The momentous mixed with the mundane on Tuesday, as a phalanx of attorneys and real estate professionals converged on the Washtenaw County Clerk/Register of Deeds office to file paperwork for Pfizer’s sale of its Ann Arbor property to the University of Michigan.
Because documents for the sale of Chrysler’s Chelsea Proving Grounds were also filed that day in a separate transaction – a coincidence of timing – it marked the largest amount of transfer tax ever recorded in a single day for the county. Neither the purchase prices nor the taxes paid for those deals were disclosed. (See the end of this article for more information about how the real estate transfer tax works.) But for the Pfizer sale, the check received by the county was enough to make senior clerk Susan Bracken Case gasp, then grin.
We initially heard that the UM/Pfizer documents would be filed at 10 a.m., so we headed over to the clerk/register of deeds office at 200 N. Main to observe the occasion. Turns out we were a little off on the timing – in fact, the final transaction with the county didn’t occur until around 2 p.m. But we were able to return and bear witness to the event, as did a guy who happened to walk in at the same time to ask about a tax lien – wearing shorts and a T-shirt amid a cluster of suits and ties, he seemed momentarily unsure if he was in the right place.
Much of the heavy lifting had been completed prior to Tuesday, but we asked John Cameron, an attorney with Dickinson Wright (and outside counsel for the university in this transaction) to fill us in on the final steps taken to close the deal that day.
A small group of attorneys had gathered at 9 a.m. in the Fleming Administration Building at the office of Ciara Comerford, who is UM assistant general counsel and the point person for the university on this deal. For about 90 minutes, they went over final details of the transaction – ensuring that no last-minute problems had arisen, making sure the university’s insurance on the property was in order, checking to see that the billing for gas, electricity and other utilities had been transferred to UM.
They then authorized the university treasurer’s office to wire funds for the purchase to First American Title in Chicago, which was the closing agent for this deal. Though the attorneys and staff at the clerk’s office would not disclose the purchase price, university officials previously have said they planned to pay $108 million for the 174-acre site on Plymouth Road, located near UM’s north campus and medical complex.
The attorneys waited until they’d received word that the transfer was verified – they’d been given a federal reference number as a way to track it in case problems arose, but none did – then they packed up their briefcases and headed over to Liberty Title, on Main Street just a block away from the county administration offices.
Liberty Title was the local agent for First American Title – Tom Richardson, Liberty Title’s co-president, said somewhat ruefully that they were not providing title insurance, which presumably would have meant a little more coin for his firm. Rather, they worked with the attorneys to review all the closing documents, a process which included making some minor changes and faxing papers back and forth between Liberty Title and First American Title, Cameron said. They checked to make sure each of the 20 or so documents were properly signed and notarized, and made a brief trip in the late morning to the clerk/register of deeds office to see if everything was in order from the county’s perspective.
At this point – and we’re not kidding – they called the university to send someone out to the property and verify that it was still standing and that all the property they’d agreed to purchase was there – including records and personal property, such as equipment. It was.
Back at the Liberty Title office, Cameron got on a conference call with the attorney representing Pfizer and the title insurance representative from First American Title. Each of them said something to the effect of “I’m authorizing you to close this transaction.”
With that, the escrow officer for First American Title broke the escrow account, which freed up funds to pay the deal’s broker their brokerage commission and to pay the transfer tax, among other fees. The official closing also meant that the group in Ann Arbor was now authorized to record the documents with the county, so they crossed the street to the county administration offices. They got a tax certificate from the treasurer’s office – verifying that there were no back taxes owed on the property – then brought all the documents to the clerk/register of deeds, where the paperwork was recorded. The attorneys received time-stamped copies of the documents – the originals will be scanned into the county’s database and returned to them in a few days.
When Cameron concluded his description of the day, he said: “And now we’re going out to lunch. We’re done.”
It was a bit anti-climactic, in fact. Comerford of UM’s general counsel said there’d likely be some kind of celebration at the Pfizer site later in the day by the staff of the Medical School, which is paying more than $60 million of the purchase price and is taking the lead in determining how to use the space.
Some staff from the office of Hank Baier, UM’s associate vice president for facilities and operations, would also be part of whatever celebration ensued – Baier’s staff was on hand Tuesday at the Pfizer site to take over the management of the buildings and property from local representatives of the drug company, Comerford said.
Coda: Real Estate Transfer Tax
While the county couldn’t disclose the purchase price or transfer tax paid on the Pfizer property, chief deputy clerk Jim Dries did give The Chronicle a mini-tutorial on how the tax is calculated, as well as some data about how much transfer tax the county has collected over the past 20 years.
The seller is responsible for paying the Michigan real estate transfer tax (RETT) for the sale of real property, such as land or buildings (as opposed to personal property, such as equipment, appliances, furniture or other items that can be moved). The county collects the tax when the property deeds are presented to the register of deeds office for recording after a sale has closed.
The state gets the largest portion of the RETT: For every $1,000 of a property’s sale price, the state gets $7.50 and the county gets $1.10. So if the $108 million cited by UM were the price only for real property (an unlikely but possible scenario), then the county would have received about $119,000 in RETT, with the state receiving $810,000.
Why wasn’t the purchase price disclosed? State law does require that the price for real property be disclosed to the government, but it can be done in one of two ways: 1) on the deed, which is a public record, or 2) on a real estate transfer valuation affidavit, which can be filed when the deed is presented for recording. If an affidavit is filed, that keeps the transaction price confidential. Often you’ll see a property’s purchase price recorded as $1 on official public documents – that means an affidavit has been filed. Both major deals on Tuesday filed affidavits, so no information on the purchase prices was disclosed to the public.
But here’s some context: On Tuesday, the county collected RETT on 19 real property transactions, including the Chrysler and Pfizer deals. Gross receipts for transfer taxes on those 19 transactions totaled $1,053,551, including $918,498 in state RETT and $135,053 in county RETT.
The previous day (Monday, July 15), the county collected just $39,367 total, including $30,202 in state RETT and $9,164 in county RETT.
Overall, a drop in real estate prices and a slowdown in sales have resulted in a sharp drop in RETT revenue for the county, which peaked in 2005 at $2.54 million. Last year, RETT revenues fell slightly below $1.4 million. So far in 2009 (through July 16) RETT revenues are $482,300.
Finally, for data geeks among our readers, here’s a listing of county RETT revenue from 1988 through 2008:
1988 = $793,920
1989 = $795,316
1990 = $717,684
1991 = $738,481
1992 = $799,184
1993 = $896,369
1994 = $1,106,343
1995 = $1,057,454
1996 = $1,205,976
1997 = $1,449,923
1998 = $1,741,230
1999 = $1,834,796
2000 = $1,888,762
2001 = $1,878,522
2002 = $2,119,614
2003 = $2,238,317
2004 = $2,539,692
2005 = $2,542,227
2006 = $2,203,118
2007 = $1,844,344
2008 = $1,397,368