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Firm Seeks to Build $225M Arena Without Public Funds

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The Virginian-Pilot(Norfolk, VA.)

RICHMOND — A Virginia Beach development company expected to submit a proposal to build an entertainment and sports arena near the Oceanfront will not ask for public funding.

The proposal from The ESG Cos., expected to come within the next two weeks, will call for building the arena with private financing and likely with backing from partners overseas, Virginia Beach Del. Ron Villanueva said.

An 18,000-seat facility, envisioned to house sporting events, religious conferences and shows, will cost about $225 million to build, city lobbyist Bob Matthias said.

"This is what you want," Villanueva said. "You want a private entity to come in here and say they can do it rather than relying on state or local taxpayer money."

Although Villanueva said he hasn't seen the draft, he has shopped the opportunity to partner with ESG to foreign investors who have expressed interest in the project. He said he couldn't discuss specifics of the plan, but in the past year he has been on trade missions to the Philippines and hosted Beach visitors from Nigeria.

Those meetings were not focused on the arena but on business opportunities in Virginia Beach in general, Villanueva said. He said he has a longstanding relationship with ESG and is not being paid for his help.

"My job is to help promote our community and our region, and this is a viable opportunity," he said.

ESG's proposal isn't expected to ask anything of taxpayers upfront, but it could benefit from pending legislation that would allow the city to remit sales tax revenue generated by the arena to a private developer. Those taxes - paid on things such as ticket and popcorn sales - would help repay the cost of building the facility and would apply only if the city leases land or contributes infrastructure, such as sidewalks, for the project.

A similar arrangement is in place for other venues in the state, said Sen. Frank Wagner, a Virginia Beach Republican who is carrying the Senate version of the bill. Allowing it for an arena will make the project more attractive to potential investors, he said.

"It's just another tool in the toolbox so that we can get as much competition as possible," Wagner told the Senate Local Government Committee, which approved the bill last month.

The full Senate is expected to vote on the measure this week. The House is similarly on track to take up its version by Del. Barry Knight, also a Virginia Beach Republican.

Because of his connection to the project, Villanueva did not carry the legislation and said he will abstain from voting on it.

Villanueva last year successfully championed a bill giving Virginia Beach the authority to issue bonds to pay for its share of an arena project and repay them using sales tax revenue.

That wouldn't be necessary under ESG's proposal, which will be in concert with Virginia Beach's S.B. Ballard Construction Co. But it would be needed if Beach officials go with a plan - such as that from W.M. Jordan Co., one of the region's largest construction firms - that wants the city to cover some of the costs.

The entire financing formula for W.M. Jordan's plan, which was submitted in November, has not been made public, but it asks for a "substantial equity contribution" from the state and a possible city match on the investment from partner Global Spectrum. In return, Global Spectrum would pay "substantial rent" for 25 years.

It's unclear whether the General Assembly would allocate money for an arena, but lawmakers have been lukewarm on the idea when approached in the past. The city has not asked for any state money for the project this legislative session.

The original arena plan from Comcast-Spectacor, a Philadelphia-based sports and entertainment company, wanted $150 million from the state and $241 million from the city. With private funding, the total price tag of about $426 million was far more expensive than the newer proposals in part because it included the costs of relocating a pro basketball team to anchor the facility.

Negotiations to enact that plan flopped early last year.

Global Spectrum, a division of Comcast-Spectacor, and HKS Architects, which was behind Cowboys Stadium, are backing the proposal from W.M. Jordan, which lists Virginia Beach hotelier Bruce Thompson as a consultant.

A third proposal - in addition to the one by W.M. Jordan and the one anticipated from ESG - has also been rumored. The city hasn't received anything yet, city spokeswoman Mary Hancock said. The deadline is in mid-February.

"I'm sitting back waiting because we can't do anything until we know what the proposal is," Beach Mayor Will Sessoms said.

Kathy Adams, 804-697-1563, kathy.adams@pilotonline.com

 

February 3, 2014

 

 
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