GTECH Corp.’s decision last week to rebuff advances by Massachusetts officials and locate its new corporate headquarters in downtown Providence marked a major economic-development coup for the capital city as well as the state of Rhode Island.
The development also underscores the commitment to Rhode Island of another corporate heavyweight: Amgen Inc., which plans to acquire GTECH’s existing headquarters in West Greenwich. The California-based biotechnology giant – which already is pouring $1 billion into two large plants nearby – presumably wants the space for yet further expansion of its cell-culture manufacturing capacity, which would likely mean hundreds more jobs for the state.
At an April 9 press conference, state officials outlined an intricate deal forged with GTECH that will keep the lottery systems company in Rhode Island for at least 20 years. Its $65 million, 265,000-square-foot global headquarters will be built on “Parcel 9,” at the northeast corner of Francis Street and Memorial Boulevard, across from Providence Place mall. It will be the first major office building built downtown in 13 years.
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Company officials said they hope to break ground this summer and complete the building within two years. GTECH intends to ink an agreement this week with Amgen to sell its West Greenwich headquarters, the terms for which had not been disclosed as of late last week.
GTECH also will build a $20-million, 250,000-square-foot manufacturing facility in West Warwick at the West Warwick Industrial Park adjacent to Interstate 95. The company also will commit, beginning in 2008, to maintain at least 1,000 full-time jobs. Its existing Rhode Island work force now totals 830 employees.
Under the agreement with the state, GTECH will invest $140 million to upgrade the state’s video lottery hardware and software over 20 years. The incentive package also includes a $12.5-million up-front payment to the state, and the company also will contribute money toward a new parking garage and support the development of a new hotel downtown by committing to thousands of room-nights each year. Details of that investment and the nature of those projects have not yet been outlined.
The state’s incentive package, which also includes a string of sales – and property tax breaks, still requires the General Assembly’s approval, as well as an agreement with the Rhode Island Lottery Commission.
The deal – in negotiations for months but hammered out only in the several days leading up to the announcement – is a major victory for the economic-development efforts of Gov. Donald L. Carcieri and the Rhode Island Economic Development Corp., as well as Providence Mayor David Cicilline.
GTECH had been “very close” to accepting what was apparently an equally enticing incentive package from Massachusetts officials to relocate its headquarters to Norton, Mass., according to GTECH President and Chief Executive Officer Bruce Turner. He cited the state’s political leadership and enthusiastic willingness to strike a deal as the overriding factor in the company’s decision.
“This is the beginning of a new start for our whole state economically,” Carcieri said.
It also provides a big confidence boost to the city of Providence. Some observers have said big companies avoided locating in the capital city during former mayor Buddy Cianci’s corruption-plagued tenure, despite the city’s much-touted renaissance.
The state not only keeps GTECH’s nearly 1,000 high-paying jobs, but also seals a long-term commitment from a rapidly growing company, virtually assuring hundreds more jobs and tax-base growth.
GTECH has told investors it plans to spend up to $2 billion over the next five years, primarily for strategic acquisitions, according to Turner. Those acquisitions likely would be absorbed in Rhode Island if they “fit operationally,” Turner said.
The company’s quarterly earnings have consistently breezed past Wall Street estimates, prompting one equity analyst last year to refer to GTECH as “a new high flyer.” Its stock price reached a (split-adjusted) record high of $36.95 a share the day of the big announcement.
With its planned relocation to Providence, GTECH comes full circle, having started in an office above Capriccio restaurant in the early 1970s, based on a single contract from the Rhode Island Lottery. “Being able to return here almost feels triumphant,” Turner said during the press conference.
Turner, who was named CEO for the second time last August, said the Amgen inquiry was the sole factor that prompted GTECH to consider relocation.
“I told people when I arrived that I liked Rhode Island and that I wanted to stay here,” Turner said. “It had not been our intent to move.” GTECH, however, felt obligated to its shareholders to consider the sale to Amgen, he said.
The sale price of the 50-acre West Greenwich site, along Interstate 95, had not been disclosed as of late last week. The building, constructed in 1990, has an assessed value of $11 million, according to the town of West Greenwich. Real estate experts say the price tag for the GTECH property could exceed $30 million.
GTECH officials have not disclosed a timeline for GTECH’s relocation, although Turner said Amgen’s need for the headquarters building is “virtually immediate,” and GTECH will require temporary office space in Warwick while its Providence headquarters is under construction.
GTECH employs 4,200 workers worldwide and has contracts with more than 80 customers around the world – primarily national lottery systems.
Its annual revenue is roughly $1 billion and its market capitalization has grown to more than $2 billion following the appreciation in its share price over the past two years.
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