Arizona House Approves Tax Credits for Apple

Apple's new data center at the former First Solar plant in Mesa
Apple’s new data center at the former First Solar plant in Mesa

PHOENIX – The Arizona State Legislature wants tax credits for Apple Inc. by extending renewable energy tax credits and exemptions to cover the 1.3-million-square-foot data center it plans to open in Mesa.

The House approved a bill Tuesday that expands a $5 million sales tax credit passed last year to include international operations centers that make a capital investment of $1.25 billion, such as the facility Apple plans to build next year.

The House swiftly debated the bill and passed it 57-3 after amending it to match the Senate version. That will allow a speedy trip to the governor’s desk when the Senate acts. Two Republicans and one Democrat voted against the bill.

To qualify for the sales tax credit, Cupertino, California-based Apple would have to invest at least $100 million in new renewable energy facilities and use some portion of that energy to power its data center.

The bill by Sen. Bob Worsley, R-Mesa, also exempts Apple’s facility from sales taxes on electricity or natural gas, resulting in a $1.3 million loss of revenue for the state’s general fund for the budget year starting July 1, 2016, according to the Legislature’s budget analysts.

Worsley said the bill helps Arizona get its foot in the door with Apple and could lead to bigger projects in the future.

“We think we have a real shot at being a secondary place for Cupertino,” he said.

The Greater Phoenix Economic Council supported the Senate version of the bill as an economic incentive to attract more businesses.

“Senate Bill 1468 certainly enhances Arizona’s ability to compete in the global economy to attract these high-wage companies,” said Chris Camacho, president and CEO of the Greater Phoenix Economic Council.

Opponents said the bill was specialty legislation.

“I just don’t believe in picking winners and losers,” said Rep. Michelle Ugenti, R-Scottsdale, echoing a refrain often heard from Republicans opposed to business incentives. “I just don’t think it’s a good economic tool.”

Apple originally bought the facility in 2013 for Merrimack, New Hampshire-based GT Advanced, which planned to make sapphire glass for Apple products, but the company went bankrupt in October 2013.

After those plans fell through, Apple said it would find a new use for the plant and committed to building and financing 70 megawatts of new solar power generation, enough to power more than 14,500 homes.

The company said the facility will now control Apple’s global networks, employ about 150 permanent workers and run on 100 per cent renewable energy. Construction is expected to begin next year.

See also Real Estate Daily News February 15 

 




Turning Closed Apple Mesa Facility into $2 Billion Data Center

Apple’s-new-data center-at the-former-First-Solar-plant-in-Mesa-AZ
Apple’s new data center at  Mesa Gateway in Mesa, AZ (photo Solarthermalmagazine)

$2 Billion Global Command Center Will be One of Apple’s Largest Investments

PHOENIX AZ— Apple said Monday it will invest $2 billion over 10 years to open a data center in the Phoenix suburb of Mesa that will be the company’s fifth in the U.S. and serve as a control facility for its global networks, one of Apple’s Largest Investments.

The announcement comes four months after an earlier Apple plan for the 1.3 million-square-foot Apple Mesa facility purchased in 2013 failed.

The tech giant had a deal with Merrimack, New Hampshire-based GT Advanced (GT) to use the plant to make sapphire glass for its products, but GT declared bankruptcy in October after production issues developed. After the GT failure, Apple said it would work to find another use for the plant.

In a written statement, Gov. Doug Ducey announced that the facility is expected to employ 150 full-time Apple employees, with 300-500 construction and trade jobs. Additionally, Apple is making a significant investment to power the facility with 100 percent renewable energy — building and financing solar projects that will take advantage of Arizona’s excellent solar resources. The projects will produce 70 MW of clean energy, enough to power more than 14,500 Arizona homes.

Arizona lawmakers are not taking any chances, making sure Apple’s planned data center qualifies for tax breaks for energy use and a farm of solar panels that will be used to power the $2 billion facility.

State Senate President Andy Biggs and other Republican legislators introduced Senate Bill 1468 Tuesday in Phoenix. The bill adds “international operations center” to a list of qualified business activities that can receive state and local tax breaks for energy consumption and renewable energy use.

The Arizona Legislature ushered through similar tax breaks last year when Apple planned a 700-worker sapphire glass plant at the same building. That measure was geared toward manufacturers.

The state created a Foreign Trade Zone in Mesa for Apple. That means the technology giant pays a 5% property tax rate instead of 18% like most other businesses. Apple was slated to get $10 million from a state business recruitment fund for the failed sapphire glass plant. But, that incentive never happened because of GT’s demise.

Apple is not asking for a similar incentive for the new data center but it appears Arizona lawmakers just aren’t taking any chances.




Smaller Industrial Tenants Driving Absorption in Phoenix’s Recovery

Jones lang lasalle logoJones Lang LaSalle is reporting in its Q1 industrial report that despite seasonal lay-offs, Phoenix has recorded another month of steady job gains. The Valley added 43,000 new jobs over the last 12 months, a 2.4 percent annual gain. The trade, transportation and utilities sector added 8,400 new jobs, a testament to growth in retail operations across the valley. Manufacturing employment continues to falter with a loss of 1,500 jobs over the last year. Intel’s new 2.2 million square foot manufacturing facility in Ahwatukee/ Chandler was completed this quarter, but currently stands vacant. However, with improving economic conditions in Phoenix, and the additions of large companies such as Apple to the Valley, expect manufacturing to rebound over the next few quarters.

Leasing activity in the first quarter was primarily driven by smaller tenants between 25,000 and 50,000 square feet. Smaller companies are much more sensitive to local economic conditions and as a result, are growing with Phoenix’s recovering economy. The housing market is beginning to stabilize in Phoenix with smaller increases to the median price, but related companies such as those involved in cabinetry and carpentry are reaping the benefits of the housing market’s quick rise.Other companies involved in retail and entertainment are also seeing increased consumer demand and as a result are expanding their operations into larger footprints across the valley.

2013 saw industrial construction get ahead of absorption leading to incremental increases in the vacancy rate as the new product had trouble finding tenants. However, despite this spike in construction in 2013, Phoenix is on track to fill its new space as activity from users begins to pick up.

Leasing activity

Southwest

  • CFA Cabinetry expanded into 63,840 square feet at 420 S 53rd Avenue
  • All Pro Industrial leased 21,596 square feet at 2939 W Culver Street

Tempe

  • PetClub, a growing pet retailer, leased 45,228 square feet 860 W Carver Road
  • Box Smart signed a deal for 28,068 square feet at 1120 W Fairmont Drive

Airport

  • Creative Touch Interiors leased 36,540 square feet at 1002 E University Drive
  • CLARK Security Products also renewed its space this quarter for 25,182 square feet at 2140 S 7th Avenue

Gilbert

  • JumpStreet, an indoor trampoline park, renewed 25,423 square feet at 455 E Warner Road
  • Water Purity signed a deal for 22,710 square feet at 6410 S Sossaman Road

Grand Avenue

  • Express Tow and Salvage leased 23,800 square feet at 3839 W Indian School Road

Tenants in the market

  • Tesla is considering Arizona for a large, new manufacturing facility to produce batteries.
  • Project Knockout, a global retailer, is in the market for 500,000 square feet of distribution and manufacturing space in the Southwest Valley.
  • An undisclosed solar company is close to consummating a 180,000-square-foot lease southwest valley.
  • An undisclosed furniture company is looking for a 200,000- to 300,000- square-foot solution in the southwest valley.

 

Sales activity

  • Cohen Asset Management purchased the 43 Avenue Logistics Center located at 1635 South 43rd Avenue for $21.1 million ($54 per square foot). Tratt Properties was the seller of the 100 percent vacant, 394,776-square-foot property.
  • The 250,796-square-foot Riverside Distribution Center, located at 2225 South 43rd Avenue, traded hand in the first quarter for $13.2 million ($53 per square foot). Prologis sold the property when it was 44.0-percent occupied to Exeter Property Group.
  • Meritex Enterprises purchased the Mack Deer Valley distribution Lane from Carlson RE Co. The property was 97.0-percent occupied and traded at $17.7 million ($91 per square foot) center at 21410 North 15th
  • Leclerc Group purchased a 165,000-square-foot warehouse facility in the Southwest valley to occupy. This owner/user purchased the building from Leggett & Platt for $7.6 million ($46 per square foot).

Construction activity

  • Intel finished construction on its 2.2 million-square-foot manufacturing fab in Ahwatukee/Chandler in the first quarter. Unfortunately, due to the fast moving nature of the semiconductor industry, the fab currently stands vacant. Intel has outlined intentions to adapt the facility to manufacture newer chips.
  • The WinCo Warehouse is under construction and expected to be delivered in the second quarter this year. The 800,000-square-foot facility will act as a distribution hub for WinCo Foods.
  • The Buckeye Business Center is also under construction and will add 697,049 square feet of industrial space to Phoenix’s inventory. It is still 100 percent available to any interested tenants.
  • Turner Spectrum Ridge broke ground last quarter and is moving along with construction on several new industrial properties in Deer Valley. A total of eight free-standing buildings will add 120,169 square feet to Phoenix’s inventory.

For complete reports see JLL Phx Q1 2014 Industrial Outlook and JLL Phx Q1 2014 Industrial Statistics.

Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services. Jones Lang LaSalle’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities.

Contact Jones Lang LaSalle in Phoenix at (602) 282-6300.