Published March 27. 2013 1:00PM Updated March 28. 2013 6:23PM
Decision comes despite developer's interest in property, state support and local grass-roots effort to reuse facilities
Groton — Pfizer Inc.'s decision Wednesday to tear down the company's sprawling former research headquarters off Eastern Point Road stunned local and state officials who had invested thousands of hours trying to reuse the space to spur economic development in the region.
Officials involved in the negotiations said last-minute obstacles thrown up by Pfizer after a major developer had offered to purchase the 750,000-square-foot complex known as Building 118 made it appear as though the pharmaceutical giant never had been serious about finding a buyer.
Even an 11th-hour call from Gov. Dannel P. Malloy to Pfizer President and Chief Executive Ian Read failed to dissuade the company from nixing a deal, according to two legislators.
"What makes this very painful is there is a bone fide developer that certainly has the wherewithal to do this project," Town Manager Mark Oefinger said. "His portfolio is 80 million square feet. This is a small project to him."
Sources identified the developer as Stu Lichter, president and senior managing partner of California-based Industrial Realty Group, which specializes in bringing empty buildings back to life.
Lichter, in a phone interview Wednesday, said he appreciated the governor and other state officials going to bat for him after he initially approached Pfizer about a deal. He added that Pfizer's decision to back out cost the region at least one major new employer that he had lined up as his first tenant, a bioscience company that would have added between 100 to 200 jobs with an average salary of about $100,000.
"I think it's disgraceful to raze that building," Lichter said. "When you have an asset — and as specialized an asset (as Building 118) — it's clearly an economic development tool the region is going to lose."
Lichter echoed legislators' suspicions that Pfizer never really intended to sell the building, despite the fact that it will cost more to demolish the structure than it would have to sell it, even for a nominal price.
Lichter said Pfizer initially told him that the company had a schedule for demolition, but if a deal could be worked out within a certain timetable, officials would seriously consider an offer.
But, according to Lichter, Pfizer kept bringing up additional issues that would stall negotiations.
One of the issues became jokingly known as the "rogue rat." Pfizer was worried that scientists in a Building 118 not controlled by the company might lose control of their animal-study subjects, who then potentially would invade a nearby building where Pfizer was doing experiments on rats, leading to various problems, according to several officials and confirmed by Lichter.
Pfizer also raised other concerns that never before had been issues, such as parking, officials said. Lichter added that Pfizer also wanted approval rights for tenants and even for suppliers of products the tenants used.
"Demands from Pfizer started getting so out there," Lichter said. "It felt like they kept moving the finish line back as we cleared the hurdles."
"I don't think the price was a problem," state Sen. Andrew Maynard, D-Stonington, said in a phone interview. "The seller has chosen not to sell."
Substantial state support
Pfizer's official line to the media was that Building 118 simply didn't draw enough interest from potential buyers. The company told local officials, in a conference call, that the main problems revolved around "logistical issues" that either couldn't be resolved or had not progressed fast enough.
Either way, state officials found the decision shocking because the state Department of Economic and Community Development had been holding ongoing discussions with Pfizer concerning a deal to purchase Building 118, which actually is a group of seven buildings. The complex is easily dividable, and developer Lichter had expected to attract multiple tenants in the bioscience industry.
"This decision by Pfizer is very disappointing," Mark Ojakian, Malloy's chief of staff, said in a statement, "especially considering that the state was ready to provide substantial support to keep the building from being demolished."
The local legislative delegation was equally disturbed by the Pfizer decision.
"This blockbuster news sends a terribly negative message loudly and clearly about today's corporate culture, compounded by the extraordinary consideration Pfizer has received over the years in terms of both local and state tax credits," state Sen. Andrea Stillman, D-Waterford, said in a statement.
"Frankly, this is a slap in the face to all of us who worked so hard to see this building repurposed," Maynard said.
State Rep. Elissa Wright, D-Groton, and state Rep. Betsy Ritter, D-Waterford, also expressed disappointment, saying solutions need to be found to keep and attract scientific talent in the region.
State Rep. Ted Moukawsher, D-Groton, said local officials, led by Oefinger, the town manager, and Groton City Mayor Marian Galbraith, worked hard to overcome obstacles to a deal.
"A truly promising outcome for Building 118 has been thwarted by corporate cold-bloodedness," Moukawsher said.
Galbraith urged Pfizer to reconsider its decision, which will cost the town about $2 million in real estate taxes and the city nearly $500,000, she said.
"I'm shocked at the announcement today," Galbraith said in a phone interview Wednesday. "Up until yesterday, I thought progress was being made."
George Mathanool, a member of the Groton Economic Development Commission who had proposed using Pfizer properties as a hub for mature international companies that want a presence in the United States, said he still hopes the company will reconsider a deal to help profit its stockholders. He said he doesn't expect Pfizer to start knocking down the building until as late as May.
"We could really use 118 to revitalize eastern Connecticut," Mathanool said.
Town Manager Oefinger said he doesn't know for sure that Pfizer's decision isn't just another negotiation strategy.
"I'm still hopeful that calmer folks will come to the right conclusion," he said.
But Tony Sheridan, president of the Chamber of Commerce of Eastern Connecticut, noted that Pfizer had extended its deadline for making a decision on the property and questioned whether there had ever been a solid offer on the table for Building 118. He added that quarterly goals may have entered into the equation for Pfizer, which has been under the gun to cut research-and-development expenses and reduce its global footprint.
Groton site leader Rod MacKenzie, in a note to Pfizer employees acquired by The Day, said the decision to tear down 118 comes as Pfizer attempts to consolidate its operations to two-thirds of its 160-acre campus. He said more than 45 showings of several buildings on the campus currently for sale or lease did not result in a viable tenant for the massive complex.
"Given the substantial operating costs associated with maintaining an empty facility and having exhausted potential alternatives, we are proceeding with plans to raze this building," MacKenzie said in the note.
Pfizer spokeswoman Joan Campion said the company has tried to market Building 118 for two years. It announced last summer that it had applied for a permit to demolish the building, which has an animal-testing area but is considered by some officials to be outdated and in need of substantial upgrades for today's market.
"We greatly appreciate the time and efforts of Governor Malloy, Congressman Joe Courtney, the Connecticut DECD, the City and Town of Groton, members of the state and federal legislative delegation, and the local business community in trying to find a viable reuse for this building," Campion said in a statement.
The company announced last summer that it was gearing up to demolish the research lab where such groundbreaking drugs as the antibiotic doxycycline and the arthritis medication Feldene were discovered. Pfizer initially said it would make a decision on the fate of the building by December, but intense efforts by Malloy, the local scientific and economic-development communities and the DECD led to the company extending the deadline by more than 10 weeks.
"No jobs will be impacted as a result of this decision," Campion said. "We have made very good progress in the re-use of other buildings on the campus that we believe will provide a significant benefit to the local community."
Ojakian, the governor's spokesman, noted that other negotiations are ongoing — deals that could involve any of the other Pfizer properties currently for sale or lease, including 286, 288, 90 and 114.
"We hope to have something to announce in the near future," Ojakian said.