Details emerge on Virginia Beach arena; venue could open in 2018

VIRGINIA BEACH – Private developers told the City Council on Tuesday they hope to open a long-proposed 18,000-seat arena at the Oceanfront in 2018, pending approval of a tentative agreement.

Afterward they told reporters a professional sports team — potentially one that plays hockey — might one day call it home.

The announcement comes nearly two years after negotiations began and a day after Mayor Will Sessoms said those discussions concluded. New details were presented and revealed in scores of records during the meeting.

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Arena rendering. The Virginia Beach Convention Center is on the left. (Courtesy of www.esgco.com)

The deal with developers calls for United States Management LLC to lease 5.8 acres of city land near the Virginia Beach Convention Center for 60 years, beginning once construction is complete. USM will also have rights to the surrounding 40 acres and will sell the arena’s naming rights.

Under the final terms, USM will build, operate and own the 500,000 square-foot arena, which would be capable of holding 15,000 people for concerts and events, and 18,000 seats for a pro sports team, according to a summary of the transaction. USM will spend $200 million, the deal says. About $170 million will come from an unnamed Chinese bank.

When the 60-year lease is up, the arena will become city property.

An artist's rendering of the proposed sports and entertainment arena in Virginia Beach. (Photo Courtesy City of Virginia Beach.)
An artist’s rendering of the proposed sports and entertainment arena in Virginia Beach. (Photo Courtesy City of Virginia Beach.)

The city’s half of the agreement requires it to use about $76.5 million from a special tourism fund to improve infrastructure at and around the arena site. It also says the Beach will grant USM a 30-year incentive package that includes sending all tax revenue generated at the arena to USM and allowing it to collect one-eighth of the hotel tax in the city. The portion of the hotel tax is estimated to be about $3.2 million annually.

A summary of the deal says the arena “will be comparable in fit, finish and quality to existing arenas” in Tulsa, Okla.; Lincoln, Neb.; and Jacksonville, Fla.

There will be a public presentation of the deal at 6:30 p.m. on Nov. 19 at the Convention Center, and a public hearing will be held at the council’s Dec. 1 meeting. Sessoms said the council wants to hear if citizens support or oppose the deal, but the terms cannot be amended because of the deal’s complexity and reliance on the private sector.

An earlier version of the plan called for USM’s lease to expire after 40 years, after which the arena would be turned over to the city, but that timeline was extended after the developer’s lender, an unnamed Chinese bank, expressed concerns about the developer’s ability to refinance its debt after 30 years, said Andrea Kilmer, who is leading USM.

Other newly released details shed light on solutions to one of the project’s more contentious side-effects: parking.

When constructed, the arena will reduce the Convention Center’s available parking and potentially compete with that venue for the remaining spaces.

To prevent and solve potential disputes over that situation, the city will create a supervisory committee, replace lost spaces and provide an additional 2,700 parking spots off-site for events that draw more than 6,500 people. It will also allow arena visitors to park at any city lots or garages at the resort area between Oct. 1 and May 15, according to a summary of the deal.

The arena must host at least 20 events with at least 7,500 attendees each year and sell at least 450,000 tickets annually, according to the agreement. If it fails to do so for two consecutive years, the city can terminate the lease and take ownership of the arena.

Kilmer noted after the briefing that USM has “definitely had some discussions” with pro teams to play their home games in the arena. If one did, it would almost certainly meet a large chunk of USM’s minimum yearly attendance requirements.

Kilmer would not say which teams they have talked to or give a timetable on those discussions, but she hinted at which sport the developers are targeting.

“We are designing the arena in a hockey configuration,” she said, adding later that such a layout will make the arena capable of hosting basketball games as well. Sessoms has previously expressed hope the arena could host the Atlantic Coast Conference men’s basketball tournament.

The City Council is scheduled to vote on the deal Dec. 8 after the public has a chance to comment on it. Sessoms sounded confident Monday that the deal would find the nine votes it needs to pass, but at least one councilmember has strong reservations.

Councilwoman Barbara Henley said Tuesday she had “major concerns” about some of the final agreements, including the effect on parking and the fact that the Chinese lender has not been named. Kilmer said later that some city officials know who the lender is and that the public soon will, too, after the bank approves the deal on its end.

But Henley’s “big hang-up”  is what she the called the “sleight of hand” the city is using to work around a law that bans cities from granting lease terms longer than 40 years. The city plans to transfer the land to the Virginia Beach Development Authority, which will execute the lease and then return the land to the city, according to summaries of the deal.

Henley said she will try to keep an open mind, “but right now, I’ve got this as a major concern that someone has to make me very comfortable with for me to support” the deal.

Councilman Bob Dyer said he is not typically a fan of public-private partnerships, but “I am jazzed on this one.”

The project’s “tangible benefits” are not the arena “per se,” he said, but the message it sends to other developers who could come in after and stimulate economic development at the Oceanfront and across the city.

Councilman John Moss added that he supports the deal as well.

 

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