouldbe up to $8.5 million from the Economic DevelopmentInvestment Fund 2.0, provided over 5 years between2022 and 2026. The City’s contribution would represent 25% ofthe total estimated capital cost of $35 million. TheCity would be provided 5,000 square feet of leased spacefor $1 for a 20-yearperiod, to be utilized by the Waterloo Region Small Business Centre. Except forthe abovenoted leased space, UW would be responsible for operating costs associatedwith the facility. With afacility of this nature, increased interest in the Innovation Districtwould be expected.This could include demand for new development, the creation of new office space, and/or demand forexisting space. For example, the City owns 7.5 acres of adjacentlands (Bramm Yards)with the potential to accommodateup to 650,000 square feet of new development. Subject to futurepublic engagement, visioning and a master plan, these lands could accommodateas many as 4,000new jobs. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 11 Section Background 2 2.1 Make It Kitchener2.0 Make it Kitchener 2.0, Kitchener’s Economic Development Strategy was approved by Kitchener Council onOctober 26, 2020.Throughoutthecommunity consultation process,health innovationwas identified as one of the key future growth industries the communitywants to see new investment in.Health innovation is described as a leading industry within the Impact Economy. The strategy envisions supporting ‘Difference Makers’ through the creationof spaces and programs that enable entrepreneurs tostart, lead and scale new businesses. 2.2 UW Health Sciences Campus In 2006, the City of Kitchener partnered with the University of Waterloo to establish the Health Sciences Campus in Downtown Kitchener located in the Innovation District.The initial catalystproject was the University of Waterloo’s School of Pharmacy supported by a $30M investment from the City of Kitchener, followed by the McMaster DeGroote School of Medicine. A vacant 90,000 sq ft warehouse remained on the campus with the intent to expand and repurpose the building over time. 2.3 UW Velocity Velocity is a leading entrepreneurship and incubator program at the University ofWaterloo. From idea to product development to commercialization, Velocity provides the knowledge, tools, lab space, mentoring and network that startups, scaleups and entrepreneurs require for commercialization andsuccess. The Velocity Downtown Kitchener program located at the Tannery, has evolved from softwareto hardware, and nowmedicaltechnology and deep science.UW is recognized for their leadership in technology, entrepreneurship, programming, research excellence and innovation. Velocity’s objective is to become a global leader for healthinnovation with afocus on deep science and medical technology companies.Deep sciencecompanies can be described as follows: Life sciences/therapeutics/synthetic biology; Medicaldevices, tools and diagnostics; Materials science, industrials, cleantech; and, Hardware & electronic devices. Health/Medical Technology companies can be described as technology that can be used for health prevention andin a care setting, which can includedisposables, equipment, surgicalprocedure innovations, implant technology, biomaterials and connectedhealth IT. This includesall devices with which a patient can be diagnosed ortreatedwith. In 2016, the City of Kitchener invested $500,000 in the University of Waterloo’s Velocity program, asa means to resolve theshortage of wetlab space in the region. The investment waspart of a doubling ofVelocity’s capacity to 36,000 sq ft in the Tannery. As a result of the increased wet lab space, more companies have emergedfocusing health innovation.As companiestransition into med tech and deep science, thecomplexityof supports increase. Incubation and scaling often require moreresearch which increasesdemand for lab space. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 12 Velocity benefits from UW’s intellectualproperty policywhich remains creator owned, meaning the entrepreneur/creator retains the intellectual property developed with the opportunity to commercialize their ideas, and is not owned by the University. Velocity’s currentenrollment: 13healthtech and med tech companies 26deepscience companies 65total companies Investment $68M private sector investment in Velocity Healthtechcompaniessince 2016; and, $750M private sector investment in all Velocity companies since 2016. In 2019,Velocity, in partnership with the COK and Waterloo EDC, secured a $2million investmentfrom Perkin Elmer, a leader in diagnostics, life science research and environmental and industrial testing. Perkin Elmer installed a $2M demonstration lab at Velocity whichprovides the tools needed to understand the biological and chemical processes behind building diagnostics, creating a new therapy, or understanding the performance of a medical device. Community access is provided whenthe facility is available. A sample list identifying company activities is outlinedon Schedule 1. A list of companies that have participated in the Velocity program is outlinedon Schedule 2. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 13 Section The Opportunity 3 Velocity labs are currently operating at capacity with no additional lab space available for community use. Medtech and deep science companies take longer to incubate due to the complex research and testing required. Companies andtalentare leaving ourarea forother regions that havelab capacity. Thisimpacts both, the growth of our local industry, as well as our local supply chain. There remains ongoing demand forVelocity programming which had 61 applications for their fall 2020 intake, with only 10 companies accepted. Health and Life Sciences research is conducted acrossthe University in all six faculties including, Faculty of Arts; Faculty of Science; Faculty of Environment; Faculty of Engineering; Faculty of Applied Health Sciences;and,Faculty of Mathematics. The opportunity to co-locate research in ashared space enhances opportunities for collisions and collaborationbetween University departments. The Current Opportunity – UW Velocity Health Innovation Facility The City has anopportunity topartner with the University of Waterloo to expand theHealth Sciences Campus through the repurposing of the vacant90,000 sq ft warehouse into a premier health innovation facility, driven by the Velocity program, to provide incubation supportsto new, emerging and growing companies. Thefacility couldinclude: Wet labsfor chemicalandmaterials science; Advanced Biosafety Level 1 Lab – companies work with low risk biological materials for development work for new therapies, DNA work and cellular engineeringto create new bioproducts; Three Biosafety Level 2 Labs– support work in the development of gene therapies, biologics, and tissue engineering. As only one activitycan occurat a time, multiple labs increasethe number of companies that can be supported; Clinical Simulation Suite- validation and non-clinical testing of health technologies in a replicated hospital room.Practitioners willinteract with companies to acceleratealignment of product and clinical development; Universal Product Development Space – flexible space to support product development for hardware and electronics, and additive manufacturing (3D printing); Shared Instrumentation Space - workshop housing tools used in analyzing biological and chemical properties; Small Business Centre – 5,000 sq ft of co-location space for entrepreneurs focussing on health and life sciences UW interdisciplinaryco-location and collaborations The Future Opportunity – City’s Bramm Lands Through theCity’s Corporate Strategic Plan, City Council has directedstaff to engage with the community on the development of a vision and master plan for the adjacent Bramm Yards. The proposed facility would significantly increase the viability, developability andvalue of the Bramm Yards. Based on current zoning,the site could accommodate up to 650,000 square feet of new developments.City staff will work with stakeholders and the community to identify a preferred vision for the site, which could include new office space for health innovation companies. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 14 Section EconomicImpact Analysis 4 The following provides an overview of the anticipated economic impacts which could be achieved throughthe proposed Health Innovation Facility. Projected Growth of the Health Industry The health industry across North America is expected to experience significant growth over the next 10 to 20 years,driven largely by threeforces: an aging population, response to the current pandemic, and greatersocietal awareness of the importance of health, preventativehealth and wellbeing. According to the World Health Organization, the health sector is expanding faster than the economy. Global health spending rose 3.9% a year between2000and 2017, while the overall economygrew by 3.0%.In 2017, global health spending was estimated at $7.8 trillion.In 2017, public spendingrepresented60%of global spending. Source: World Health Organization; Global Spending on Health: A World in Transition, 2019 To understand the local impact of our aging community, consider that if per capita health care costsremain constant, Kitchener’s growing population aged65+ wouldincrease local health expenses by $356million by 2041: Sources: Region of Waterloo population forecast (Kitchener provisional allocation, moderate forecast), Canadian Institute for HealthInformation, National Health Expenditures Trends 1975-2018 Notes: Health spending was estimated based on 2016 per capita costs by age, not adjusted for inflation. Figures assume per capita spending will remain constant. The Need for Innovation According to Deloitte’s 2020 Global Health Care Outlook, the health care sector will bechallenged to achieve financial sustainability by reducing the cost to deliver services. Atthesame time, patient/customer expectations continue to rise with greater demand for real-timeand expedient care and diagnostics. As a result, innovations in care models through digital technologiesand data sharingare necessaryto achieve both outcomes.Given the regionand University’s historyof technology innovation, the proposedfacility would position our region as a future leader in the advancement of health innovation and medical technology. Regional Comparisons Post-secondary institutions in Waterloo Region graduate morethan 4,000 students each year in health-related fields. However, our communitylags behind London, Hamilton and Kingston inemployment. For example, between 2017 and 2018, employment in health-related occupations in Waterloo Region only increased by 510. This suggests that85% of local graduatesfind work outside of our region. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 15 Median Hourly Region2017 Jobs2018 JobsChange% Change Wages Kitchener-- Cambridge— 14,59615,1065103%$29.58 Waterloo Hamilton26,15427,2991,1454%$29.63 London21,17121,7435723%$28.69 Toronto160,238167,1956,9574%$30.23 Guelph4,3114,4831724%$30.14 Ottawa— 41,77642,9441,1683%$30.15 Gatineau Kingston8,1298,5384095%$30.52 Barrie5,7386,0112735%$30.23 Sources: EMSI Q3 2019 Data Set comparing 4 Health Occupations, October 2019 According to projections utilizing the Ministry of Agriculture,Food and Rural Affairs’ analyst tool, without intervention, it is expected that these neighbouring cities will continue to experiencedisproportionate growth in health employment while Waterloo Region willlag behind even further. As a result, two negative outcomes are likely. First, Kitchener’s growth in health industry employment will be disproportionatelylower than provincial growth rates.Secondly, Kitchener residents may not be ableto find the specialized care they need locallyand may have to travel to other communities to receive it. Notes - Larger bubbles represent larger industries. A Location Quotient (LQ) of >1 represents a regional strength, suggesting a strong presence of companies exporting products and services. Source: EMSI 2019.3. Data were obtained through OMAFRA’s Analyst tool for economic development BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 16 Small Business Centre Activity Thenumber of health-related businessconsultations (not including inquiries)atthe Waterloo Region Small Business Centrehas increasedby 275%over thepast two years. Staff note that the increase isdueto growing consumer demands for well-being, wellness and para-medical services: YearConsultations 201820 201942 2020(Q1-3)74 Sources:Waterloo Region Small Business Centre Growth of Local Health Industry During the COVID-19 Pandemic According to theWaterloo Economic Development Corporation,as many as 90 local companies adaptedtheir operations to providePersonal Protective Equipment for Canada’s battle with the Coronavirus. This includes manufacturing of respirators, surgical masks, sanitary wipes, face shields, etc. The almost instantaneous pivoting of the local industry demonstrates our region’s ability to adapt manufacturing and technological know-how to advance growth in new industries. Impact ofthe University of Waterloo’s Velocity Program Velocity, the University of Waterloo’s flagship entrepreneurship program and Canada’s most productive incubator, is seeinggrowth in the number ofhealth tech and deep tech companieslooking to build scaling companiesready to take on global challenges. Since 2008,all Velocityprogramminghas seen: 400+ companies incubated $1.3B in investment collectively 2,600+ jobs created Over the first 5 yearsof the new facility, the University projects the following outputs of health tech companies: Startups Incubation of 50-75 high growth healthtech start-ups $20Minprivate sector investment 150-225 highly skilled jobscreated Scaleups Support for 50health tech scaleups $75M of private sector investment 500-600 highly skilled jobscreated University of Waterloo’s Total Economic Impact Over the last 10 years, UW Entrepreneurship Programshave created over 7,500 jobs,generating revenue of $2.3B. In 2018-2019, UW researchcontributed$458M to Ontario’s GDPwhile Velocity and the Accelerator Centre contributed $170M to Canada’s GDPandcontributed$80M to the Region of Waterloo’s GDP. Interest from the Province of Ontario Medtech and health innovation are receiving significantlymore profile and attention from the Provincial Government. At an October 13WaterlooRegion roundtable, Minister of Economic Development, Job Creation and Trade, Vic Fedeli indicated that Waterloo Region’s established tech ecosystem positions the area to be a major player in helping Ontario strengthen its medtech and personal protective equipment industries. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 17 Adjacent City-Owned Lands The City ownsapproximately7.5 acres of land directly adjacent to the proposed site. Based on currentzoning, said lands could accommodatein excess of 60,000 square metres (650,000 square feet) of newdevelopment. Depending on the ultimate development of these lands, they could generatenewproperty tax revenuesand new office space for employment.The sale of these lands could be utilized for future catalytic investments, as per MakeIt Kitchener 2.0. The proposed facility shouldenhance the value of these lands. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 18 Section Community Benefits 5 In addition to the potential economicopportunities identified in section 3, the proposed Health Innovation Facilitycould also help produce the following community and social benefits: Improvements to Healthcare – innovations driven from startups and researcherswithin the facility shouldultimately lead to health care improvements for local residentsand beyond. This could include, butnot limited to,improvements to acutecare, an enhancedpatientexperience, enhanced care services, etc. Innovation District – theCity’sInnovation District is already an epicenterof innovation, with the presence of the Communitech Hub, Schools of Pharmacy and Medicine, Google’sCanadian Engineering Headquarters, and many established and growing technology companies. Adding a facility of this nature, with a long-term goal of building an urban business park focused onhealth innovation, would only strengthen the District’s role asa majorhub of innovation in Canada. Continued Growth of Post-Secondary Presence in Downtown Kitchener – thenew facility would add to the existing community of post-secondary institutions,including the UW Schoolof Pharmacy, McMaster School of Medicine, WLU School of Social Workand the Conestoga College Downtown Campus. NewCompanies, Diversification & Competitiveness – as has been evident by spinoff company growth from the current Velocity facility and the Communitech Hub, the proposed facility will incubate new companies which, upon graduationfrom theprogram,willrequire permanent office space throughout the community. It is likelythat many companiesmay choose to remain Downtown. This in turn will lead tofurther diversification ofour employment base, greater competitivenesswhen attractingcompaniesand talent, and overall increases to the local tax base. Partnership Opportunities – a central facility of this nature would create opportunities to foster partnerships between the region’svarious health focused stakeholders, includingthe UW School of Pharmacy, McMaster’s Degroote School of Medicine,GrandRiverHospital, Waterloo Med Tech, etc.UW hasa variety of strategic projects underway with the local hospitals which would benefit fromco-locationand the clinical simulation suite. Toronto-Waterloo Innovation Corridor – as the proposedfacilitywould be locatednear key trail connections and within walking distance of the future multi-modal transit station, connections between Kitchener, Guelph, the GTA and downtown Toronto should increase. Particularly should connections form between companies, researchersand practitionersalong the corridor, health care companies inToronto, for example, may look to Kitchener as a potential source of startup talent, mergers or acquisitionsorvice versa. evitalization – increased presence and numbers of companies, employees, researchers, etc., will lead to ContinuedR additional demand for residential development, furtherboost investor confidence and draw new businesses at a much faster rate. Access forSmall Businesses – by providing co-location space for the Region of Waterloo's Small Business Centre, local health related companies would have increased accesses to supports and tools togrowtheir business. These companies will have the opportunity to collaborate with startups, scaleups, mentors and lab space. Diversity - UW isfocused onimproving entrepreneurship diversity and, based on trends, expectsat least 30-40% female founders forstartups and scaleups.The proposed 5,000 square feet of space to be programmed by the Small Business Centre would enable the City to ensurethat a broad range of businessesand entrepreneurs are able to access and utilize the facility. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 19 Talent Attraction – this facility shouldassist in the retention of talent, particularly students of the Velocity program, who may otherwise move to other communities after graduation. Business Retention – this facilityshould enable the retention of companies within the community, creating new employment, innovation, advancing the ecosystem, the supply chainand growing our GDP. Global Brand – afacility of this scale wouldgarner recognition asa globalhealth innovation centre which attracts globalcompanies and talentfrom outside of Kitchener and Waterloo Region. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 20 Section Strategic Alignment 6 The proposed partnership and investment in the UW Velocity Health Innovation Facilityalignswith the following strategicpriorities of the City of Kitchener: City of Kitchener Corporate Strategic Plan – The City’s strategic plan sets a vision for building “an innovative, caring and vibrantKitchener”. A key pillar of the strategy is a‘Vibrant Economy’, where the city will make strategic investments to support job creationandeconomicprosperity.Under this pillar, Council identified the following strategic action: 3.2Foster the creation of a city-wide network of incubators, accelerators and co-working spaces by completing the buildout of 44 Gaukel in 2019, advancingwork on a Creative Hub and undertaking business cases in 2019-2021 for the food manufacturing and health/med-tech industries. Theproposed Health Innovation Facility woulddirectly implement a component of action 3.2. MakeIt Kitchener 2.0 – Health innovation is a core industry of the ‘Impact Economy’ and a major theme of Make It Kitchener. The proposed Health Innovation Facilityhelps achievethe ambitionof creating leading facilitiesfor entrepreneurs to advance health and med-tech innovations. As a startup incubator, and through the proposed partnership with the Waterloo Region Small Business Centre, the proposed facilityprovides key infrastructure, space and trainingto enable ‘Difference Makers’.The proposed location on Joseph Streetwould elevate the strategic importance and value of the City’s adjacent lands (Bramm Yards), which is subject to future community visioning and a master plan. The introduction of City-leased space within the proposed facility would enable entrepreneurs, small business owners and differencemakers to access a facility which they otherwise might not be able to, and to contributeto, and benefit from, collocation andcollaboration. United Nations Sustainable Development Goals – Theproposed Health Innovation Facilityalignswith the following goals: 3. Good Health & Well Being 8.Decent Work & Economic Growth 9. Industry, Innovation andInfrastructure City’s Official Plan – the proposed facility is located within the City’s Innovation District. The Official Plan identifies this area as providing a dense urban setting with the presence of high-tech and health sciences related office uses including new post-secondary and research relateduses. The conversion of former industrial buildings to new uses is encouraged. University of Waterloo StrategicPlan – the University’s strategic plan (2020-2025) identifies asignature commitment to lead globally and nationally at the interface of society, health and technology.They imaginethis happening by establishing an interdisciplinary institute that builds on Waterloo’s academic and research strengths in technology as well as the determinants of health. By 2025, the University is committed to aligning theirresearchstrengths deliberately with important globalchallenges such as health technologies. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 21 Section EnvironmentalScan 7 Theproposed health innovation facility wouldoffera unique focus relative to other health incubation and accelerator facilities, such as the following: Ontario/Canada MIX by Intellijoint - Located in Kitchener with 30,000 square feet with a state-of-the-art lab, manufacturing facilities and collaborative office space to provide a space for local healthcare professionals and smaller Health Tech focused companies. The goal of MIX is to connect the Medtech community both locally and globally by creating a collision space for members to share expertise, leverage experience, and achieve scale. McMaster Innovation Park (MIP) - MIP run by McMaster Universityin Hamilton's West end currently spans 700,000 square feet with plans todevelop a recently acquired six-acre property that will add an additional 1.8 million square feet of space geared towards mid-market life sciences companies. MIP is alignedwith the research priorities of McMaster University and aims to act as a bridge between academia and industry. MaRS- Located in downtown Toronto with 1.5 million squarefeet of office, lab, meeting, and event space aimed at small and mid-sized companies. MaRS Health aims to support companies and institutions that are focusing on health solutions, streamlining the healthcare system, and improving patient outcomes with thegoal of bolstering the health economy and helping people enjoy longer, healthier lives. Biomedical Zone - Located within St. Michael’s Hospital at the Keenan Research Centre in downtown Toronto. This physician led, hospital-basedhealth technology incubator is a partnership between Ryerson University and St. Michael’s Hospital. Aims to create scalable sustainable healthcare solutions with global reach. Global/UnitedStates The Engine - Run by Massachusetts Institute of Technology (MIT) in Cambridge, Massachusetts with 25,000 square feet of office, lab, and maker space. The goal is to provide access to the specialized labs, equipment, tools, and space necessary to build transformative technologies. Run by MIT in partnership the leading academic andresearch institutions in the state. University Park at MIT – Located in Cambridge Massachusetts,this mixed-use development comprises office and laboratory buildings thatare home to health innovation companies adjacent to MIT’s maincampus. As a comparable urban office park, its goal is to foster technology transfersamong university students and researchersto the private sector. Global Center for Medical Innovation (GCMI) Medical Incubator - Located in midtown Atlanta GCMI’s MedTech incubatoris made up of multiple facilities with 44,000 square feet of labs, operating rooms, and office space. Aiming to provide the tools, space, facilities, support, and ecosystem necessary for early stage MedTech companies to succeed. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 22 Section Capitaland Operational Impacts 8 8.1Initial Capital Investment The conversion ofthe warehouse includes both interior and exterior renovations, including new HVAC, plumbing, electrical, ventilation, labs, exterior cladding and landscaping. Environmental testing needs to be completed onsite. The conversion will adhere to environmental standards with aLEED SilverCertification. CapitalCosts The proposed agreement and funding would be structured as follows: Total Capital Contribution – 280 Joseph St Original Purchase Cost for 280 Joseph St $5M WarehouseConversion Costs $30M Total Costs $35M Proposed Funding COK(25%) $8.5M UW(33%) $11.5M Senior Levels of Govt(42%) $15M Total Funding $35M The COK funding is25% of capital andoutstanding construction costs payable quarterly over 5 years. UWis responsible forany cost overruns.The project could be phased depending on the timing of external funding, however theinitial phase would be the build out of 45,000 sq ft and all of the lab space. Timing: 2021: Design, Tendering, Site Plan 2022-2023: Interior and Exterior Construction 2023-2024: Lab fit out Partnership Details: COK Investment: up to $8.5M COK Funding:25% of Capital/Construction Costs incurred quarterlyover a 5 year term Operating Costs:$1.8M annually to be funded by UW Facility Term: Minimum 15 years from completion of construction. Should the facility cease to operate as an incubator/lab before the end of the 15-year term, the City’sinvestment isto berepaid on a pro-rata basis BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 23 COKSpace:5,000 sq ft to be provided to the City for the Small Business Centre for two 10-year terms.Common Area Maintenance Fees for the 5,000 sq ft are to be shared equally between the City and UW The City of Kitchener will support the University of Waterlooto secure the $15.5M in additional fundingfrom external sources such as donors, Fedev and the Province of Ontario. The City has been successful in leveraging strategic investmentsas follows: Communitech: COK $500K investment in 2010has resultedin $300M by various levels of government o Velocity: COK500K investment in Velocity lab in 2016 resulted in: Perkin Elmer’s $2M lab investment Fedev:$2.2M in new fundingfor Velocity 8.2 Operating Expenses UW Velocity Programming: Operating costs are expected to be $1.5M annually and are the sole responsibilityof UW. Small Business Centre 5,000 sq ft will be provided lease free for two10-year terms. Responsible for Common Area Maintenance Fees (CAM’s) which include hydro, gas, water, maintenancefor 5,000 sq ft, shared 50% with UW. Estimated costs for COK are $17,500 annually The Small Business Centre willbe responsible for programming expenses. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 24 Section Conclusions 9 Based on the foregoing,staffconclude the following: The global health industry is poised for tremendousgrowth. Significant investments, such as the proposed Health Innovation Facility, arenecessary to ensure our community can emerge a leaderandnot just benefit from growth opportunities ahead; Given the anticipatedpressures on the Provincialhealth system, resulting from the pandemic andthe aging of our population, new innovations toall aspects of the health system will be necessary; Our community’s opportunity within thebroader health ecosystem will be throughtechnology and innovation; The proposed facility willincubate new health innovation companies at a larger scale than the current facility allows. It willalso enable greater collaborationamong startups, researchers, the existing industry, small businesses,practitioners and other keylocal stakeholders; The University of Waterlooand the Velocity program, are internationally recognized as a leader in innovation andjob growth; The proposed facilitywould enhance the viability of new development onthe adjacent Bramm Yards; Together, the current UW Health Sciences Campus, proposed facility and future business park can create a leadingcentre for Health Innovation, where many of the innovations developed stand to benefit local health services; and, In doing so, the proposed partnership wouldadvance the City’s strategicobjectives contained in boththe Corporate Strategic Plan and Make It Kitchener 2.0, providing significant long-term value for residents. BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 25 Schedule 1 -Sample Description of Velocity Companies AVRO - Lifesaving therapeutics are prevented from reaching market or seeing maximum uptake due to the manner in which they are delivered. AVRO Life Sciences has developed a one size fitsall transdermal drug delivery platform capable of serving as a vehicle for awide range of drugs and doses, while increasing the scope and amount of what can be delivered through the skin with similar pharmacokinetics (drug absorption) to pills and IVs. LSK (Life Sciences Key Technologies) - A technology inspired by the Zika virus crisis,Life Sciences Key Technologies (LSK) is now helping the world cope with COVID-19. With an aim to decentralize healthcare diagnostic testing, their portable diagnostic device, PLUM,candiagnose viral diseases on the spot, even in remote areas. Schedule 2 Deeptech, Med tech Companies Launched/Incubated by Velocity Note: dozens of software and marketplace companies continue to be launched and supported by Velocity. CompanyStatusCurrent LocationHealth Tech PressionLaunchedWaterloox Hedgehog MedicalVelocity IncubatorKitchenerx CuriatoLaunchedWaterloox Pear DiagnosticsLaunchedTorontox Voyage LabsLaunchedKitchenerx Vena MedicalLaunchedKitchenerx PerennialLaunchedLos Angelesx Penta MedicalLaunchedKitchenerx HelpWearLaunchedTorontox Amina HealthLaunchedKitchenerx Acorn BiolabsLaunchedTorontox SuncayrLaunchedMississaugax Nicoya LifesciencesLaunchedKitchenerx ExVivo LabsLaunchedKitchenerx ThereaphageVelocity IncubatorKitchenerx MediphageLaunchedTorontox ClearVoxel ImagingVelocity Incubator Kitchenerx StabiloVelocity IncubatorKitchenerx OcuBlinkVelocity IncubatorKitchenerx A-Line OrthopedicsVelocity IncubatorKitchenerx BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 26 GravityVelocity IncubatorKitchenerx Qidni LabsVelocity IncubatorKitchenerx MembioVelocity IncubatorKitchenerx Avro LifeScienceVelocity IncubatorKitchenerx NerVVelocity IncubatorKitchenerx Serenity BioworksVelocity IncubatorKitchenerx Elucid LabsLaunchedMississaugax MicromensioVelocity IncubatorToronto/Kitchenerx Life Sciences Key TechnologiesVelocity IncubatorToronto/Kitchenerx Aurora Quantum TechnologiesLaunchedOttawa Salient EnergyLaunchedHalifax UpgrainLaunchedToronto LabsCubedLaunchedKitchener QuantWaveTechnologiesLaunchedWaterloo Sci-BotsVelocity IncubatorKitchener LumotuneLaunchedKitchener NanophyllLaunchedHamilton AlchemyLaunchedKitchener Pegasus AeronauticsLaunchedWaterloo LabforgeLaunchedKitchener Borealis WindLaunchedWaterloo GroboLaunchedWaterloo MonogramLaunchedKitchener Smarter AlloysLaunchedWaterloo TritonWearLaunchedMississauga VolteraLaunchedKitchener AcertaLaunchedKitchener EmbarkLaunchedSan Francisco AvidBotsLaunchedKitchener NorthLaunchedKitchener Traject SportsVelocity IncubatorKitchener TelicaVelocity IncubatorKitchener EvercloakVelocity IncubatorKitchener BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 27 DropLabVelocity IncubatorKitchener AgriseaVelocity IncubatorKitchener StacktronicVelocity IncubatorKitchener Brink BionicsVelocity IncubatorKitchener NanoCNETVelocity IncubatorKitchener Pulse IndustrialVelocity IncubatorKitchener BlueLion LabsVelocity IncubatorKitchener IntelineVelocity IncubatorKitchener WatFlyVelocity IncubatorKitchener NanoQuanVelocity IncubatorKitchener AryllaVelocity IncubatorKitchener H2NanOVelocity IncubatorKitchener IcspiVelocity IncubatorKitchener Halion DisplaysVelocity IncubatorKitchener BUSINESS CASE – UNIVERSITY OF WATERLOO HEALTH INNOVATION FACILITYPAGE 2 - 28 Tuesday, October 27, 2020 Dan Chapman, Chief Administrative Officer, City of Kitchener 200 King Street West Kitchener, ON N2G 4G7 Dear Mr. Chapman, Request for Partnership in the Innovation Buildingat the University of Waterloo’s Health Sciences Campus in Downtown Kitchener’s Innovation District Please accept this letter as a request for partnership between the University of Waterloo and the City of Kitchener. The University of Waterloo has the opportunity to develop a 90,000 square foot warehouse at 280 Joseph St. on the Health Sciences Campus in Downtown Kitchener and requests to partner with the City of Kitchener on this important development. The University of Waterloo and the City of Kitchener share a closely aligned vision for the future of downtown Kitchener. The University’s 2020-2025 Strategic Plan upholds a signature commitment to lead globally and nationally at the interface of society, health and technology. Make It Kitchener 2.0, the City’s 2020 Guide to Economic Recovery & Growth, likewise identifies health innovation as a key pillar, noting that “our community is ideally positioned to establish a unique foothold in the health industry, by leveraging our strengths in technology, data, communications, manufacturing and medical devices to emerge as a centre for health innovation and medical technology.” This shared vision to create a health innovation and health tech hub in Kitchener’s Innovation District offers an opportunity to drive economic growth with a forward-looking approach that also serves to attract and grow health innovation companies and jobs in the region. The University of Waterloo plans to use this space for to expand Velocity, Canada’s most productive incubator, into a 45,000 square foot space, complete with a wetlab, four advanced biosafety labs and a clinical simulation suite. These highly specialized lab spaces build on a visionary 2016 City of Kitchener investment into the original Velocity space at the Tannery, which established a unique wetlab that has attracted numerous startups to Velocity and to the region. The rest of the space will be used for interdisciplinary researchat the University’s Health Sciences Campusand as collaboration space for entrepreneurs, researchers, students, and community partners. I t is our hope that the City of Kitchener will be our first partner in this importantnew opportunity. At the meeting of the University’s Board of Governors’ on October 27, the board approved the recommendation of the Building and Properties Committee to proceed with the 2 - 29 finalization of the details of this partnership opportunity. Our shared vision will be transformative as we work together to drive economic growth in the region. Thank you, Sandra Banks Vice-President, University Relations University of Waterloo 2 - 30