u-m administration on the acquisition of the pfizer campus

This is the letter sent out to University of Michigan staff and students this evening.

To the Campus Community:

The University of Michigan has taken a critical step in advancing our work in health, biomedical sciences and other disciplines with today’s decision by the Board of Regents to purchase the former campus of Pfizer Inc. in northeastern Ann Arbor.

This acquisition of the 174-acre site, adjacent to North Campus, includes 30 laboratory and administrative buildings, with nearly 2 million square feet of space, as well as amenities and open land. More importantly, this is a bold commitment by the University to invest in research that will benefit our community, our state and beyond.

We anticipate this acquisition will create 2,000 jobs over the next decade, and we are excited about the possibilities before us. We are increasing our capacity to contribute as one of the great research universities, while creating jobs that ensure our region’s intellectual and economic vitality.

This new campus will provide much-needed facilities for UM’s growing research community and support the recruiting of new scientists to Ann Arbor. It also will open up greater opportunities for students to participate in research projects. We will encourage deeper collaborations with industry, such as pharmaceutical, biotech, energy, nanotechnology and other firms, as well as startup companies launched by UM faculty, staff and students. Ideally, we will find private sector partners to locate on the campus and further the research and business objectives we develop. A campus-wide committee will be charged with determining how best to integrate existing and newly arriving scientific teams whose research interests are similar.

While some renovation will be needed to former Pfizer laboratories, many are nearly in the configuration and condition needed for UM researchers. We also are determining how to link the new campus with the rest of the University through transit and technology. Funds used for the purchase are being drawn from UM Health System reserves and our investment proceeds.

To learn more about this development, please visit (here).

We are confident this expansion will advance both the University and the region, because it represents a strategic use of UM resources while attracting and retaining skilled workers, strengthening our state’s life sciences industry, and ensuring UM’s national standing in research and discovery.

Sincerely,

Mary Sue Coleman
President

Robert P. Kelch
Executive Vice President for Medical Affairs

So, is it a good idea?

I’m torn. Part of me wishes that it had sold to a for-profit, tax-paying entity. Clearly, however, that wasn’t going to happen. After a year of looking, no one had come forward, and, with the economy worsening by the day, it wasn’t likely that anyone would. The important thing, it seems to me, is that the laboratory buildings weren’t demolished. I don’t know how realistic it was, but someone mentioned to me, after Pfizer first announced that they would be vacating what had been their global research and development campus, that in similar cases the company had torn lab buildings down rather than pay taxes on the valuable finished space… I can’t recall what the original asking price was for the Pfizer campus, but one imagines that the University got a good deal on it at $108 million. (It seems like a drop in the bucket compared to the billions of dollars we’ve been discussing these past few weeks.) With 80 layoffs just announced at the University Hospitals, though, it seems like a risky time to take such a big move. My hope is that works out for the best… and that the University puts serious resources behind attracting taxable, for-profit corporations to occupy some of the space.

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28 Comments

  1. Posted December 18, 2008 at 9:45 pm | Permalink

    This is a land grab, pure and simple. It is not true that the Pfizer property was not attractive to private companies, or that no companies would come forward to make good use of the facilities. There have been interested parties, and the nature of the facility would’ve continued to make it an attractive location for site selectors.

    U of M snatched this up right now to short circuit private economic development efforts. The University is a big player in county economic development, and would have been well aware of what was going on behind the scenes.

    I’m with the City of Ann Arbor on this one: the University’s action to purchase the entire 174 acres outright (removing $1.5 – $2 Million annually from the City’s tax revenues!) is the action of a bully, not a good neighbor. President Coleman and her merry gang should be ashamed of themselves.

  2. mark
    Posted December 18, 2008 at 10:06 pm | Permalink

    My impression is that Pfizer, Spark and others aggressively looked for a buyer. I think there’s evidence of that. If Pfizer could have sold it for more, they would have.

  3. mark
    Posted December 18, 2008 at 10:08 pm | Permalink

    Here are the facts and figures.

    Purchase price: $108 million

    U-M will purchase the property “as is,” and is releasing Pfizer from all pre-closing conditions, including environmental conditions. U-M also will assume responsibility for environmental issues, up to $12 million, should any be present. U-M will have an opportunity to perform extensive due diligence before closing on the property, including a comprehensive assessment of Pfizer’s records and actual environmental condition of the entire site.

    Anticipated jobs created: 2,000 faculty and staff positions during next 10 years; potential in time to replace or exceed jobs lost when site was vacated.

    Location: South of Plymouth Road in northeast Ann Arbor, bordering U-M North Campus

    Total acreage: 173.5 acres

    Number of land parcels: 4 (straddling Huron Parkway, with a tunnel between)

    Number of buildings: 30

    Number of gross square feet: 1.97 million

    Number of gross square feet of research space: 1.3 million

    Number of gross square feet of office space: 420,000

    Occupancy: Can begin late 2009, expected to be completed in 2018.
    If U-M began planning a new biomedical research building of comparable size today, the earliest it would be occupied is 2014.

    Parking: approximately 1,500 existing spaces

    Job growth within U-M Health System: historically 400-500 jobs annually; While the Health System will continue to create jobs, it is expected that the growth will slow to 300-400 jobs annually.

    Current U-M research budget: $876 million in research expenditures in FY 2008
    Fifth-largest research university in nation

    Market share of NIH funding is growing despite a competitive funding climate

    In 2008: Licensed 13 new startups; 306 new inventions disclosed; 144 patent applications; all-time high of $25 million in tech transfer revenue.

    Economic impact of University Research Corridor institutions (U-M, Wayne State, Michigan State): $13.3 billion per year (including 69,285 jobs); educated more students than any other U.S. R&D cluster; Research universities accounted for 94 percent of federal academic research dollars into Michigan.

  4. mark
    Posted December 18, 2008 at 11:23 pm | Permalink

    And, if I’m not mistaken, DR, the University owned much of the property before it was developed by private industry in the first place.

  5. Posted December 19, 2008 at 12:18 am | Permalink

    If I’m not mistaken, the U could’ve been a better neighbor and found a creative way to get control of the property while keeping it on the tax rolls. This is a devastating loss in tax revenue to Ann Arbor, and the U is the cause of it. There are ways to deal with these issues in a more equitable way, and Pres. Coleman et. al. could care less.

  6. mark
    Posted December 19, 2008 at 12:21 am | Permalink

    Are you suggesting that the U forced Pfizer out? That’s just ridiculous.

  7. Posted December 19, 2008 at 1:00 am | Permalink

    No, I’m suggesting that U of M totally disregarded the City of Ann Arbor in making this purchase. There are ways for the University to ensure that the City doesn’t lose $1.5 – $2 Million in annual tax revenues (how many police officers is that, 15? 20? 25?). By simply purchasing the property directly and in its entirety, Pres. Coleman basically told the City to go suck an egg budget wise.

    If there was such a rush to get researchers in there, the university could’ve made a lease arrangement with Pfizer that preserved the property on the tax rolls for the time being. The agreement could’ve included a future purchase, should no private buyer step up by a certain date (such as the end of 2009).

    There have been rumors of possible private buyers, which likely means that some have been looking. Why not wait a bit to let economic development take its course in a down economy?

  8. Oh boy
    Posted December 19, 2008 at 6:53 am | Permalink

    “There are ways to deal with these issues in a more equitable way,”

    It’s called a city income tax… that way the city benefits when the U adds JOBS, and high paying ones at that.

  9. beermaestro
    Posted December 19, 2008 at 8:21 am | Permalink

    We are the Borg.

    Prepare to be assimilated.

    Resistance is futile.

  10. Posted December 19, 2008 at 8:28 am | Permalink

    Here’s what the Dean of the Medical School had to say about it:

    Today is a momentous day for our Medical School, and our University.

    As you have likely heard, the University’s Board of Regents has just approved the purchase of the former Pfizer campus — which some have referred to as “174 acres of opportunity.” This new campus will provide a home for a broad range of research and other activity that will involve scientists, physicians, students and staff from around the University. The Medical School will take the primary role in planning its use and transforming it into a hub for discovery, collaboration and economic growth.

    I believe that this purchase provides us the opportunity to achieve our vision of creating the future of medicine. With this new campus, our school will be able to make strides in addressing our pressing research space needs, recruiting outstanding chairs and faculty, and continuing to grow our research enterprise. It’s an incredible opportunity that will help us use our resources strategically and wisely. This is why I have committed, with the consent of the school’s senior leadership, significant Medical School reserves to help fund a large portion of the purchase price.

    We are not entering into this investment lightly. After careful financial analysis, Dr. Kelch, other University leaders and I believe that this purchase will yield benefits far faster and more economically than other options that would involve building new facilities. Simply put, the laboratory space on the new campus is equivalent to two Biomedical Science Research Buildings, and it will be available far sooner and for far less initial cost.

    This purchase is a unified Health System undertaking. The Medical School is fully committed, as is the Hospitals and Health Centers, which has also contributed some of its reserves toward the purchase price and will be using a portion of the campus’s administrative space. Planning for this campus will be deliberate and strategic, and will tie directly to our institution’s master plans.

    I am privileged to lead the process, and I thank President Coleman and Dr. Kelch for this opportunity. Over the next months and years, the planning will involve many other members of the U-M health sciences, life sciences and bioengineering communities, and those from other disciplines as well as external advisors. Three major committees as well as several supporting committees are being formed.

    I will lead a campus-wide committee charged with setting priorities for use of the new space, as well as for the use of other “backfill” space on our existing campuses. We will analyze U-M’s research community to look for themes and affinities among teams – both existing and newly recruited — that could be enhanced by being co-located on any part of campus.

    An external Scientific Advisory Board, composed of prominent figures from outside U-M, will also be formed to help guide the planning process. If you would like to submit names of prominent scientific, industry or government leaders for consideration, please use the link below.

    A third committee will serve as the project-management infrastructure to implement the plans for occupying the new campus. Subcommittees will handle such issues as finances, facilities, communications, clinical programs, educational programs and public/private partnerships. Membership on this committee will be determined according to the priorities set out by the other two groups.

    If you have ideas for any of these committees to consider, I encourage you to send them to my office using this page: http://www.med.umich.edu/u/medschool/dean/contact.html.

    All of this planning will begin even as the University is conducting due diligence and carrying out steps to meet state and regulatory requirements, so that we are ready to move ahead quickly when the purchase is finalized. We hope that the purchase process will end by June.

    A detailed inventory of the new campus shows that renovation will be needed before many of the spaces can be used, but we expect some laboratories and offices will be occupied starting at the end of calendar year 2009. Others will take longer to be ready for use.

    This is an unprecedented opportunity for our school to expand our research enterprise, build collaboration with others across the University, and fulfill our missions and vision. I encourage all of you to reflect and advise me on how best to put this unprecedented opportunity to use for the good of our school, our university, our region and our world.

    As the process proceeds, I will regularly share updates with you. Information will also be available on a web site that will be launched in January.

    Sincerely,
    James O. Woolliscroft, M.D.

  11. Curt Waugh
    Posted December 19, 2008 at 9:12 am | Permalink

    I’m a little confused by all the anger over land being pulled from the tax roles. This is the system we have and have had for pretty much forever. If people don’t like it, change the laws so that ALL property pays taxes. But taking it personally and getting mad at the U doesn’t make a lot of sense.

    The thing that worries me is that, somehow, while the entire world is collapsing around them, the U has enough money for expansion. Why do they have so much money at times like this? How is it that they’ve been able to hoard our money and spend it like water during the worst economy in decades? It’s like they’re just trying to find a reason to spend money that’s taking up too much space in the campus safe. “Mary, I can’t get to the hundreds. They’re all covered up by these bushels of twenties.”

  12. Posted December 19, 2008 at 10:30 am | Permalink

    I’ve been out of state for awhile now, but I think the “they took $2m off the tax rolls” is too simplistic a way to look at this. In this climate, I suspect it’s highly unlikely any large, private entity would have acquired the property at the valuation the U put on it and, if they did acquire it, there’s not any evidence they would have put it to active use any time soon. Nobody big is growing right now.

    If you agree with the above, then the value of this property would continue to go down and, long term, the taxable value would also go down, no?

    To me, the U acquisition seems like a lesser evil…

  13. Craig F
    Posted December 19, 2008 at 10:45 am | Permalink

    The truth is, there’s no shortage of wet-lab space in Ann Arbor.

  14. Posted December 19, 2008 at 11:11 am | Permalink

    I think we should just abolish the tax system altogether and let people hire their own police force and trash pickup. If you don’t have the money to pay for it, then you don’t get the service. Rich people in Ann Arbor could hire Blackwater to be their police force.

  15. Fair Tax
    Posted December 19, 2008 at 11:18 am | Permalink

    Ann Arbor needs an income tax.

    $250 or more would be 10%
    $200 to $249 would be 9%
    $100 to $200 – 7%
    $50 to $100 – 5%
    $0 to $50 -0.01%

    That’s the only fair way, otherwise U-M eats up the whole town.

    P.S. it’s also bullshit that a non-academic/non-charitable use building like Michigan Stadium is not taxed just because it’s owned by Big Blue.

  16. nammeroo
    Posted December 19, 2008 at 12:27 pm | Permalink

    ..considering how cowardly Ann Arbor was in the face of the City of Ypsilanti’s income tax effort, I think it would be an EXCELLENT idea to see Ann Arbor propose a local income tax. I would be THRILLED to watch Ann Arborites go through the same torture our (now former) city leaders put us through last year..

  17. Posted December 19, 2008 at 1:31 pm | Permalink

    This is positive, exciting news for Ann Arbor, U-M and all of SE Michigan. It creates jobs and allows for more bio-med and other research. Plus it puts to use the vacant property including high tech labs. I’m shocked that people would find negatives in this development.

    Good for U-M. I’m glad and thankful they had the money and decided to invest it in a way that will help Michigan’s economy.

  18. frenchfries
    Posted December 19, 2008 at 2:24 pm | Permalink

    As a U-M person, I was pretty excited to get the email yesterday. It seems like a bold move–akin to Obama’s talk of a 1 trillion dollar stimulus. Infrastructure like this will help enormously with pulling in large NIH center grants and in recruiting top faculty to run these centers and apply for more grants. Some departments have been able to make some lemonade out of the Pfizer closure by hiring some of their exceptionally talented employees into all levels, including administrative and academic positions. We have also been nervous about losing colleagues whose spouses were at Pfizer.

    As an Ypsilanti resident and supporter of the income tax, I didn’t immediately think about the tax consequences for Ann Arbor. I can see the concern, however. I would also mention, though, that depending on how you do the accounting, U-M is a quasi-private university since it only receives a fraction of its operating budget from the state. U-M charges Ivy league prices to out-of-state students, and I think the current deal permits up to about 35% from out of Michigan. I wonder if additional financial pressure on the university would lead to higher tuition (in-state is already near or at the top among public schools nationally) or a shift in the in-state/out-of-state balance. Turning on the property tax spigot may nudge U-M into a non-Michigan school, which you may or may not think is bad.

    As it happens, Massachussetts has designs on getting at Harvard’s endowment:

    http://www.insidehighered.com/views/2008/05/19/miller

    Universities really are not businesses, and it is not clear to me that they should be treated in the same way. I do think it is imperative that we fit into our community in as symbiotic a way as we can.

    I grew up in New York and watched bank after bank move across the river to New Jersey when they offered lower taxes. That’s what businesses do. What happens if U-M moves to Ohio? I realize that is preposterous, and I think that proves the point that we can’t approach universities and businesses in the same way.

  19. Kazoo
    Posted December 19, 2008 at 2:30 pm | Permalink

    I guess I don’t get the issue people have. Who cares what the U buys up. If it weren’t for them (and their subsidieries)Washtenaw County would be down the proverbial shitter like every other county in the State. Be thankful.

  20. Posted December 19, 2008 at 3:27 pm | Permalink

    Amen to Kazoo. I think the idea that there’s not enough tax in Ann Arbor is absurd. You guys have services that most towns can only dream of and correspondingly high taxes already.

    UM buying Pfizer just means that the city will have to cut back. What the hell is wrong with that? You’re still way better off than anywhere else in the entire state.

  21. Posted December 19, 2008 at 3:28 pm | Permalink

    I find it ironic that desig repub is freaked by a loss of tax revenue. It would seem that his republican moniker isn’t everything it seems to be.

  22. Posted December 19, 2008 at 5:49 pm | Permalink

    My concern is with the non-business, non-government elephant in the room gobbling up a big piece of taxable land in the city for itself, and doing a very good job of smashing the significant private economic development potential of this site in the process.

    It is clear that the University had the means to pull off this deal – it is also clear that no one in the lofty ivory towers inhabited by President Coleman’s team considered how this deal would impact the city in which the university sprawls.

    Perhaps an Ann Arbor Income Tax would be a good idea, if only to remind the U of M Administration that indeed there is a city around their campus fiefdom. Heck, with President Coleman’s ever increasing salary, she alone could replace a significant chunk of that lost tax revenue!

  23. Posted December 19, 2008 at 6:51 pm | Permalink

    The University is the only thing that keeps Washtenaw County Alive, DR.

  24. Brackache
    Posted December 19, 2008 at 7:14 pm | Permalink

    This is surreal.

  25. Posted December 19, 2008 at 8:20 pm | Permalink

    I recognize that the university is a huge employer, and a nice buffer against the automobile industry mess. It’s just that the Pfizer property represented a unique attractor for high tech/life sciences companies, especially foreign firms looking for space in the U.S. It’s good if you have land available for such businesses, but it is even better from the perspective of those making decisions on new sites if you have an off-the-shelf, ready-to-go wet labs and fully wired and set up buildings to move into right away.

    Because of how U of M handled this what should’ve been a win-win scenario for everyone is instead a win-lose one, with the City of Ann Arbor and county economic development on the losing side.

  26. Posted December 19, 2008 at 8:27 pm | Permalink

    I think you’re having a bout of wishful thinking. Nobody is going to come to this state right now. Why would anyone come here? The taxes are too high, the people are too stupid, it’s too damn cold, the Lions suck AND the taxes are too high.

    Seriously, why would any business move here? Better the U buy it and create some U jobs with decent benefit packages than let it sit there empty for years providing homes for pigeons.

  27. Posted December 19, 2008 at 8:55 pm | Permalink

    ..you may be right, but I’m just not ready yet to give into that level of depression. At heart I’m an optimist, so I’m optimistic that things will turn for the better by next summer, and for the best by the fall of 2010 when we once again have an “R” next to the Governor’s name (and maybe even “R”‘s next to the names of the Majority Leadership in the state legislature too!).

    I’m fairly certain that it is actually impossible for our leadership in Lansing to make it any worse than they already have, and with the auto loans coming through my friends in that business are looking a bit less tense.

  28. Steven Trudent
    Posted October 26, 2009 at 9:54 am | Permalink

    Looks like they’ve found a use for the Pfizer campus after all.

    Ann Arbor, Mich. — The feature film “Trust”, starring Clive Owen and directed by David Schwimmer, will begin production at the University of Michigan’s new North Campus Research Complex in November.

    U-M purchased the complex in June, about 18 months after pharmaceutical giant Pfizer vacated the 30-building campus on Ann Arbor’s north side. The research and development facilities currently are vacant as U-M plans to turn it into a center for innovative research and education. The site is not open to the public.

    The script for the film, co-written by Schwimmer and Andy Bellin is a suspense-drama that sensitively addresses the topics of cyber stalking, rape and a father’s rage over his daughter’s trauma.

    “Of all the scripts I’ve read in reviewing proposals for use of campus space for films, “Trust” is the most meaningful and important,” said Lee Doyle, director of the University of Michigan Film Office. “We are delighted to be able to accommodate the project and are eager for the opportunity it presents for our students and to stimulate the economy of our state.”

    U-M opened its film office in 2008 to address the steady number of requests to use University locations that have arisen since the State of Michigan passed its tax incentive program for filmmakers.

    The crew of Trust expects to hire students as both production assistants and extras. Directors are very interested in providing educational opportunities to U-M students.

    Schwimmer, who is an active member of the Board of Directors of the Rape Foundation of Santa Monica California, says TRUST is a project of great personal significance.

    In the film, Owen and Catherine Keener play the parents of a 14-year-old girl who are stunned to discover she has been vicitimized by an adult who gained her trust posing as a teenager on a chat room. Viola Davis plays a sexual assault counselor.

    “I have heard countless stories and met many victims of rape and sexual assault (men, women and children), and know well the devastation of this trauma—to both the victim and his or her loved ones,” Schwimmer wrote about the project.

    The effort to use the vast facilities of the North Campus Research Complex is a massive project that is well underway at U-M. The new complex is expected to house cutting-edge innovative research with global impact, create thousands of new jobs, help U-M recruit top-notch faculty, students and staff, and spur public-private partnerships.

    The purchase of NCRC represents the largest physical expansion of U-M’s campus in nearly 60 years. U-M already is one of the nation’s largest research institutions and officials expect the purchase of the former Pfizer property will help U-M researchers attract even more grant funding for research.

    “We are tremendously excited about the potential at NCRC, and this film provides some icing on the cake,” said Ora Pescovitz, U-M’s executive vice president for medical affairs.

    “It’s wonderful that the producers of this film have found a good fit at NCRC. We know this is just the start of efforts to stimulate Michigan’s economy by breathing new life into the site.”

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