Week of December 10, 2001
Blockbuster Deal of the Week
from Site Selection's exclusive New Plant database
$84.2 Million in Incentives
Michigan's RX Prompts Pfizer's $600 Million,
By JACK LYNE
Site Selection Executive Editor of Interactive Publishing
ANN ARBOR, Mich. -- Freed-up land for growth and US$84.2 million in incentives helped convince Pfizer (www.pfizer.com) to commit to a $600 million, 600-employee expansion in Ann Arbor, Mich.
The recently announced deal retains Ann Arbor's largest private employer and its largest taxpayer. Pfizer already employs more than 3,000 in that Michigan city. Facing overcrowding and, at first, the lack of a suitable site, the drug maker considered expanding in several other undisclosed states, Pfizer officials said. Senior Vice President David Canter, director of Pfizer's Ann Arbor Laboratories, described the Michigan deal that came together as a three-way win.
"This is a win-win-win solution that will benefit the state, the city of Ann Arbor and Pfizer," Canter said at the project announcement. "Pfizer now will have the land we need to flourish. This will bring the city of Ann Arbor and the state of Michigan economic growth and new jobs in the research and development sector, strengthening the Michigan Life Sciences Corridor initiative."
Pfizer Official: Incentives 'Key'City and state incentives "were both key to successfully completing this deal," Canter said. Of the $84.2 million in incentives, $73.5 million was approved less than 24 hours before Pfizer's announcement.
The incentives package, state and local officials explained, came from:
Ann Arbor's incentives require the company to invest a minimum of $100 million in property within five years. If Pfizer's total expansion investment reaches $800 million - a possibility that company officials have mentioned - Pfizer would be required to invest a minimum of $300 million in property.
Ann Arbor's agreement further stipulates that Pfizer will not pay less than the total of its 2001 taxes during the expansion's five-year projected timeframe.
Pfizer has committed to pay for the additional infrastructure and sewers required for the project. To curtail city congestion, the company also agreed to cut the percentage of employees who park at the site from 95 to 80.
Existing Operations at Popping PointOther factors that swayed the deal Ann Arbor's way, Pfizer officials added, included the state's life sciences research institutions, the company's existing asset base in the area, and the ability to attract and retain high-tech employees.
All the site selection attractions in the world, however, don't mean a thing without an appropriate site. And that at first presented a problem for Pfizer.
The company had grown to the popping point at its Ann Arbor complex near the University of Michigan's North Campus. Those facilities were within 1 to 2 percent of capacity, explained Canter. The overcrowding had necessitated housing 800 Pfizer employees at five off-campus sites, four of them leased, one company owned.
Pfizer had already begun a $300 million expansion program at its on-campus complex, which will add some 700,000 sq. ft. (63,000 sq. m.) of office and laboratory space. Over the longer term, though, only open acreage could satisfy the company's anticipated space needs, Pfizer said.
UM Sells Adjoining 55 AcresThe plot that Pfizer acquired marks a victory for gown as well as town, according to University of Michigan (UM) leaders. UM owned a vacant 55-acre (22-hectare) tract, which lay adjacent to Pfizer's complex and was generating no tax revenues. The university's Board of Regents unanimously approved selling the land to Pfizer.
Pfizer's Ann Arbor expansion "was critically important to the company, the university's commitment to life sciences and the community's continued economic health," said UM Executive Vice President and CFO Robert Kasdin, who was UM's point man in the land sale negotiations. UM President Lee Bollinger saw rich collaborative potential in the sale.
"We were pleased to work with Pfizer in its purchase of the land that will enable the company's expansion," he said. "We look forward to future collaboration that will bring promising research and scientific discovery, career opportunities for our graduates, and technology transfer initiatives benefiting the state's economy and the well-being of its residents."
Canter praised UM, the state and Ann Arbor for cooperatively facilitating the sale, which he called "a win for everyone."
Pfizer bought the land for some $27 million, roughly $500,000 an acre. Proceeds will be utilized for supporting UM's Life Sciences Initiative, university officials said.
To give its entire complex the same zoning, Pfizer will apply to have its new land and the two existing parcels near UM classified as PUDs (Planned Unit Developments), Canter said. Said Ann Arbor Mayor John Hieftje, "The future of life sciences research in our city is brighter than ever before."
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