$10M overhaul planned for Hauppauge building after Microchip move

Microchip Technology Inc. plans to reduce its Hauppauge office footprint by 45% while retaining all 125 employees, a decision that's prompting its current landlord to seek tax breaks for a $10 million renovation aimed at attracting pharmaceutical and life sciences tenants.

The Arizona-based semiconductor company will relocate next year to 73,500 square feet at 878 Veterans Memorial Hwy., which is owned by 878 Lease LLC, a subsidiary of Signature Acquisitions, executives said.

Microchip, which is a public company, currently leases 133,755 square feet at 80 Arkay Dr., or about 67% of the building’s total space.

Rechler Equity Partners, the Arkay Drive building’s owner, recently won preliminary approval for up to $2.5 million in tax breaks from the Suffolk County Industrial Development Agency to support the renovation project. The largest component of the incentive package is $1.8 million in property tax savings over 15 years.

In return, Rechler Equity has promised that the new tenants will employ at least 100 people, with salaries averaging $103,870 per year, according to its application for IDA assistance.

If Rechler Equity fails to meet that employment commitment, it could be required to repay the tax breaks, said Kelly Murphy, the IDA CEO and executive director.

Murphy said there is growing demand for office, laboratory and warehouse space from new pharmaceutical and life sciences firms. 

Long Island does “a really terrific job on manufacturing, but when it comes to the commercialization of products, that’s where we are losing these startups to other places where the cost of doing business is lower,” she said. “What [Rechler Equity] is planning to do — updating decades-old office space and creating research and development space and warehouse space — is needed.” 

A public hearing on the tax breaks will be held Monday at 1 p.m. at the HIA-LI office, 225 Wireless Blvd. in Hauppauge.

Mitchell Rechler, a managing partner at Rechler Equity, said the project could be delayed or become economically unfeasible without IDA assistance because the company is competing with newer buildings in lower-cost regions.

Plainview-based Rechler Equity is Long Island’s largest owner of commercial and industrial properties, with a portfolio totaling 6.5 million square feet, according to property records.

Ted Trias, the company’s acquisitions and leasing director, said the Arkay Drive building will continue to offer a cafe and gym. The building’s remaining 66,000 square feet is leased to advertising firm Austin Williams, lender National Business Capital and information technology firm BMB Solutions, among others.

Microchip is relocating because it doesn’t need all the space it now occupies — but the company never considered moving off Long Island, said Rodney Schroeder, its vice president of front-end operations.

“We are moving to a building that is more appropriately sized for our business operations,” he told Newsday.

Microchip came to Hauppauge in 2012 when it purchased Standard Microsystems Corp. for nearly $1 billion, according to securities filings.

Standard, also called SMSC, was one of Long Island’s biggest public companies. It was founded in 1971 by semiconductor physicist Paul Richman.

SMSC had about 1,000 employees, including 315 at the Arkay Drive office, when it was acquired by Microchip.

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.