< Previous page ^ Table of Contents Next page >

REPORTS

Second Report of the Council on a proposal for a new building project at West Cambridge (the East Forum)

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

1. Following the Discussion on 8 July 2003 of their First Report on the proposed East Forum building (Reporter, 2002-03, p. 1180), and their Notice responding to the Discussion which was published on 24 November 2003 (Reporter, 2003-04, p. 232), the Council set forth this Report as a revised first stage Report. It is proposed to proceed with the project on a revised basis which avoids the University bearing any letting risk, and which comprises two adjacent buildings instead of a single building. The lettable space would be concentrated in one building and the University would lease the site of this building to a developer who would let out the space available. The Council seek approval to select and enter detailed negotiations with a developer in order that this approach can be explored further. If minded to proceed, the Council will present the results of these negotiations in a second stage Report to the Regent House. The developer will be made aware that the proposals in the second stage Report would be subject to approval by the Regent House.

2. Since publication of the First Report in June 2003, a consultant to the project (Dr Alex Reid) has met more than 30 Heads of Departments and other senior academic staff to explain the East Forum project, and to obtain their advice as to how it can be developed in ways which will best serve the University. With very few exceptions they approved or strongly approved of the project, and their input has shaped the proposals now being brought forward.

3. Dr Reid also met several members of the Regent House who had spoken against the East Forum project at the Discussion on 8 July 2003. Some of the speakers expressed concern about the financial risk to the University of financing the lettable space; that concern has been met in the current proposals by transferring the risk of financing and letting the lettable space to a developer.

The East Forum proposal

4. Ownership and control. It is now proposed that, to provide clarity of ownership and control, the East Forum should comprise two free-standing but adjacent buildings which would be located between the Cavendish Laboratory and the recently completed residences (see the site plan below) and which would be built simultaneously. They are referred to here as East Forum A and East Forum B.

East Forum A

5. The building will contain:
(a) West Café and atrium. A permanent home for the West Café, which is currently housed in a temporary wooden building at the entrance to the West Cambridge site for which the temporary planning approval is valid until catering facilities are provided in the East Forum. The Master Plan for West Cambridge, on which the University's planning approval for the site is based, calls for such communal facilities to be provided within the East Forum. The University also has a contractual obligation to provide catering facilities open to users of the Roger Needham Building.
(b) Cambridge Enterprise office space. Office space for Cambridge Enterprise, the unit within the University which has been created by bringing together the Technology Transfer Office, the University Challenge Fund, Cambridge University Technical Services, and the business creation activities of the Cambridge Entrepreneurship Centre. The detailed office space requirement will be part of the business plan for Cambridge Enterprise which will be the subject of a future Report.
(c) Cambridge Enterprise seminar centre. A seminar facility able to hold an audience of up to 150, capable of subdivision into smaller meeting rooms.
(d) Cambridge Enterprise incubation space. Incubation space, under the control of Cambridge Enterprise, to accommodate the early-stage start-ups which it supports. This would be office-type space. It is judged that it would not be practical to provide 'wet lab' space for start-ups within the East Forum, and that such need would have to be addressed in other ways.

East Forum B

6. The building will contain:
(e) Lettable space. Lettable space for non-University tenants whose activities are relevant to the University's research and knowledge transfer activities. It is a principle of the Master Plan for the West Cambridge site that, in order to foster fruitful interaction with the wider world, there should be provision on the site for non-University organizations whose activities are relevant to the University.

7. The proposed ownership arrangements, and the indicative size and components of each building, are set out in the table below:

 Site ownershipBuilding ownershipFinanced byApprox size (sq.m.) gross internal area
EAST FORUM A 
West Café and atriumUniversityUniversityUniversity600
Cambridge Enterprise office spaceUniversityUniversityDonation500
Cambridge Enterprise seminar centreUniversityUniversityDonation400
Cambridge Enterprise incubation spaceUniversityUniversityDonation1,500
 
EAST FORUM B 
Lettable spaceUniversity: 125-year lease to developerDeveloperDeveloper5,000
TOTAL 8,000

8. The main financial change from the First Report is that whereas the First Report proposed that the University would borrow £11m to construct the lettable space, and would bear the letting risk, the current proposal is that the lettable space would be financed, built, and owned by a developer, who would bear the letting risk.

9. The main design change from the First Report is that there would be two free-standing adjacent buildings, rather than a single integrated building comprising University space and lettable space.

10. Another change is that the area of lettable space has been provisionally increased from about 3,000 to about 5,000 sq.m. gross internal area. This makes better use of the site, and would enable a wider range of tenants to be accommodated. For example Intel (whose Cambridge research unit is currently accommodated in 800 sq.m. of the nearby William Gates Building) have indicated an interest in principle in moving to the East Forum, where they would be seeking significantly more space. Previously the amount of lettable space had been constrained in order to limit the University's letting risk; however that risk is now transferred to the developer. The proposed increase is a reversion to the size of building originally proposed in the Master Plan.

11. There are good prospects, but at this stage no certainty, that a developer will agree to participate on the basis proposed. Preliminary discussions have been held, without commitment, with several developers. These discussions have been promising. A notice seeking formal expressions of interest was published in the Official Journal of the European Union, and a short list was drawn up from the developers who responded. Two of these have been selected for further negotiation.

12. The procurement route for the construction of East Forum A and East Forum B will be further explored to ensure that any involvement of the selected developer in the design and construction of East Forum A reflects the best combination of risk and value for the University.

An economical and practical building

13. Some speakers at the Discussion on 8 July 2003 were under the impression that the East Forum would be a lavish building, using adventurous technology. This is not the case. The intention, fully supported by the prospective developers and the donor, is that the building should be practical and flexible in design, and economical both to construct and to operate.

An inclusive approach

14. Knowledge exchange between the University and industry will be enhanced by adopting a vigorously inclusive approach. In particular it is essential that interaction between Cambridge Enterprise and companies which are not located on the West Cambridge site is made convenient. This will be addressed by:

(a) The provision, within East Forum A, of shared workspace facilities to relevant firms that do not wish to rent office space on a permanent basis.
(b) The inclusion, within East Forum A, of an information resource centre for technology transfer. There would be opportunity for all relevant firms to present information about themselves in this centre.
(c) The opportunity for any relevant firm to hire the Cambridge Enterprise seminar centre.

15. The aim would be to provide, in these ways, connection with the East Forum for all those relevant organizations that wish to become involved.

Policy issues

16. Policy issues arising from the mix of activities within the East Forum would be dealt with in the following ways:

(a) No special privileges for tenants. No tenant of the lettable space will have any preferred investor status, nor any special access to University intellectual property or spin-outs. Conversely, University start-ups and spin-outs will have no obligation to use the services provided by any such tenants.
(b) Future use of University space. As announced in the First Report, the Hauser-Raspe Foundation have offered to make a donation towards the building costs of the Cambridge Enterprise space. It is intended that the agreement between the University and the donor will provide that the University space paid for by the donor will be used, for at least 50 years, for entrepreneurial activity. This will be broadly defined, so that it does not commit the University to maintain the staffing of Cambridge Enterprise at any particular level. For example, if the University decides in future to reduce the number of staff in Cambridge Enterprise, the surplus space could be used by the University for other entrepreneurial activity, such as the provision of additional incubation space for University spin-outs.
(c) Selection of tenants for the lettable space. The proposals in the First Report, under which the University would have borrowed money to fund the lettable space, provided the University with discretion over the choice of tenants. When the First Report was published it was envisaged that Amadeus Capital Partners Ltd would rent between 35% and 40% of the lettable space. The arrangements now proposed, under which the developer finances the lettable space, do not identify any particular tenants. The developer will be responsible for the choice of tenants, subject to current planning restrictions. These restrictions would also be embodied in the head lease and require that all tenants of the lettable space are research institutes; companies engaged in commercial research; companies engaged in activities relevant to knowledge transfer and exploitation; or the University itself (for example for temporary decanting space). On balance, the Council judge that the disbenefits of the inability to select tenants are outweighed by the benefits of risk avoidance and are mitigated by the planning restrictions.

Financial implications for the University

17. The East Forum A building (to be owned and occupied by the University) would be procured by the University from the developer for a fixed sum, and against an agreed specification. The financial implications for the University arising from the mix of activities within the East Forum are set out below:

(a) Cost of catering space. As set out in the Report of 9 June 2003, the costs of constructing and fitting out the site-wide catering facilities, comprising the re-located West Café and atrium, would be met by the University. It is expected that most of these costs will be covered by the East Forum's contribution to the West Cambridge Infrastructure Fund and by the proceeds of the sale to the developer of the lease on the site of the East Forum B building. It is proposed that, as with the current West Café, the operator (currently expected to be the University Centre) would be responsible for heating, lighting, and all other operating costs of the café. Detailed costings will be provided in a further Report seeking final approval.
(b) Income from sale of lease to a developer. The First Report assumed that the whole of the site for the East Forum would be provided without charge by the University. The approach now proposed, under which a developer develops the lettable space at its own risk, will produce a payment to the University from the developer for a 125-year lease on the site of the East Forum B building. This payment will reflect the market value of the lease.
(c) Avoidance of letting risk. The First Report assumed that the University would borrow money to build the lettable space, and would bear the risk of any letting voids and shortfalls in rent below the target figure. Under the approach now proposed, this letting risk has been removed, and will be borne by the developer.
(d) Donation. The philanthropic gift from the Hauser Raspe Foundation is intended to cover the cost of constructing and furnishing the space for Cambridge Enterprise, including space for incubatee companies, and space for part of the Corporate Liaison Office and the Careers Service. An amount has been included for electronic facilities including audio-visual screens.
(e) Running costs. As set out in the First Report, Cambridge Enterprise would be responsible for the running costs of the Cambridge Enterprise space. They would be able to offset some of these running costs through service charges made to incubatee companies, and through letting of the seminar centre to third parties. The running cost of the café would be met by the University Centre, and the running costs of the East Forum B building (the lettable space) would be met by the developer.

Risks

18. The main risks, and the ways in which they have been addressed, are set out below:

(a) Risk of construction costs running over budget. Under the arrangement proposed, any over-run in construction cost would be borne by the developer.
(b) Risk of letting delays or future voids in East Forum B. The financial risk of such delays and voids would be borne by the developer, who would also be responsible for the servicing costs of East Forum B. Payment by the developer for the lease of the land would be a single up-front payment.

Next steps

19. The project has now moved to a stage where an academic User Representative is required. Professor Andy Hopper of the Computer Laboratory, located on the West Cambridge site, has agreed to take on this role.

20. Subject to approval of this approach by the University, the next steps would be:

(a) Selection of the developer.
(b) Reaching heads of agreement with the developer, subject to final approval of the project by the University.
(c) Reaching heads of agreement with the donor, subject to final approval of the project by the University.
(d) Determination and specification of communal facilities and whether they are to be provided by the University or through third parties.
(e) Presentation of a third Report, seeking final approval. This Report would summarize the conditional heads of agreement with the developer (including the price to be paid by the developer for the lease of the site for East Forum B) and with the donor. It would set out (i) the costs to the University for catering and for service charges for East Forum A, (ii) the other communal facilities to be provided, (iii) the infrastructure costs to be borne by the University, and the contribution to infrastructure costs to be made by the East Forum project, and (iv) estimated costs to the University in professional fees for the negotiation of the detailed agreement with the developer, and for the oversight of that agreement.
(f) The third Report would not be presented without the prior presentation of the implementation of the proposal to separate Cambridge Enterprise from the Research Services Division and of the initial business plan of the new Cambridge Enterprise.

21. The short-term costs of professional fees to carry the proposal forward to the third Report are estimated at £23,500. This includes legal and property adviser fees for the negotiation of the conditional heads of agreement with the developer. Because that amount is covered by the existing fees warrant already approved for the East Forum project, no further approval for financial expenditure is being sought at this stage.

Approval sought

22. The Council recommend:

That approval be given to a revised approach to the East Forum Project as set out in this Report.

9 February 2005ALISON RICHARD, Vice-ChancellorDAVID S. INGRAMG. A. REID
 A. J. BADGERD. LOWTHERDAVID SIMON
 Z. BARANSKID. W. B. MACDONALDLIBA TAUB
 NIGEL BROWNJAMES MATHESONJOAN M. WHITEHEAD
 WILLIAM BROWNMARTIN REESRICHARD WILSON

Note of dissent

We are unable to support this Report, since the planning and costing of the East Forum depend upon two Reports that are not yet available - one on the business plan for Cambridge Enterprise, and the other on intellectual property rights. Without a business plan it is imprudent to judge how large Cambridge Enterprise will be, what facilities it would require, and where it would be best located. That business plan will in its turn depend on what further intellectual property rights (if any) Regents decide to transfer from individual academics to the University as a corporate entity. The Regent House should consider these matters in the correct order.

  R. J. ANDERSONBOB DOWLING
  RICHARD BARNESRUTH KEELING
  MIKE CLARK 

< Previous page ^ Table of Contents Next page >

Cambridge University Reporter 23 February 2005
Copyright © 2005 The Chancellor, Masters and Scholars of the University of Cambridge.