The University Board of Regents unanimously approved Thursday the purchase of a 2 million-square-foot research and development facility from Pfizer Inc., the pharmaceutical giant that announced last year it would close its Ann Arbor location.
The University will pay $108 million for the 174-acre Plymouth Road facility vacated by the company earlier this year. The University expects to close on the property in June after due diligence and ensuring the site complies with state and federal regulations.
The University Health System reserve fund will cover the bulk of the purchase with University investment returns also shouldering some of the cost, according to Timothy Slottow, the University’s chief financial officer.
“This purchase is an investment in the future of the University of Michigan and of our state,” University President Mary Sue Coleman said in a written statement. “These facilities will help attract more research funding to the area, allowing us not only to broaden our contributions as one of the nation’s premier research universities, but also to strengthen the region’s ability to stimulate new business.”
Over the next decade, the University hopes to create more than 2,000 jobs at the research center, which employed about 2,100 people before Pfizer moved out.
At the meeting, all of the regents spoke in support of the purchase, praising it as an opportunity for the University to expand its research in life science. The regents also said the purchase will be beneficial to the Ann Arbor area and the state.
“If we don’t invest in ourselves, how can we expect anybody else to?” Regent S. Martin Taylor (D–Grosse Point Farms) said. “We have this capacity, we have the ability to do it.”
After the meeting, Robert Kelch, executive vice president for the University’s medical affairs, said officials will put together a plan for the site’s use over the next 12 to 18 months.
“We don’t know exactly yet, but we will come up with a great plan,” Kelch said. “What this does is unleashing the intellectual capacity of the University. The restraining influence is the lack of high quality research space.”
Many of the laboratories are ready to use, he said, but some will need to be renovated and refitted.
The Pfizer complex, once the largest taxpayer in the city with a combined taxable value of $147 million earlier this year, will come off the tax rolls when it becomes a University entity.
Ann Arbor Mayor John Hieftje said in a phone interview that he was excited about the potential for job creation resulting from the University’s purchase. However, he said that losing the tax revenue from the Pfizer complex — which accounted for 5 percent of the city’s tax base — will only further complicate the city’s struggling finances.
“It’ll be a serious hit. It’ll be a long time before the serious benefits kick in.” Hieftje said. “On top of what’s going on in the economy, and then you have this happen, it’s going to make things that much harder.”
Hieftje said he would have liked the city to have been involved in the negotiations to soften the impact on tax revenues, which are vital to the city’s operations.
“The city (government) is 20 percent smaller than it used to be,” he said. “There will probably have to be further reductions. Almost surely. We’ve already taken all of the easy cuts. We’re starting to get more into the substance of what the city already uses.”
Speculation about the site’s future began in January 2007, when the company announced its decision to close the facility. At the time of the announcement, Coleman and other administrators said they wanted to see private companies move into the facility, but did not rule out the University’s interest.
“We didn’t know if another entity would come in and purchase the entire property,” Coleman said in a press conference after Thursday’s Board of Regents meeting. “As we’ve said all along, if somebody had done that, and had stepped up to the plate, we would have welcomed that.”
As the state’s economy worsened and the prospect of buyers emerging from the private sector dimmed, the University continued its evaluation of the property.
“We decided that this was a good fit for the University and we were going to take it over,” Coleman said. “Once we did the really in-depth analysis, then we thought the time was now.”
With the addition of the Pfizer complex, Coleman expects the University’s annual research spending to top $1 billion within the next five years.
“What we’re doing is sending a very powerful message – that we’re committed to the region and the state and we’re growing,” said Stephen Forrest, vice president for research at the University.