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Arvato Digital Services, LLC

Project Number: 20201002
Pilot Type: Expansion
Status: Approved
Parcel ID: 094100 00304
County Commission District: | City Council District:

Summary

Arvato Digital Services LLC (“Applicant”) was approved for an 11-year Expansion PILOT to enable the company to retain 180 existing positions and create six net new positions with a combined average wage of $55,998 and invest $30,257,475 to purchase and expand a distribution center at 3303 East Holmes Road (“Project”). While Arvato is new to the Memphis market, this Project is designed specifically to provide service to Smith + Nephew and is therefore being evaluated under the EDGE Expansion PILOT Policies and Procedures. Applicant and Smith + Nephew will enter into a third-party logistics service agreement for the Project that will have a term of at least as long as the benefit provided in this term sheet, subject to typical performance obligations.

Smith + Nephew currently owns and operates 3303 East Holmes Road, employing 180 warehouse and distribution employees at an average wage of $42,570 a year. Smith + Nephew plans to sell 3303 East Holmes Road to Arvato, then lease back and operate the existing space as it does today through a transition period ending on or about September 30, 2021 under the terms of IDB PILOT #20010302.

All existing PILOT Leases with the IDB related to 3303 East Holmes Road will be terminated on or about September 30, 2021 when operations transfer to Arvato. PILOT #20010302 will be amended, reducing the total jobs commitment from 1,839 to 1,659.

New PILOT leases will be created on or about October 1, 2021, providing benefit for real property improvements at 3303 East Holmes Road that exceed the current 2020 appraised value. All new personal property at the site up to limits provided by EDGE Expansion PILOT Policy will be included.

The new Arvato operation will maintain no fewer than 186 jobs with an average wage of $55,998.

The total Project investment includes purchase of the existing property for $10,500,000, construction of a 105,000 square foot expansion at a cost of $7,790,437, and $11,967,038 in new personal property.
Parcel 094100 00304 (3303 E. Holmes Road) is 34.162 acres and contains an existing 209,916 square foot warehouse.

Both real property improvements and new personal property located on this parcel will be included in the PILOT. Real Property PILOT benefit will only be extended to the value of the building created above its current value of $5,077,100 as appraised by the Shelby County Assessor of Property’s office.

Arvato is a third-party logistics service provider operating in 85 global locations with nine in the United States. Services include warehousing and distribution, freight and customs management, financial services, and customer support. The company is the top fashion e-commerce provider in the European Union and has been expanding into healthcare sectors. The company is a wholly owned subsidiary of the Bertelsmann Group, a Germany-based conglomerate with more than 126,000 total employees and annual revenues of $21 billion.

Smith + Nephew is a global medical technology business that produces a range of devices and wound therapies. The company has maintained a presence in Memphis since acquiring the Richards Medical Company in 1986. Today, the orthopedics manufacturer employs more than 1,800 people in Memphis.

Arvato has been evaluating locations throughout its network to provide contract warehousing and distribution services to Smith + Nephew, including Atlanta and Louisville. This PILOT will allow the Applicant to acquire the property, provide continuous operations through a transition period, expand and modernize the facility, combine Smith + Nephew’s Memphis and Atlanta distribution into one location, while maintaining Memphis jobs, adding new positions and increasing wages.

The location currently produces $71,770 in City and County property taxes. Estimated annual property taxes will be $285,558 during the PILOT term and $562,870 after. Staff projects $10,924,857 in total local tax revenues to be received during the PILOT term of this Project and a $3,620,137 benefit to the Applicant.


PILOT Term:

11

Projected New Jobs:

6

Projected Retained Jobs:

180

Total Jobs:

186

Projected Average Payroll of New Jobs:

$55,998

Projected Average Payroll of Retained Jobs:

$55,998

Annual New Direct Payroll:

$335,988

Annual Retained Direct Payroll:

$10,079,640

Total Capital Investment:

$30,257,475
Real Property Investment:
$17,625,000

Personal Property Investment:
$11,967,038

Community Reinvestment Credit (CRC):
$665,437

Capital Investment not in PILOT:
$186

Projected Tax Revenue:

$10,924,587

Projected Taxes Abated:

$3,620,137
City: $1,596,734
County: $2,023,403

Benefit/Cost Ratio:

3.02

Projected MWBE/LOSB Spending:

$2,324,270

Incentive Provided:

$3,620,137

Compliance Information

Not applicable

Approved

10/21/2020

Ramp up Period

2

Closing

Not applicable

Effective

Not applicable

Lease Begins

Not applicable

Lease Expires

Not applicable

Amended

Not applicable

Property Details

Lease Began

Not applicable

Lease Expires

Not applicable

Arvato Digital Services, LLC

3303 East Holmes Road, Memphis, TN 38118