UI Research Park developer selling majority stake to invest in expansion

UI Research Park developer selling majority stake to invest in expansion

CHAMPAIGN — The developer of the University of Illinois Research Park since its creation in 2001 is selling majority ownership of its buildings there to an undisclosed Chicago-based real-estate investment firm in order to raise money for the park's expansion.

Fox/Atkins Development will retain minority ownership in the 11 buildings and continue to handle leasing and property management at the park for at least five years. It will also remain the park's developer through at least 2020, and compete for the next 10-year development agreement with the university in 2021, developer Peter Fox told The News-Gazette on Wednesday.

Under the sale, which requires approval from the UI Research Park board, the university will retain ownership of the land and the park will continue to be managed by UI Research Park LLC, a limited liability company of the UI Board of Trustees.

The purchase will not affect the UI's EnterpriseWorks incubator, the I Hotel and Conference Center, the Survey Building or other privately-owned buildings in the park.

Fox wouldn't disclose the sale price but said it will provide capital for future development of the land between First and Fourth streets and St. Mary's Road and Hazelwood Drive, and eventually south to the new Carle sports medicine facility at First and Windsor Road, "which is going to take a substantial amount of money."

He also said Fox/Atkins Development, founded by Fox and the late Clint Atkins, has invested more than $75 million in the Research Park over the past 18 years without dispersing any proceeds back to the owners or taking standard development fees.

"We chose just to reinvest it, for instance in the hotel or new buildings," Fox said. Clint Atkins' sons, Todd and Spencer Atkins, are Fox's current partners.

"It's fair to say the Atkins family has been patient for a very long time. This was a transaction that we entered into with Clint, and Todd and Spencer have been great partners. I don't think it's unreasonable when somebody's in something 18 years to expect something" in return, Fox said.

The sale is expected to be finalized by late September or even earlier, once the university completes its "due diligence," officials said.

Fox/Atkins plans to start construction this fall on a 40,000-square-foot building at 1903 S. Fourth St., funding it upfront but giving the new buyer an option to purchase that building as well, Fox said. A 33,000-square-foot expansion of the Illinois Conference Center is also planned by 2020.

"We're kind of selling these 11 buildings but then immediately beginning to reinvest again," Fox said.

A map of the research park showing which buildings are part of the sale, along with their tenants, is below:

Fox: Buyer a good fit

Officials would not identify the buyer, but Fox said it is a "very well-capitalized, large national and international firm with an excellent reputation," and some of its principals hold degrees from the UI.

"It took us awhile to find somebody that we also felt would be committed to the university, committed to the concept," he said, crediting efforts by the university and Research Park Director Laura Frerichs.

Under its agreement with Fox/Atkins, the UI Research Park holds the first right to purchase any properties in the park, but it declined this time. It will have the same right should the new buyer decide to sell at any point, Fox said.

Frerichs said the park was created as a public-private partnership so that a commercial developer could "build fast" and manage corporate relations for construction and property management, and the university wants to continue with that model.

"We see this as an opportunity to continue to make investments in the research park," she said.

The deal has been in the works since November or December, Fox said. Fox/Atkins hired an international firm to market the properties to 20 targets and has been talking to a couple of interested buyers since February, he said.

Frerichs said the UI president, chief financial officer, chancellor and leaders of the UI Research Park board have been kept informed throughout the negotiations.

She said the university is happy that Fox/Atkins, as a local entity, will retain an ownership interest in the buildings and continue as property manager, leasing agent and developer.

"We're optimistic that the investment allows the furtherance of development here in the research park," she said.

2,100 employees at park

Fox said one of the buyer's conditions was that Fox/Atkins remain a significant investor. The exact percentages are still being negotiated, but Fox/Atkins' investment will be at least seven figures, he said.

Frerichs said the university and the Research Park have worked to ensure a seamless transition for companies that rent office and lab space there. They were informed of the impending sale on Wednesday.

"Our hope is that there's little or no impact to any of the companies that are here," Frerichs said.

The Research Park board still has to approve the buyer in order for the company to receive a transfer of the ground-lease agreements made with Fox/Atkins, she said. Ground-lease payments, based on appraisals at the time a building is constructed, provide funding for utility infrastructure improvements as the park is developed, Frerichs said.

The Research Park includes 2,100 employees and more than 120 companies, including 17 Fortune 500 firms.

"The Research Park has reached record employment and occupancy rates as a reflection of the vibrant technology community that includes a mix of corporate innovation centers, startup companies and university partnerships," Frerichs said, which provided Fox/Atkins with an attractive selling opportunity.

In 2006, Fox/Atkins sold two other buildings to a Chicago investor, which later defaulted on its mortgage loan. Fox/Atkins has been attempting to buy them back, "but we haven't been successful," Fox said. "They're not full, and we think we can lease them. We also think we can maintain them better."

Research Park Board member Rick Stephens declined to comment on the sale Wednesday.

Staff writer Ben Zigterman contributed to this report.