VIRGINIA BEACH — The state’s largest arena could now be built with American money and without a required amount of Chinese steel.
United States Management LLC announced Tuesday it will borrow $200 million from B.C. Ziegler and Company, a Chicago investment bank, to finance its planned 18,000-seat sports and entertainment facility at the Oceanfront. It will also spend $10 million of its own on the project.
The move is a reversal from USM’s earlier plans to pay for the arena with $170 million from the government-owned Export-Import Bank of China and $40 million in equity. It also removes a condition that the facility be built with a certain amount of Chinese construction materials, such as steel, which was one of the most common criticisms of the project at public hearings.
“We didn’t put all our eggs in one basket and we’ve been looking for this alternative for some time,” USM President Andrea Kilmer told the City Council. “This alternative was not available in the investment market three years ago or even two years ago,” which was when the city and USM began to negotiate.
The lender switch will not affect the construction timetable unless there are further snags, Kilmer said. USM wants to break ground by the year’s end, open the arena by late 2018 and attract an NHL or NBA team sometime after that.
The City Council will have to approve the project’s new financial structure for USM to move forward with it because the old one was part of an agreement the developer signed with the city late last year.
While the changes could save both the USM and city “millions” because of rate changes and formula adjustments, Kilmer described edits to the original 400-plus-page-long agreement as “minimal.”
“We’re asking for a change to basically one page,” she said.
Several councilmembers received the Kilmer’s presentation warmly and some praised it.
“I think this is really a good news story,” said Councilman John Uhrin, who represents the Oceanfront.
A public hearing on the updated financial details is tentatively scheduled for July 5 and the council could vote on the measure as early as July 12.
USM has been working to beat a September deadline to obtain financing for the project since the City Council approved its plans in early December.
USM alone will be responsible for paying back the Chicago bank, under the proposal.
The city did not agree to fund the arena when negotiating a non-binding agreement allowing USM to build, operate and own the Oceanfront entertainment complex.
Instead the city pledged to divert all taxes collected at the arena and one-eighth of the hotel tax generated citywide during the next 30 years to developers. Those payments are designed to help USM pay off its financing and have been predicted to hover around $3.2 million each year, eventually totaling an expected $96 million, according to the original arena deal. The payments will remain capped at $476 million under the proposed changes.
The city also has agreed to spend $76.5 million improving infrastructure where the arena is proposed to be built, near 19th Street and Jefferson Avenue and across from the Convention Center.
After 60 years of operation, when the property lease is up, the arena will become public property.
Miyun Cho Fellerhoff, managing director and practice leader of Ziegler’s General Municipal and Structured Finance team, said in a statement the bank is “extremely excited to be involved.”