Week of September 30, 2002
Snapshot from the Field
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Bayer Puts 1-Million-Sq.-Ft. Northernby JACK LYNE, Site Selection Executive Editor of Interactive Publishing
Indiana Plant on Market - for $1
So what's the deal here? It's Bayer Diagnostics' (www.bayerdiag.com) 1-million-sq.-ft. (92,900-sq.-m.) plant in Elkhart, Ind. (www.edcec.com). And the facility that for 50 years-plus made over-the-counter medications is on the market for an asking tab that virtually defines "priced to sell."
The purchase price: US$1.
And that's for a facility with an estimated value of $12 million, according to estimates from Grubb & Ellis/Cressy & Everett (www.cressyandeverett.com), the Mishawaka, Ind.-based commercial real estate firm that's brokering the sale.
Not every day, obviously, does a plant that's produced millions of doses of Alka-Seltzer sell for less than it costs to buy a pack of the plop-plop, fizz-fizz pain reliever. Pain relief, however, is just what a done $1 deal would give both Bayer Diagnostics and the city of Elkhart.
"It's a win-win for the community and the company," said Joe Martin, Bayer Diagnostics senior vice president and general manager. "In the past, we have always supported local communities in Northern Indiana, but this effort is longer lasting and can have a more direct impact on local residents, Bayer employees and their families."
The shuttering was a harsh blow for Elkhart, a city near South Bend with a population of roughly 42,000. In one form or another, the operation has been a fixture on 1884 Miles Ave. since 1938 (initially as a facility for Miles Laboratories, which Bayer AG acquired in 1978). At its economic apex, the plant had a hugely positive impact, employing 3,000 workers.
Community leaders considered a broad range of uses for the Bayer plant, which sits on a 27-acre (10.9-hectare) site. Ultimately, however, commercial or industrial use, they decided, offered the optimum economic outcome.
"This Bayer initiative is the company's latest and most creative contribution to our city," said Elkhart Mayor Dave Miller. "The company's offer can create a lasting benefit for the people of Elkhart."
$20 Million to Bulldoze PlantThe Miles Ave. plant's shutdown, however, doesn't mean that Bayer's economic benefits are disappearing from Northern Indiana. The company remains very much a player in the area, where it has some 1,100 employees.
Bayer Diagnostics, for example, currently has a $15-million upgrade under way for its Self-Testing Segment, which is headquartered in Elkhart.
In addition, the Bayer unit recently announced that it will add a $33-million expansion to its manufacturing operations in the city of Mishawaka, which is some 10 miles (16.1 kilometers) from Elkhart. The Mishawaka expansion will create what Bayer officials call a "center of excellence" for high-volume, high-technology manufacturing. "Bayer's creation of a global center of excellence will undoubtedly have a lasting impact on Northern Indiana," said Miller.
So why is Bayer selling one of its multi-million-dollar operations in Northern Indiana for $1? Economics, dear Watson.
Tearing down the aging plant would cost $20 million, according to Bayer Diagnostics estimates. That whopping outlay is one reason behind the company's creating the "Develop Northern Indiana" marketing initiative, complete with the $1 price tag for the Elkhart property.
Bayer Diagnostics is underwriting the global marketing effort for Develop Northern Indiana. Grubb & Ellis/Cressy & Everett will promote the property through its national and international office network, working with local, state and regional economic development officials, Bayer officials said.
$1 Sale Lasts Only One YearThe Develop Northern Indiana marketing strategy is a one-year program - a time limit with firm economic grounding.
Maintenance for the closed operation will run as much as $7 million a year, according to Grubb & Ellis/Cressy & Everett estimates. That, in turn, means that maintenance costs would outstrip the facility's value if the property languishes on the market for more than about 20 months.
Bayer Diagnostics is aiming to have a buyer lined up by mid-2003. The local work force's experience is a major selling point for the property, company officials said. That experience, they explained, stretches back 116 years, to Bayer acquisition of Miles Laboratories.
"As a long-time member of the Elkhart community, Bayer wants to help strengthen the local economy by attracting another company that can appreciate the quality of the local work force," Martin said. "Generations of Elkhart families have worked at Bayer and its predecessor company, Miles Laboratories, so we understand and appreciate the skills and work ethic found here. We hope to find a new owner for the facility that can take advantage of this unique opportunity." Even with the $1 price tag, though, a sale isn't a foregone conclusion.
Built in 1938, the Miles Ave. plant is competing with a surplus of industrial space that's of more recent vintage, according to area brokers.
Then there are possible environmental expenditures for a potential buyer to consider. No environmental study has been conducted on the property, Bayer officials explained, since the facility has had the same owner for its entire 64-year existence.
So what happens if there's no buyer on the horizon by September 2003? Bayer Diagnostics officials aren't speculating.
Donating the site to the city could be a possibility. Bayer has a history of charitable giving in Northern Indiana, donating more than $1.2 million over the last five years. The company's most recent gift was a $500,000 donation to the Economic Development Corp. of Elkhart County.
©2002 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.