Mayo Clinic is returning to the fifth floor of Rochester's Minnesota BioBusiness Center, after a Belgium-based biotech firm left it empty for more than a year.
In March 2015, the Rochester City Council approved a five-year lease for Mayo Clinic-linked Celyad to take over the fifth floor to create a prototype manufacturing facility that would add 33 jobs to Rochester.
Celyad's lease meant displacing all the Mayo Clinic workers based on that floor. Mayo Clinic moved its employees out at the start of 2015.
However, the project didn't go as planned. Celyad, formerly known as Cardio3, was unhappy when development costs came in much higher than the estimate provided by the city.
"The budgets we got far exceeded initial assumptions on which the project was decided," said Celyad CEO Dr. Christian Homsy in an email from Belgium in November. "Including the city support, the fit-out cost now exceeds the cost to do the same work in other locations where there is no city or state support."
Celyad halted the project before any construction work was done, so the 14,963 square feet of space remained just as Mayo Clinic left it. However, the biotech company did uphold its end of the lease and has been paying rent of $22,444.50 per month, or $269,334 per year. City officials say the company has made all of the required payments.
Since the end of 2015, the city has been looking for a new tenant to take over the fifth floor. Now, the city has approved a new lease with an old tenant.
The new deal adds the fifth floor to Mayo Clinic's lease, which already includes four floors of the seven-year-old building.
"The lease amendment would provide for a rental rate of $17 per square foot for the 'premises,' which consists of the entire fifth floor. That rate would be in effect for a term consistent with the present term for the other four floors through April 1, 2029," according to the agreement approved by the Rochester City Council on Monday.
That's $1 less per square foot than the $18 per square foot Celyad has been paying.
Before approving the new Mayo Clinic lease, the city council OKed the termination of the Celyad agreement. It called for Celyad to continue paying its regular rent through Sept. 30, plus "a lease termination fee" of $111,549.18.
That fee will cover costs for the space from October to Jan. 1. Mayo Clinic will be building out the space starting in October and it will began paying rent in January. Mayo Clinic plans on using the floor to help teams that need more room.
"Planned occupancy will include relocating certain research support teams in need of additional office type space," stated Kelley Luckstein, of Mayo Clinic Media Relation, in an email.
Celyad's relationship with Rochester began in 2007, when it licensed stem-cell research by Mayo Clinic's Dr. Andre Terzic and Dr. Atta Behfar. It was called Cardio3 Biosciences back then. They have collaborated for years on the cardiopoiesis technology the company uses to repair patients' hearts by re-programming their own stem cells to regenerate cardiac tissue. Mayo Clinic owned 2.69 percent of Celyad as of March 3, 2015.
Beyond the fifth floor prototype manufacturing facility, the Celyad deal was designed to clear the way for the biobusiness to possibly build a 100,000-square-foot manufacturing facility with 350 employees in Rochester. That's what the company anticipates it will need if the Federal Drug Administration gives it a green light to take its stem-cell treatment to market.
Celyad's Homsy says Rochester now is out of the running for that.
"Celyad has assessed that a manufacturing plant in Rochester at this point of time cannot be justified. We have opened an office in Boston from where our U.S. management is based, but we have delayed the decision on a manufacturing plant in the U.S. as we are able to manufacture all clinical lots out of our Belgian facility. As we approach commercial launch in the U.S., this situation may be revisited," he responded from Belgium by email.
Though the relationship between Rochester and Celyad has diminished dramatically in recent months, Homsy said it is not completely over.
"We continue to collaborate with Mayo Clinic, as well as with Andre Terzic, in the context of the evaluation of our CHART-1 data that should be disclosed by end of June 2016. If the data is positive, further development in the U.S. in the form of CHART-2, and, potentially, commercialization would follow," he stated.