Arena Development Proposed Changes to Financial Structure DAVID L. HANSEN, CITY MANAGER SEPTEMBER 27, 2016
Overview Status of Deal City Council Conditions Path Forward
Deal Overview: Then & Now Development Agreement: Proposed Approved December 2015 Amendments Arena 15,500 seats, expandable Unchanged Approximate Cost $200 Million Unchanged Lease Term 60 years, $1 year Unchanged Financing Method Bank Loan-Chinese lender Bond Sale-VBDA conduit, neither City, VBDA nor Commonwealth responsible for payment of debt Amount Financed $170 Million Up to $240 million, includes debt service reserve, capitalized interest during construction period, and costs of issuance Development Team $40 Million >$20 million, including at least $7.5 million Contribution toward cost of construction Arena Fund Payments 1¢ of hotel tax, plus taxes generated at arena Unchanged Maximum of $14.6 M per year for 33 years City Cure Rights in event of Yes, at City’s election Unchanged Developer Default Deadlines for financing, Financing Commitment 11/8/16 All dates extended 60 days construction and opening Closing 9/8/17 Construction 7/8/18 Opening 10/1/19
City Council Conditions Conditions Description Detail Comment Maximum Amount No more than $200 Million for Financing limited to no more Capitalized interest Financed construction or the actual than $ 240M estimated as calculated on step up guaranteed maximum price for follows: basis rather than draw the design-build construction $192.5M Construction Cost down basis. Otherwise contract, whichever is less; plus $ 16.0M Debt Service Reserve Consistent . capitalized interest on a drawn- $ 24.0M Capitalized Interest down basis, debt service reserves $ 7.2M Issuance Costs and issuance costs. $239.7M Previous The amount financed shall not No bond proceeds dedicated to Consistent Expenditures/ include any previously incurred previously incurred expenses. Development Fee expenditures by USM or any No development fee included. development fee payable to USM. Maximum Payment Maximum Payment Cap shall not No change. Consistent Cap change, including the maximum annual payment amounts and the maximum 33 year term of such payments. Feasibility Study A complete independent financial Feasibility Study provided. Consistent feasibility study shall be provided.
City Council Conditions (cont’d) Conditions Description Detail Comment Indicative Rating An indicative rating letter from a No indicative rating letter Proposed modification Letter/ Investment major rating agency shall be provided and bonds to be sold to condition. Grade Rating provided. unrated. The bonds are anticipated to Developer to increase equity carry an investment grade from contribution by $7.5 million to one of the three major rating offset risk of unrated bonds. agencies. City, VBDA and Repayment of the bonds shall not Documented in transaction Consistent Commonwealth not be a general obligation of the documents. obligated to repay City, Development Authority or bonds the Commonwealth of Virginia. City Protections and All previously agreed protections Documented in transaction Consistent Cure Rights and cure rights of the City to documents. remain. Arena Operator SCG AEG
Path Forward Special Meeting and Vote by Development Authority (tentatively October 4) City Council Public Hearing and Vote (October 4) Bond Issuance
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