How Do You Build An Innovation District?

In Depth: An Interview With Dennis Lower, President and CEO of Cortex

If you’re in St. Louis, it is highly unlikely you haven’t heard something about Cortex, the nearly 200-acre mixed-use innovation community currently being developed in Midtown. EQ sat down with President and CEO of Cortex, Dennis Lower, and got the who, where, when, whys and whats from the man with a plan.

Cortex President and CEO, Dennis Lower

When did you get involved with Cortex?

I came here in May 2010 as the first hired executive of Cortex. The board had done a tremendous amount of work in the eight years prior to my coming, where they basically set the development table and got several milestones accomplished and in place.

One was getting development incentives with the entire development, in other words, to build two buildings—this one and the Dupont/Solae building. Then they reached out to get executive leadership to get it to the next level.

Before I came here I was working on the development of two other research parks: Louisiana and New Jersey.

What changes were made when you arrived?

We made a few course adjustments to move Cortex forward, and one of those is to position Cortex as an innovation community. That’s an important phrase; an innovation or knowledge community.

Research parks are not about the buildings, those are important and necessary, but they’re predicates to programs, and programs drive the need for buildings. What we are focusing on, in addition to providing more space, is to provide programming and support for emerging companies and entrepreneurs to be able to form companies and grow companies and populate the buildings in the district.

But it’s that focus now on programming and on looking at this entire larger Midtown community as an innovation community that is sort of the mid-course adjustment that we are making moving forward, and it’s getting some traction.

How did Cortex get started?

We were formed in 2002, and these were the sponsoring institutions; Washington University, SLU, UMSL, BJC Healthcare and the Missouri Botanical Garden.

The reason these five entities joined together was to capture the economic benefit of the research that was coming through the institutions. And capturing that economic benefit, and growing those jobs and growing that economic impact locally within the region as opposed to licensing the technology to companies outside and having that technology grow up somewhere else, and then having that state or locality capture that benefit.

So the whole idea was we can do more with the intellectual property of the research that’s coming through the institutions than we had been doing. Specifically, we want to commercialize that technology as much as possible locally to capture the economic benefit.

How is the availability of money for research changed?

What’s happened in the last 10-15 years, both in the corporations as well as with the universities, is pushing to invest in technologies and research that is closer to the market as opposed to further upstream. On the university side, that discipline is coming from the federal government that funds a lot of university research by attaching a requirement that in the application itself the translational benefit be identified.

It’s often referred to as bench to bedside—how quickly can you take it from basic research and get it into the clinic. So there’s been much more of a push in the biological sciences to demonstrate how quickly you can translate this research into a product or into a procedure that can be utilized in hospitals and clinics for the benefit of the patients.

In the case of companies, yes, there still is internal R&D that goes on, but companies are now looking to do a lot more buying of emerging companies and bringing them in, because those companies’ pre-acquisition will have demonstrated certain milestones to show that that product works or has good likelihood of working, and so companies are willing to pay a premium for that rather than do all of that R&D inside their walls and not only experience all the successes, but also swallow all the failures of research avenues that don’t pan out.

They’re trying to cut down on the loss of R&D dollars inside by reaching out into younger startup companies that demonstrated good viability and buy them at a later stage. They pay a little more of a premium than if they had paid for it themselves, but then they’re betting on more of a sure thing when they buy it, as opposed to internally spreading R&D dollars when a lot of those bets are gonna fail.

That trend has happened within the private sector, and on the public side, the federal government says, “Great research, we like it, but show us how quickly can you commercialize it and what’s the commercial endpoint to the research.” So getting the researchers to think about application while they’re doing the basic research. That movement has been going on for the last 10 to 15 years.

How was the land for Cortex acquired?

It’s not city land—it’s all privately owned, so that makes our job much more challenging.

So this $29 million allowed us to begin to buy some land, assemble it, demolish, clean it—that sort of thing—and also from those dollars, there was some office and operational overhead that was carried for Cortex to start implementing this project. But it would have been a whole lot easier if all of this 175 to 180 acres had already been acquired, assembled and cleaned and it was already ready for development.

It’s much more challenging in an urban area as opposed to a greenfield area, because it’s not cleared, it’s not cleaned and it’s unassembled, so you have to do all those things before you can get to your final endpoint. If you build in a suburban research park, and you’re building on a clean tract you can do it much more quickly and save years of time.

Now, the question you might ask is “why didn’t you do that as opposed?” to “why did you pick this location?”

We picked this location for a couple of reasons. Four out of the five of these sponsors are in the city, and the fifth one (UMSL) has lots of connection to the city and a commitment to growing the city even though they sit in the county themselves.

This is an urban economic development project. There was a consideration in looking at greenfields to begin with, but there was a commitment to staying in the city and specifically to take this roughly 200 acres between the med school and BJC and St. Louis University and fill this old industrial space in a redevelopment.

Are there other reasons this harder path of built-on land was chosen as opposed to clean land?

The wisdom of that—yes it’s taken longer—but the wisdom of that in the last 10-15 years there’s been a big demographic switch, particularly with millenials wanting to be in urban areas for their careers. Live, work, play, learn.

So we are ideally positioned to capture that workforce that wants to be in the city. That is a very positive force that is converging with the 10 years of effort that we’ve already put in to laying the foundation for drawing this urban research district.

That’s not just happening in St. Louis—that’s happening globally right now. That’s a demographic trend globally that technology companies are establishing an urban presence for a couple of reasons; this need to continually source new technology in part can be satisfied by associating more closely with universities, and many of the great universities are in urban areas, so that makes sense.

So back to the point I was talking about earlier, if you’re not going to have your own little R&D university inside your own company, but now you’re looking to the outside and you’re looking to license more in from universities, and you’re looking to buy more companies that are out there already succeeding or failing, you want to be close to where those emerging companies are and close to those universities.

And the third reason is you want to avail yourself of talent acquisition for your workforce. And increasingly that workforce in their 20s and 30s want to be in a more urban environment.

So the move out to the suburbs or the move out to the periphery of the cities which occurred in the last 35 years is starting to reverse itself a little bit. So that decision to put Cortex in the city, though it has taken longer to redevelop old infrastructure and assemble the land, in the long run, it’s going to prove to be a very wise decision and it’s going to spur more redevelopment as a result.

So this local capitalization of local research was the impetus for Cortex?

The whole idea was of commercializing both the university research as well as working with the corporations in the region and try to pull shelf technology out, so it was those two things that were the impetus for the start of Cortex. We had a local and global mission.

Locally become the regional epicenter for technology in the nation and entrepreneurship, and if we achieve that, then we will accomplish our global mission, which is to establish the St. Louis region as a nationally and internationally recognized tech hub. So one is hand in glove with the other.

How will you measure success?

We know we will have achieved that in five or 10 years from now when people will think about entrepreneurship and innovation and technology and Cortex, and talk about them all in the same sentence. That will be our indicator of success.

Our immediate objective though is this roughly 200-acre area here between St. Louis University on the east and the medical campus on the west at Kingshighway, with I-64 to the south and Forest Park to the north.

There’s also been a push toward getting other types of businesses into the area, hasn’t there?

That’s what we’re trying to transform into; a mixed-use innovation community. Again a slight change, a course correction, not just filling it up with technology buildings, but integrating with retail, integrating with residential, so that people are able to walk to where they work and are able to stay in the district and dine in the evening.

Missouri redevelopment statute chapter 353 gives Cortex the master developer role in this 180-acre area. That means it’s our responsibility to either develop it all or to cause it to be developed. In most cases, it’s the latter.

We facilitate with other developers who bring their capital to the table and their expertise, but we shape and guide what is able to be built with a master plan, and we enter into Parcel Development Agreements—PBAs with those developers that binds them to certain requirements of development and sustains the use of that over a long period of time. So if you invest $10 million dollars today as a company in Cortex, in 20 years your neighbors are going to look a lot like you.

The wider area already has a lot to offer.

It’s going to be a vibrant mixed-use technology community. We’re surrounded by great neighborhoods to the north and south, SlU, the medical district and complex, then Grand Center is up there as well and then Forest Park over here, so all those are amenities that we market off of.

All these things you can walk to or bike to, and that’s tremendous for the technology workforce that we are developing here because they want amenities. Technology workers really have an ability to be very mobile, and they can go to areas across the country where they want to live, and where they want to live is based on quality of life.

So it’s important that we create this mixed-use community for quality of life purposes so that the work force says, “Hey, I like this. I want to come and be part of this innovation community. I want to come and work for this company because I like the after-hours choices for entertainment and dining, and I like to be able to live in the adjacent neighborhood or in the district itself and walk to work.”

So we created that with a master plan in 2012 that included research office, research lab, residential, retail, all mixed together (we also have a Metrolink station right in the middle that we’re working with Metro on establishing). We’re hoping to get that constructed by the end of 2016, beginning of 2017.

We have a new interchange that’s going to be open in another month or so at Argo and Boyle coming right into the district—so new off ramps and on ramps right at our front door coming right into the Cortex property.

What is Cortex Commons?

Cortex Commons will be a programmed park. By programmed I mean there will be scheduled concerts and other uses.

It might be movie nights, might be yoga on the green, might be science fairs, might be maker fairs, as well as just being able to come out there at lunch time and eat your lunch, mingle with other entrepreneurs, mingle with other workers, so all those things will be programmed in this park to create collision points for entrepreneurs to meet each other in the district.

Those collision points are what will fuel continued innovation. It’s one company doing one thing, sitting down with another company doing another thing, and the’re just chatting over lunch and finding out what each other does and they come up with a new idea.

And they say wouldn’t it be great if we could do this together, and suddenly a new company can be formed. That’s the process of innovation.

It’s a contact sport and we are trying to create the serendipitous interactions of smart people in cool places to be able to accelerate new company formations.

What is the timeline for completing Cortex?

Everything on that master plan came through the fruition of almost 4 million square feet, over $2 billion of development, over $1 hundred million public infrastructure, and over 10,000 jobs. That’s what we’re driving for.

These things take time. Traditional research parks or districts are on a 20-30 year time frame, and we’re tracking quite nicely on that time frame. Everything in phase two is under construction or has just been completed. @4240 was sold to Wexford Science and Technology.

The importance of that is that it was the first external validation that our vision is a good solid vision, because Wexford is investing over a hundred million dollars in phase two and is now looking at their next building as well, so they’re willing to invest more. It validated that what we were doing is on the right track.

These types of development, in order to create a level playing field with the greenfield developments, you often have to put public subsidy in. Our objective is to get to a place where the public subsidy will no longer be needed and we will have established the full value proposition for Cortex.

We’re not quite there yet, but we are working on establishing that value proposition. When we reach a tipping point, that’s where we cut way back on subsidies required.

When does Phase 3 begin?

Phase 3 construction will start very soon and that’s why IKEA is very important for us for a couple of reasons. IKEA is a very smart company.

They’re an international company and they know that a big part of their customer base are 20- and 30-somethings, as well as older people who are buying stuff for their children and their grandchildren. They see the demographic trends and want to be in the heart of it.

So they’re kind of like a bell cow. Very smart when it comes to marketing.

They looked for almost a decade to enter the St. Louis market and finally made a decision to come into the city because it extends that radius for them —from which they draw their customers— the best, both on the east side of the river as well as the west side, and being in the urban core, a lot of their customer base is here and it’s returning to the city, as it’s been demonstrated of the last several years with the numbers of people moving back into Downtown.

Is there other development going on in the area?

This small mid-town area has 25 percent of the region’s construction going on. That includes the medical campuses, the St. Louis college of pharmacy. BJC HealthCare, Wash U medical school, Cortex, and residential developments, so a lot of development is on the drawing board and moving forward over the next 10 years.

IKEA sees that, they understand what that means and they want to be part of it. IKEA itself culturally is aligned with our values.

They are an innovative company with over 10,000 products that they design, develop and produce all themselves, and they’re constantly innovating and changing that. They are a very green, sustainable company.

They will have solar panels and they’re investigating geothermal as well. And they’re a very good corporate and community citizen. Anyone working 20 hours or more get full benefits, including a 401k. They really value employees.

They value their environment with their sustainability, and Cortex is a sustainable green park. @4240 building received a platinum Leeds rating. And this building (@4320) is Leeds-certified as well.

And with all of the infrastructure that we have put in here, we have reached an agreement with MSD district water to be putting in what are called BMPs—Best Management Practices for stormwater runoff. So we have rain gardens that are included in the commons and rain gardens in the streetscapes.

We are committed for that long-term sustainability, getting a Cortex Metrolink station here, again, part of our commitment to walkability, visibility, car-optional, which is another characteristic wanted by many millennials—less dependence on owning your own car and using more public transportation, walking, biking, that type of thing. That’s all part of our cultural disposition, what were trying to develop here, and it’s part of why IKEA is committed to as well.

Is the development of Cortex spurring other development?

It’s going to leverage more retail development, and as you know, Pace properties is leveraging off of that to develop Midtown Station, and there are quite a number of residential projects that are leveraging off of what we’re doing. The synergistic effect of what we’re doing is creating a lot of renewal for the city.

And that’s what we’re about; urban redevelopment. Several other initiatives in planning right now that we hope to announce over the next 609 months, more tech building, housing and retail potentially.

Fundamentally, we are trying to stand up five complementary innovation centers within the district that are going to drive entrepreneurial density, that are going to drive more collision points, informal, serendipitous meetings. It will be a way for us to streamline the delivery of technical assistance to these companies.

How many startups are in Cortex now?

At any given time right now we have 50 to 60 startup companies in Cortex, we hope to double and triple that through the establishment of these five innovation centers.

These are the five; CET on the ground already; BioGenerator, who just expanded their lab space from 5000 to 17,000 square feet.; Cambridge Innovation Center, is the premier gold standard for innovation centers in the country, located in Kendall Square in Cambridge adjacent to MIT, where there are 650 companies in about 210,000-215,000 square feet, seven or eight venture capital companies are there, the branches of major corporations are there like Disney, Cisco, Microsoft, Apple, and Shell oil.

Why? They want to rub elbows with these emerging companies, and the emerging companies like to be next to those established companies because there’s mentoring and networking that can go on, and potential sources of exit for them.

That’s a model that we’re trying to implement here, and Boeing as an established company moving in, we’re talking to several other large corporations to establish a presence with their creative groups within the district that they can be part of this talent acquisition cycle and look at companies they might license their technology or buy.

Creating all that gumbo of established and emerging companies is what these five innovation centers are trying to do. CIC is the quintessential example for that, this is their first expansion outside of Cambridge, and their second is in Europe in Rotterdam.

But we’re the first expansion; the space is now being built out for the in @4240 and will be open in September. And they’re moving one of their partners and his family here to St. Louis to run it.

The Impact Hub is a global social entrepreneurship organization founded in London in 2006, and there are about 45 of these globally. We would like to become one of those.

We’re in the process of vetting that out with them and that would help us to establish our international objective as well. If you’re a member of one hub, you’re a member of all hubs.

Tell us about Tech Shop?

TechShop is very important for us. It’s a membership-based maker space, open access workshop area with lots of great tools; water-jet cutters, wood and metal lathes and those types of things.

It’s important to have that in an innovation community for prototyping new products. Jim McKelvey talks about prototyping Square at the Menlo Park Tech Shop, which was when he finally started to get traction.

It’s open access, so it’s for social entrepreneurs, it’s for soccer moms, it’s for anybody that has a creative itch they want to scratch and it creates its own social network as well.

People belong to it in a similar way people belong to fitness center. This is a social network for makers, so it’s very complementary to the other innovators.

In just the two months since this interview took place, Cortex officials have continued to announce new successes, including news that the makers of Fleischman’s Yeast (and other products) AB Mauri is relocating to Cortex (from Chesterfield), as well as the possibility of the paired programming initiative started by Jim McKelvey, LaunchCode, establishing a location in the mixed-use innovation district.