University of Michigan gets first commercial tenant for former Pfizer site
University of Michigan President Mary Sue Coleman announced the first tenant at the North Campus Research Complex on Wednesday during a media tour of the University Research Corridor.
Melanie Maxwell | AnnArbor.com
A startup chemical products company that spun out of Michigan State University laboratories will become the first commercial tenant of Ann Arbor's 174-acre ex-Pfizer campus since the University of Michigan acquired the site in June 2009.
U-M said today that it is renting 4,300 square feet of lab space to BoroPharm Inc., which is commercializing a process to reduce waste in the production of chemical materials called boron intermediates.
It’s the first outside company U-M has welcomed to the former Pfizer space. University officials envision using other parts of the complex to house various industry collaborations and possibly even the university’s own startup companies. Most of the space will be dedicated to the university's own research initiatives.
University officials said the decision to lease the space to BoroPharm was easy, in part because they had no immediate plans to use the chemistry lab the company is occupying - a facility known as Building 40 under Pfizer’s leadership.
U-M President Mary Sue Coleman told AnnArbor.com that BoroPharm is emblematic of the type of industrial partners the university hopes to attract to the site.
"We knew we would have a robust opportunity here, not only to have a partnership with technologies that are coming out of the university, but that we could attract companies that are small, that are growing, that make sense from a research perspective," Coleman said. "This little company, BoroPharm, meets all those criteria.The reason we actually liked them as our initial tenant is because they actually sell products. They’re making some profit right now."
Financial terms of the lease were not immediately available, but David Canter, the former Pfizer site leader hired by U-M to direct the campus' repositioning, said the space was leased for a price comparable to industry standards.
Canter said the building is a "very specialized chemistry facility" designed for the types of chemical production BoroPharm is pursuing.
BoroPharm is expected to maintain its business office in Novi and a collaborative technology operation with the MSU BioEconomy Institute at another former Pfizer complex in Holland, U-M said.
It was not immediately clear how many jobs the company plans to add in Ann Arbor, but the university's press release said “BoroPharm has pledged to invest significantly in equipment and improvements over the coming years.”
AnnArbor.com files
“The NCRC location provides us a terrific platform to continue to grow our company and continue partnering with world-class researchers,” BoroPharm CEO Todd Zahn said in a statement.
BoroPharm was considering leaving Michigan, which largely lacks the unique chemical production facilities the company requires.
"To have them move down here is the perfect example of how we can use our collective strength, because they were going to move to another state if they hadn’t found the space here, the support here and the ability to grow here," Coleman said. "And that’s what we offer them."
The decision to welcome BoroPharm comes as the university has repeatedly emphasized its intentions to welcome industry partners at the ex-Pfizer site, a massive complex that includes 30 buildings and 2 million square feet of facilities. BoroPharm plans to use two-thirds of its 4,300-square-foot lab space right away.
"These are the types of opportunities we want to look for," Coleman said. "We don’t just want to fill up the space. That’s not an option."
The city of Ann Arbor, still reeling from lost taxes tied to the university’s acquisition of the site, will not reap a big financial boost from the new company.
BoroPharm will not be subject to real property taxes because the university owns the property, City Finance Director Tom Crawford and City Assessor David Petrak confirmed.
The company will be subject to personal property taxes on equipment it owns and uses at the site - unless it’s using U-M-owned property, which would not be subject to taxes.
“We’re more likely to see indirect benefits” from companies moving into the Pfizer site, Crawford said, citing improved employment levels and a boost in the housing market.
Ann Arbor SPARK, the region's economic development organization, applauded the news of BoroPharm's move into the university's space.
"SPARK is working closely with U-M on the redevelopment of the ex-Pfizer complex, and we view today's exciting announcement as the confirmation by U-M of their desire to consider both public and private uses for the NCRC," SPARK Vice President for Marketing and Public Relations Elizabeth Parkinson said in an e-mail.
So far, U-M has moved about 300 of its own employees to the ex-Pfizer site, now called North Campus Research Complex. The university is methodically mapping out its strategy for the site, and executives hope it will encourage new multidisciplinary research initiatives and innovative collaborations.
The university recently hired former Pfizer site leader Canter to lead the site. He officially started on the job Monday.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
Lady Audrey
Thu, Jul 22, 2010 : 6:16 p.m.
This conversation is just crazy. We now have a new company in town and with it employees who will eat and work in our town, maybe even live here if they can afford it. We have lots of houses and condos on the market. Let's rejoice the potential for the future when there are more people working at the site and living in our community. We'll get more from their presence in the community than from real estate tax on 4000 sq ft.
treetowncartel
Thu, Jul 22, 2010 : 10:26 a.m.
I have no way of knowing Pfizers plan if U of M did not buy the property, I wasn't privy to that board meeting. I also do not know whether Ann Arbor would have accepted the donation, relieving Pfizer of it tax obligation. However; if they had, they could have sold the property in pieces or as a whole and still maintained the taxes on the parcel(s).
Bacon Bits
Thu, Jul 22, 2010 : 10:16 a.m.
@treetown: Earlier you mentioned the loss of taxes by U-M purchasing the Pfizer site. One thing to consider, that might not be widely known, was that Pfizer was actively planning on razing the entire complex. Pfizer had no plans to keep paying property taxes: they were going to demolish the complex and donate the then-vacant land to the City. If U-M didn't buy the facility, we'd be left with parking lots. And BoroPharm would be operating in another state today.
treetowncartel
Thu, Jul 22, 2010 : 7:04 a.m.
Uhm, there are way too many miostatements here to correct, but the glaring one is calling the University of Michigan a non-profit. It is a public institution. Non-profits are incorporated and still have to pay property taxes, it is their federal and state tax liability that is diminished. Yes, jobs are a good thing, but I think some people are a little concerned about what the University is doing. However, if lets say all of the children of Michigan taxpayers could actually attend the Universityu, people might be not feel that way.
trespass
Thu, Jul 22, 2010 : 6:28 a.m.
@Randy M- When I worked for another non-profit hospital we were limited in the outside work we were allowed to accept. I think the tax code said we could not earn more than 3% on outside business. The UM could lose it's tax exempt status if it violates the tax code. I think the citizens of AA should look closely at the UM budget and see if they are not violating that code.
Randy M
Wed, Jul 21, 2010 : 9:49 p.m.
Probably not, but it could buy a large building to use as a school or a church and rent out a small portion of it for use by another school or church. Happens all the time, and it's a lot more similar to what the U is doing here than is your hypothetical. In order for a non-profit to keep its tax-exempt status it must be primarily engaged in the activity for which it earned its 501(c) designation--which means it can in fact enagage on the periphery in activities that may not be directly related to that purpose but that fulfill it in some way (and you might be surprised what activities some non-profits have been allowed to conduct in this manner, especially churches). The University of Michigan is a tax-exempt non-profit and nothing it is doing in connection with this rental arrangement is going to change that. Those of you--and all Ann Arbor taxpayers--who seek to recover some of the Pfizer tax revenue should hope for more of these arrangements because commercial enterprises doing business, hiring workers, and partnering on projects with the U-M on that site is not just our best but our only hope of that.
Richard Dawn
Wed, Jul 21, 2010 : 9:47 p.m.
The University does not have "commercial landlord" in their mission statement. I don't think that's the objective. It sounds like a incubator type arrangement that offers private firms unique connections to talent and equipment for their growth that you wouldn't find in any traditional office park. There are no local competitors who can offer that. Both entities stand to prosper and I join those who say better here than elsewhere.
Randy M
Wed, Jul 21, 2010 : 6:16 p.m.
@lokalisierung: So you're objecting to the law that exempts non-profits from tax liability -- or to a non-profit's right to be a landlord? Or both? And Brian Bundesen: What's "unfair" about the arrangement -- and to whom? Do we know that it's being rented at a below market rate -- or are we just assuming it? Some landlords own their buildings outright and others are overleveraged -- which can cause disparities in rental rates, too. Is that also unfair? Lots of factors go into rental rates, and usually the market dictates. In this case we're talking about a limited and specialized market, as you have pointed out. And as others have mentioned, a company is staying in the state rather than leaving -- yet still people are finding reason to complain.
Brian Bundesen
Wed, Jul 21, 2010 : 4:29 p.m.
In principle, the idea of a tenant renting from a Landlord that does not have to pay taxes, hence getting a lower rent, is unfair. However, this is a pretty unique situation. It's not like BioPharm was debating between the Pfizer site and space in Briarwood mall. It was a highly specialized facility, only rentable to a very few potential tenants. Plus, in my reading of the article, if BioPharm didn't get this facility, they were going to leave the state. It's all a trade off. Half a loaf is better than none. Jobs lead to housing which leads to money circulating in the local economy. On balance, in this environment, I'll take it.
treetowncartel
Wed, Jul 21, 2010 : 4:23 p.m.
@ ToPCat, I think it is proper to put this in terms people familiar with U of M are familiar with, End Around. @ Susan, if U of M never acquired the property and Pfizer still owned it they could have leased it or sold a portion to the new tenant. People in Michigan, and Ann Arbor proper, would benefit from the tax base. Now, saying they would spend that money properly is a whole different story.
Lokalisierung
Wed, Jul 21, 2010 : 3:36 p.m.
"What is the "racket" or "competitive advantage" to which they refer? What am I missing?" If you own a parcel of land you must pay property taxes on it. If you rent this space out to a business, obviously you are going to factor that into the rent they must pay, because you are "losing" (aka annually must pay)prop taxes. If my neighbor is tax exempt and does not have to pay property taxes, they can offer that same space at a lower price and still recieve more profits than I would.
Susan Montgomery
Wed, Jul 21, 2010 : 3:29 p.m.
So did people miss the fact that this is a very specialized facility and the UM site is the only one that could provide it? The other sites that missed out were ones out of state, not any nearby. This arrangement allowed the company to stay in the state, with the potential to hire more people, who will buy houses, etc. Who in Michigan is being hurt by this decision?
Lokalisierung
Wed, Jul 21, 2010 : 2:34 p.m.
Total loophole...that's weak!
Randy M
Wed, Jul 21, 2010 : 2:12 p.m.
Tenants are never required to pay real property taxes. This is true whether the owner of the building is a for-profit company (and therefore responsible for paying a property tax) or a non-profit (and therefore exempt from realy property taxation). Tenants in this city, however, are always required to pay a tax on the personal property they use in a leased space no matter who owns that space -- but only on the property they actually own, not on property the landlord owns but the tenant is allowed to use. So this situation is no different. And Nathan -- the relationship between the U and its fast-food tenants (as far as the tenants' tax liabilities is concerned) is no different from the realtionship any for-profit company would have with its tenant when leasing space it owns to a fast-food restaurant. It is no different, in fact, from the arrangement any kind of landlord would have with any kind of tenant. So what are the commenters' objections? What is the "racket" or "competitive advantage" to which they refer? What am I missing?
Top Cat
Wed, Jul 21, 2010 : 1:04 p.m.
The word "racket" comes to mind.
treetowncartel
Wed, Jul 21, 2010 : 12:54 p.m.
Education or industry, which one is it? I'm with Heardoc and Edward on this one.
Nathan Bomey
Wed, Jul 21, 2010 : 12:45 p.m.
A2Reality, The company will only pay property taxes on the equipment it's using at the site that is not owned by the university. The company will pay no real property taxes (taxes on the structure itself) or taxes on any U-M equipment it uses. This is comparable to the relationship between the university and its fast-food tenants, for example. A fast-food company that rents space from the university does not have to pay real property taxes. All this is coming straight from the city of Ann Arbor.
A2Realilty
Wed, Jul 21, 2010 : 12:31 p.m.
Nathan - Can you find out if the tenant will have to pay property taxes? I would at least expect them to pay personal property taxes for the equipment that they have on site. If no taxes are being paid by the University or by its tenants, then that is an unfair competitive advantage and Heardoc is 100% correct. atnapp - The "market" in this situation can be defined from two perspectives: 1) From UM's perspective, they are competing as a pseudo-rental agency renting its space out to commercial entities. 2) From BoroPharm's perspective, they are competing as a commercial entity. From either of these two perspectives, taxes should be paid in the same manner as other rental agencies or commercial entities, respectively.
JimB
Wed, Jul 21, 2010 : 10:44 a.m.
This is a perfect example of the dual edged sword that the UofM brings to the city of Ann Arbor's table. As the school aquires more land with the promise of creating jobs, there is less tax dollars collected by the city. This is why Ann Arborites must pay more every year, through other revenue producing systems, to offset the shrinking tax base that the U brings to the table. One being increased parking fees, (meters) etc.
theodynus
Wed, Jul 21, 2010 : 10:43 a.m.
Heardoc, UoM is a government entity created by the state constitution, with an elected board of regents beholden to the taxpayers. It's not a corporation...it's a public non-profit. What "market" do you think they're competing in?
Heardoc
Wed, Jul 21, 2010 : 10 a.m.
If the university is using part f the site for commercial operations then that segment should be subject to property taxes. If not, then this gives UofM and unfair advantage in the market place as others do have to pay property taxes. This is just plain wrong that UofM is not subject to the same tax structure as private firms.