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Report of the Council on a proposal for a new building at West Cambridge to be known as the East Forum

The COUNCIL beg leave to report to the University as follows:

1. The West Cambridge Master Plan was approved by the Regent House by Grace 8 of 14 May 1997 and Outline Planning Approval for the Master Plan was obtained in summer 1999. Central to the masterplanning concept was the positioning of two non-specific feature buildings, the West Forum and the East Forum, linked by a canal and colonnade, which serve to define the southern edge of this very large 66-hectare site. This Report sets out a proposal for the East Forum.

2. In site-planning terms, the East Forum forms a gateway to the south at the point where the main pedestrian and cycle route along the Coton footpath from the city centre enters the site; to the north it forms a destination point at the end of JJ Thomson Avenue, which runs south from Madingley Road. As shown on the site plan annexed to this Report, the building will be located to the west of the Cavendish Laboratory and adjacent to the residences and nursery project, approved by Grace 1 of 9 May 2002, which started on site in February 2003.

3. A proposal has been developed for the construction of the East Forum as a building which will combine site-wide catering and seminar facilities, accommodation for a new University support service entitled Cambridge Enterprise (see paragraph 7 below), and office space for non-University organizations whose activities are relevant to entrepreneurship and knowledge transfer. The proposal has been approved in principle by both the Finance Committee (following the recommendation of its Buildings Sub-committee) and the Planning and Resources Committee. The Council wish to seek the views of the Regent House in principle, before moving ahead to the detailed planning stages of this project.

4. The planned East Forum is an unusual proposal for the University of Cambridge in that it includes within the same building semi-commercial site-wide facilities, donation-funded University space, and space for letting to non-University organizations. This reflects the three main objectives for the building:

(1) to act as a social focus for the West Cambridge site, providing catering and other facilities to supplement those already embedded in Departments on the site. (This is both a planning requirement and a response to the perceived needs of present and future occupants on the West Cambridge site.);
(2) to provide Cambridge Enterprise with appropriate office space, including incubation space to accommodate early-stage start-ups; and
(3) to foster collaboration between the University and business, by co-locating relevant tenants, such as venture capital firms, accountants, lawyers, banks, and regional agencies and networks within the building.

In addition it is intended that the University's Research Collaboration Office, its Corporate Liaison Office (CLO), and its Careers Service will each have a presence in the East Forum.

5. The current plans envisage a building of 6,850 sq.m. gross internal area, in a south facing U-shape, three storeys high on the northern side and four storeys high to the south. This takes account of the 4-metre drop across the site from north to south. The lower ground floor would contain an atrium for coffee and casual meetings, a seminar centre, and a café/restaurant which would house in an expanded form the existing West Café, which currently occupies a temporary building. The upper floors would contain office and incubator space for Cambridge Enterprise, part of CLO and the Careers Service, and lettable offices for non-University organizations.

6. The concept is of a building which reflects the enterprise process itself, being exciting and unpredictable. Space should be largely open-plan and flexible, with plenty of communal areas to encourage interaction between all the occupants of the building. The café/restaurant would aim to be a lively and relaxed meeting place, open to all who live and work on the West Cambridge site and to the public. Cambridge Enterprise would use the building to offer events and activities related to innovation and enterprise - talks, seminars, workshops, video-conferencing, and training.

7. Cambridge Enterprise is currently part of the Research Services Division of the Unified Administrative Service. With the approval of the Council it has been created by the merger of a number of existing offices and units including the business creation activities of the Cambridge Entrepeneurship Centre, the Technology Transfer Office, the University Challenge Fund, other related University funds and Cambridge University Technical Services Ltd (CUTS). Cambridge Enterprise's mission is to help University of Cambridge inventors, innovators, and entrepreneurs make their ideas and concepts more commercially successful for the benefit of themselves, the University, and the UK economy. If this mission is to be pursued successfully Cambridge Enterprise needs to build close working links both with academics and with non-University organizations which can provide finance and advice to start-ups and spin-outs. The Council believe that Cambridge Enterprise's purpose and value is independent of any view that the Regent House may in the future take about the ownership of intellectual property rights (IPR). (See also the Council's Notice on p. 1007.)

8. Like the building itself, the funding model is complex. The planned East Forum is currently estimated to cost £21.51m, including fees, contingency, and VAT, with a contribution of £1.63m towards the infrastructure costs of the West Cambridge site as a whole, and assuming a start on site in late 2003 (although this now seems unlikely to be achieved). The funding for this is made up as follows:

Proposed gift from the Hauser-Raspe Foundation £8.00m
Further private donations (still to be raised) £1.00m
West Cambridge Infrastructure Fund (to pay for infrastructure specifically associated with the East Forum, namely cycle ramp, pond and part canal, plaza, northern approach and 50% of the atrium) £1.38m
Internal or external mortgage-type loan £11.13m

9. The philanthropic gifts (amounting to £9m in all) are intended to cover the cost of constructing and furnishing the space for Cambridge Enterprise, including space for incubatee companies, a share of the atrium, and space for part of the CLO and the Careers Service. An amount has been included for electronic facilities including audio-visual screens.

10. The loan covers the cost of constructing both the lettable space and the café/restaurant. The former, amounting to £9.60m, is intended to be repaid, together with interest, out of rental income from the non-University organizations referred to above. Depending upon the level of rent which can be negotiated it has been calculated that the loan will be paid off, with internal interest of 6% a year, in approximately 30 years. The Finance Committee have pointed out that the net rental yield on this commercial element of the development, whilst expected to average over 6%, is not as high as might be expected for wholly commercial activities (real estate investment yields are currently around 7%). However, it compares favourably with the return currently achievable on Treasury deposits and is in excess of the current net rental yields on the University's non-operational property.

11. The lettable space amounts to 46% of the total gross internal area. Most of the proposed tenants have been identified although no agreements for lease have yet been finalized. There is a close relationship between the principal donor and one of the proposed tenants. The Council are concerned to ensure that this does not give rise to any conflict of interest. It is envisaged that a venture capital company, Amadeus Capital Partners Ltd, will rent between 35% and 40% of the lettable space. One of the Trustees of the Hauser-Raspe Foundation, a charitable foundation which will provide £8m for this project, is Dr Hermann Hauser, who is a Founder and Director of Amadeus. In order to avoid any possible conflict of interest it will be agreed with the Trustee that neither he nor Amadeus will be granted any preferred investor status or any special access to University intellectual property or spin-outs. Amadeus will not have preferential rental terms and neither Amadeus nor the Trustee will have any influence on the choice of other tenants for the building. These conditions will be explicitly included in the agreement to be signed with the donor. These arrangements are similar to those which were negotiated in relation to the construction of the William H. Gates Building at West Cambridge, in which it was originally intended that embedded space would be let to Microsoft Research Ltd for a period of up to ten years (see Report, dated 7 December 1998, of the Council on the construction of a new building for the Computer Laboratory at West Cambridge, Reporter, 1998-99, p. 237).

12. For the avoidance of doubt, the Council also confirm that no other non-University tenant will have any privileged access to University intellectual property or any first-refusal or other special rights to invest in spin-out companies assisted by Cambridge Enterprise. Conversely, University start-ups and spin-outs will not have any obligation to use the services provided by non-University tenants.

13. The finances of the project are based on the principle that there should be no cross-subsidy between Cambridge Enterprise space and the lettable space. Recurrent costs for the former will be met by Cambridge Enterprise; in addition to rent, tenants will pay a service charge to cover the operating costs of their part of the building.

14. The remaining part of the loan referred to in paragraph 8 above, amounting to £1.53m, represents the cost of constructing and fitting-out the café/restaurant including its atrium seating area. The business plan for this part of the project envisages repayment of the loan plus interest at 6% over a period of 30 years, initially through a Chest subsidy and eventually through payments from the café/restaurant provider itself. If approval in principle is given, detailed figures will be provided in the Council's further Report on this project. The Council believe that the benefit which will be derived for the whole West Cambridge site from the café/restaurant and atrium facilities needs to be taken into account when assessing the financial position. They also note that the section 106 agreement which the University has signed in respect of the West Cambridge site as a whole requires site-wide facilities to be provided by the University. The relative lack of commercially provided catering facilities in this part of Cambridge has been taken into account when considering the level of business likely to be achieved.

15. The Council recognize that this project involves a number of risks. The ways in which they have been addressed are described below:

(1) Cost over-run. A form of procurement minimizing risk to the University will be used. Over the past few years two-stage contracting has achieved good correlation of budget and out-turn cost. Its extension, Develop and Construct, now being tested in the University context, should further ensure cost certainty.
(2) Failure to achieve target rents for the lettable space. For prudence, a range of rents has been assumed in the financial analysis. The letting risk will be reduced by securing signed agreements to lease for a minimum of 90% of the lettable space before proceeding with construction.
(3) Expenditure on abortive costs. As agreed by the Planning and Resources Committee, approval in principle of this project by Grace of the Regent House following a further Report will allow up to £730,000 (including VAT) to be spent on fees to complete the scheme design to RIBA Stage D and to seek full planning approval. However, nothing will be spent until a Memorandum of Understanding has been signed with the principal donor. It is also planned to obtain signed Letters of Intent from most of the prospective tenants before moving forward to the detailed design stage.
(4) Inability of Cambridge Enterprise to meet its share of the service charges. This risk is low, because, in addition to its share of CUTS income, Cambridge Enterprise will have the opportunity to earn income from incubatee companies and from hiring out the Seminar Centre (both of which spaces are funded as to capital cost by donations).
(5) Failure to raise more than £8m by way of donation. If there is a shortfall in raising the additional £1m the allocation of space between Cambridge Enterprise and lettable space will be adjusted to compensate.
(6) Failure to achieve planning permission for the mix of activities proposed. The Planners will need to be convinced that the lettable space is to be used for purposes ancillary and necessary to the activities of Cambridge Enterprise and to the research uses in nearby buildings on the site. The bulk of expenditure on design and construction will not be incurred until planning approval has been obtained.
(7) Risk of incentivizing Cambridge Enterprise to adopt inappropriate negotiating stances with University academics in relation to spin-outs and, in particular, to focus on short-term incentives to cover costs rather than focusing on long-term benefits to strategic initiatives of the University. This is an issue which the director and staff of Cambridge Enterprise need to take carefully into account as they develop their own business model in the context of their mission. Because the capital cost of their space will have been funded by donations, they will not have to pay rent. This will ease the pressure on them to become too commercial. Cambridge Enterprise will be subject to the oversight of the Council and the General Board's Research Policy Committee.
(8) The issue of potential conflicts of interest is referred to in paragraphs 11 and 12 above and will be covered in formal agreements.

16. The Council invite the views of the Regent House on this proposal in principle.


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Cambridge University Reporter, 11 June 2003
Copyright © 2003 The Chancellor, Masters and Scholars of the University of Cambridge.