VOL. 130 | NO. 181 | Thursday, September 17, 2015
Developers Threaten to Pull Out of Mall of Memphis Site
By Madeline Faber
Developers of the former Mall of Memphis site were again delayed as the board of the Economic Development Growth Engine tabled a vote on a payment-in-lieu-of-taxes benefit for the speculative industrial site.
The future of an industrial park at the 113-acre former Mall of Memphis site remains in question after a tax-incentive application was delayed for a second time.
Developers Huntington Industrial Partners and Johnson Development Associates were met Wednesday, Sept. 16, with the same answer they received at last month’s EDGE meeting. According to the developers, the $24 million tax abatement will allow them to attract industrial tenants that are being courted by North Mississippi’s state-of-the-art industrial parks. According to EDGE’s application analysis, PILOTs were created to fuel job growth, and the outcome of development without a set tenant is ambiguous.
What will happen at the next EDGE meeting also is ambiguous.
David McDaniel, principal of Huntington Industrial Partners, said that a delay will be interpreted as a ‘no,’ and his company will have to sell the 113-acre property, which JDA bought in 2012 for $2.7 million. McDaniel added that he’s received an offer from a trucking company that wants to to buy the property in a deal that would bring fewer jobs and less tax revenue.
Younger Associates, who analyzed the project for EDGE, projected that the 1.1 million-square-foot site could house as many as 851 jobs with an average salary of $60,600 and create $44 million to $66.5 million in new tax revenue.
McDaniel admitted that the application is unusual but he also proposed it as exceptional because of its potential to jumpstart Memphis’ industrial border. There hasn’t been any new speculative construction within Memphis’ city limits in eight years, he added.
With an approved PILOT, McDaniel said that construction would begin by the first quarter with buildings in place by the second quarter. The three-phase project encompasses five buildings made up of 70 percent logistics and 30 percent warehouses and light manufacturing.
While a speculative PILOT has never been given before, McDaniel pointed out that Ikea broke EDGE’s policy of not giving PILOTs to retailers.
“Let’s see how it goes, and you can build a policy later,” he said.
While the motion to delay the vote was approved (Johnny Moore declined to vote due to a conflict of interest and Larry Jackson voted against the motion), several board members stated they were interested in developing an alternative program.
Tom Dyer is committed to making the project work and put forth the motion to delay the vote another month. Deirdre Malone said that she would vote in favor of the PILOT today but stated another month was needed to figure out the variables in a favorable way.
“My hope is that you don’t do something else and give us those 30 days,” she said.
EDGE CEO Reid Dulberger and others added that the group would have to follow up with the developers and gauge how willing they are to look at other options.
The motion was a win for Steve Guinn, vice president of Highwoods Properties. Prior to the vote, he presented a counter view on behalf of an alliance of commercial real estate players believing that giving the developers a PILOT would have unintended consequences and create an unfair marketplace.
“It effectively turns the PILOT program from a job creation program to what I'm going to call a lease-up program,” he said. “Effectively, you’re kind of throwing out the rules.”
He added that there is more than 1,000 acres in the submarket that is zoned for industrial; giving a PILOT to a developer, rather than a company, would open the floodgates.
The board will approach the PILOT application again on Oct. 16.