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Posted on Mon, Oct 22, 2012 : 4:12 p.m.

VA Ann Arbor Healthcare System signs lease for 24,600-square-foot space in U-M's NCRC

By Amy Biolchini

Editor's note: This story was updated with additional information, including the cost of the lease agreement, at 5:20 p.m.

The Veterans Affairs Ann Arbor Healthcare System has signed an $866,574, multi-year lease agreement for research space in the University of Michigan’s North Campus Research Complex, officials announced Monday.

The VA’s Center for Clinical Management Research - which includes about 150 researchers - will soon be moving into a 24,600-square-foot space that the organization has leased in at NCRC's in the newly-founded Institute for Healthcare Policy and Innovation.


VA Ann Arbor Healthcare System has signed a lease for a floor and a half of space in the Institute for Healthcare Policy and Innovation, shown here, at U-M's North Campus Research Complex.

Courtesy of the University of Michigan

The Institute is housed in NCRC's Building 16, a 122,000 gross-square-foot building that recently underwent a university-funded $13.7 million renovation before opening in June.

The goal of the institute is to take an interdisciplinary approach to make health care better, safer and more cost-effective. About half of the researchers are from the U-M Medical School, and one-quarter are from the U-M School of Public Health.

Building 16 is a six-story building, with the lowest floor committed to a fitness facility and conference room space. The VA holds the only lease for space in the building, as the rest is occupied by researchers affiliated with U-M, said Joan Keiser, a director at NCRC.


Joan Keiser

With the addition of the VA researchers to Building 16, the space will be full. There will be a five percent vacancy for staff fluctuations, Keiser said.

The lease with the VA for the office space in Building 16 is an important one: It marks all of NCRC’s large free-standing office buildings as fully occupied, Keiser said.

“There’s a lot of pressure on office space here,” Keiser said. “We’ve used up pretty much anything on the campus that’s not associated with laboratories.”

Buildings at NCRC with combined lab and office space still have vacancies, Keiser said.

Overall, the Institute consists of about 400 researchers from U-M and beyond - including the VA Ann Arbor Healthcare System. The Institute has yet to appoint a director and is managed by a group of eight faculty members led by interim director Dr. Rod Hayward.

The signing of the lease agreement cements the relationship between the VA and and U-M, officials have said.


Rod Hayward

The U.S. Department of Veteran’s Affairs had been searching for a space to move the Center for Clinical Management Research outside of the Ann Arbor hospital and put out a solicitation for bids of space where it could move the research center.

The NCRC submitted a bid to the federal government detailing the amenities of the space in Building 16, including parking, as well as an inclusive $35.21-per-square-foot rate, said Derek Atkinson, spokesman for the VA Ann Arbor Healthcare System.

The government has accepted the bid NCRC submitted, which for the NCRC’s purposes signifies a lease as being signed, Keiser said. The agreement begins with a five-year fixed lease term, with the opportunity for five additional years on a year-by-year renewal rate.

However, the exact amount of square feet that the lease will entail has yet to be determined, and will be a maximum of 24,600 square feet, Keiser said.

“The dollar amount will be finalized in the coming days,” Keiser said.

Should the VA use all 24,600 square feet available, the VA would pay NCRC $866,574 per year for the space, Atkinson said. The rent payment would come out of the VA Ann Arbor Healthcare System’s operating budget.

Currently, the VA’s Center for Clinical Management Research occupies about 20,000 square feet of space at the VA Ann Arbor Hospital, Kerr said.

The movement of the VA researchers to the new U-M location will free up space in the VA Hospital at 2215 Fuller Road in Ann Arbor for additional patient care.


Eve Kerr

“The number of veterans is growing. Obviously, our first mission is for care delivery. We need that clinical space - as much as we like being in the hospital we can’t be there,” said Dr. Eve Kerr, director of the Center for Clinical Management Research and a professor of internal medicine at U-M.

The NCRC had responded to the Dept. of Veteran's Affairs bid request -- and the VA selected the office building on the NCRC complex out of all the bids it received.

The market for the space at the NCRC building is highly competitive, Kerr said.

“I know there was a lot of interest in this space,” Kerr said. “This is going to be the largest university-based institute for health policy research in the country.”

Unlike the other lab research areas of the NCRC — a former Pfizer complex acquired by U-M in 2009 — the Institute is housed in a building with mostly office space.

The Center for Clinical Management Research will occupy about a floor and a half of space in the five-story office building at NCRC, Kerr said. VA researchers will be moving into the space in the next several months.

The nature of the Institute for Health Policy and Innovation research is not clinical, but does require secure servers for researchers to analyze data.

Most of the investigators at the Center for Clinical Management Research are also faculty at the University of Michigan, Kerr said. Researchers split their time between doing research at the VA and at U-M, Kerr said.

Many researchers are focused on mental health issues for veterans — especially when it comes to suicide.

“Many of our researchers are working through those risk factors and working with our leaders in Washington D.C.,” Kerr said.

In addition to promoting new policies when it comes to veterans’ health, the researchers also inspire changes in health care that veterans receive at hospitals, Kerr said. The collaborative, synergistic nature of the environment at the Institute is a good fit for the VA researchers, Kerr said.

Amy Biolchini covers Washtenaw County, health and environmental issues for Reach her at (734) 623-2552, or on Twitter.


Dave Koziol

Tue, Oct 23, 2012 : 1:40 p.m.

$35.21-per-square-foot, wow, that must be some amazing office space!


Tue, Oct 23, 2012 : 10:04 p.m.

And the U-M gets it tax free.

Amy Biolchini

Tue, Oct 23, 2012 : 2:23 p.m.

Ed, the annual cost is $35.21 per net usable square foot, and is an all-inclusive amount that includes both the base rent and operating expenses.

Ed Kimball

Tue, Oct 23, 2012 : 2:10 p.m.

I think you missed the part of the first sentence that said "multi-year" lease. The article later says that this is a five-year lease, so the cost per year is only about $7.04 per sq. ft.


Mon, Oct 22, 2012 : 9:48 p.m.

Amy, if the U-M is able to lease out office space on the commercial market does that real estate still maintain a property-tax free status?

Angry Moderate

Tue, Oct 23, 2012 : 12:57 a.m.

I believe they are leasing part of it to for-profit companies too, are they paying taxes on that square footage? if not, it's very unfair to private landlords who can't compete with a tax subsidy.


Tue, Oct 23, 2012 : 12:40 a.m.

So the U-M buys the property off of a corporation that was paying property tax and converts it to a tax-exempt status. They then lease the property to the federal government for an $800k per year profit and the U-M maintains a tax exempt status. And you call it silly for the city to not charge property tax? You must either work for the city or the U-M. I'm trying to figure out if your statement "...sillier to charge..." is an indication of your intelligence (you negotiate for the city of A2), or your arrogance (you work for mary sue).


Mon, Oct 22, 2012 : 11:51 p.m.

Property tax is not paid by the person leasing ANY property in the state, so UM would likely keep their tax exempt status. The fact that they are leasing to the federal government seems to make it even sillier to charge property tax.

Kai Petainen

Mon, Oct 22, 2012 : 10:10 p.m.

i was about to say that it was the 'complicated' portion of the agreement.... but perhaps my memory serves me incorrectly, as i thought i read that word in there somewhere... and now it's not there. maybe i was reading another article instead.