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IKEA Property, Inc.

Project Number: 20150101
Project Type: Destination Retail
Parcel ID: 096500 00740
County Commission District: 2 | City Council District: 1

Summary

On January 21, 2015, the EDGE Board approved an 11-year PILOT for IKEA Property Inc. (“Applicant”), to assist the company construct a new 270,000 + square foot retail facility at 7807 Interstate 40, Memphis, Tennessee, 38018.

The project is expected to result in 175 new permanent full-time jobs averaging $41,011 per annum, and a total investment of $64,269,000 in real and personal property, start-up inventory, fees and soft costs.

In addition, IKEA was awarded a potential 12th year, dependent on the successful implementation of their Environmental Commitment Plan (“ECP”).

At the time the PILOT was being considered, the tax appraisal value of the 34.57 acre parcel of unimproved land located near the southwest corner of the intersection of Interstate 40 and Germantown Parkway, was $1,250,000.

The tax appraisal value was subsequently increased to $5,089,600, resulting in a projected $1,136,675 cost increase over the PILOT term. While the tax appraisal valuation has now been appealed to the Tennessee State Board of Equalization, IKEA cannot determine the cost of their proposed Memphis facility until that process is complete.

To address this concern, staff recommends amending the real property PILOT approved in January 2015 to provide up to a maximum of 18 additional months of PILOT benefit, to off-set additional costs associated with a final tax appraised valuation in excess of $1,250,000 million that may ultimately be determined. The PILOT Benefit will be adjusted by a monthly increment depending on any valuation in excess of $1,250,000. Based on the methodology in the revised project analysis by Younger & Associates dated November 5, 2015, the number of months needed to off-set additional costs will be added to the end of the PILOT, up to a maximum of 18 months, once the final PILOT land-only real property tax appraisal value is known.

The amended project is expected to create more than $17.5 million of new local tax revenue for Memphis and Shelby County, with $1.64 of new local taxes for every $1.00 of taxes abated.

IKEA is a privately held Swedish home furnishings company founded in 1943 with more than 360 stores in 46 countries. In 2013, IKEA had over 716 million store visitors, catalog distribution to more than 212 million people worldwide in 29 languages, and 1.5 billion online visitors. With US headquarters in Conshohocken, PA, it operates 40 stores in the US with $4.37 billion in sales. There is currently no IKEA presence in Tennessee, Mississippi, Alabama, Louisiana, Arkansas, or Kentucky.

PILOT Term:

12.5 years

Projected New Jobs:

175

Projected Retained Jobs:

Not applicable

Total Jobs:

175

Projected Average Payroll of New Jobs:

$41,011

Projected Average Payroll of Retained Jobs:

Not applicable

Annual New Direct/Indirect Payroll:

$12,211,325

Annual Retained Direct/Indirect Payroll:

Not applicable

Total Capital Investment:

$64,269,000
Real Property Investment:
$31,516,000

Personal Property Investment:
$11,738,000

Community Reinvestment Credit (CRC):
Not applicable

Capital Investment not in PILOT:
$21,015,000

Projected Tax Revenue:

$17,595,951

Projected Taxes Abated:

$10,737,338
City: $5,031,359 (75%)
County: $5,705,979 (75%)

Benefit/Cost Ratio:

1.64

Projected MWBE/LOSB Spending:

$3,437,500

Incentive Provided:

$10,737,338

Compliance Information

Not applicable

Approved

1/21/2015

Ramp up Period

2 years

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

IKEA Property, Inc.

7807 Interstate 40, Memphis , TN 38018