TGen will purchase the namesake research tower Phoenix built for the organization more than a decade ago, after a deal between the city and another buyer fell through last year.
The Phoenix City Council on Wednesday unanimously approved selling the downtown building to the Translational Genomics Research Institute, or TGen, with no discussion. The city constructed the $52 million, six-story building in 2004 to anchor the downtown Phoenix Biomedical Campus, according to Phoenix Community and Economic Development Director Christine Mackay.
TGen will pay off Phoenix's remaining debt on the building, under the main provision of the agreement.
The institute is still a tenant in the space at Fifth and Polk streets. The biomedical campus now includes programs from Arizona's three state universities, with plans to expand.
The deal marks Phoenix's second attempt to transfer the building to the private sector. Billionaire Dr. Patrick Soon-Shiongintended to purchase it before talks fell apart in July.
Now, Phoenix will enter into a lease and purchase agreement with the institute, which became a unit of California-based treatment and research center City of Hope last year.
TGen representatives said after the vote that the institute needed the city’s investment in the early 2000s but is now ready to grow.
“The city made a bet on TGen, and I think we’ve paid back that promise,” President and Research Director Jeffrey Trent said.
TGen will pay the city’s annual debt service obligation on the building, under the deal. That totals more than $68 million over 20 years, though the amount would decrease if TGen paid outright earlier.
Phoenix's outstanding principal on the building is still about $48.5 million, according to the meeting agenda. How much Phoenix already has spent to pay off the building was unavailable Wednesday evening.
In addition, TGen will pay the city $1 million once the agreement is executed, and $2 million more over the length of the agreement.
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Existing tenant leases in the building will remain. TGen also must ensure tenants lease at least 316 parking spaces.
Once the lease starts, TGen will be responsible for the building's operating risks, as well as managing the property.
The building generates about $3.6 million each year in lease revenues.
The institute also hopes to expand in the space, Trent said. About 200 TGen employees work there, Chief Operating Officer Tess Burleson said.
Research focuses on using genetics to develop disease diagnostics and treatments.
TGen also will consider capital improvements and how to make the building more environmentally “green,” Trent said. Under the agreement, the institute also will have access to a renewal and replacement account for changes approved by the city.
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TGen will receive that account at the end of the lease. The current balance is about $6.7 million, according to a city spokesman.
Selling the building reduces Phoenix’s debt obligations, according to the meeting agenda. It also reflects that a biomedical market that once needed city support now attracts investment, Mackay said.
“Now the private sector is willing to take that risk,” she said.