Virginia Beach Arena Financing Proposal June 28, 2016 Andrea - PowerPoint PPT Presentation

Virginia Beach Arena Financing Proposal June 28, 2016 Andrea Kilmer, USM

Our Vision Create a flexible, state-of-the art venue that: • Serves as an iconic symbol for the City, Region, & State • Offers events for everyone • Creates memories of a lifetime • Creates jobs and business • Draws major acts and top tier events • Year-round playground The time is now. The place is Virginia Beach. 2

City Economic Impact 2,300 $240M Salaries + Materials/ Services New Jobs New Spending Construction Impact 3 The time is now. The place is Virginia Beach.

City Economic Impact $111M 65,500 $15M $1.7B 440 + 20-Year NPV New Jobs New Room Salaries Net New Nights Spending Annual Operations Impact 4 The time is now. The place is Virginia Beach.

What Remains the Same • Everything, except the lender and loan structure • All previously negotiated agreements (with changes on 1 page out of over 400) • Fundamental business model and market analysis • City incentives • Privately financed and locally owned • Highly qualified, experienced team • Minority participation 5 The time is now. The place is Virginia Beach.

What Changes • Lender will be a US Investment Bank • Loan structure • 2 clauses on 1 page of the Development Agreement 6 The time is now. The place is Virginia Beach.

Main Benefits of Proposed Financing Change • Domestic Alternative to Chinese Loan  Addresses any perceived security concerns  Removes procurement requirement  Removes political volatility • Accelerated Development/Opening  2016 ground breaking/2018 grand opening • US Bank Trustee administrates Loan Proceeds • No balloon payment or interest rate risk in year 15 • Early pro sports team potential

Plan of Finance • Taxable Municipal Bond – Known Finance Structure • U.S. Investment Bank  Large Institutional Investors • Bond Proceeds will be limited to use for the Construction Contract, related Cost of Issuance, and required Reserves and Escrows • No Developer Fees or cost to date reimbursement • USM fully responsible for the debt • Bonds repaid by same revenue streams as current Agreement – 1% of Hotel Tax and “But For” Taxes – Payments from Arena Operations • VBDA may serve as the Conduit Issuer – No obligation and no recourse to VBDA, City, or State – Same role it plays for other private entities, such as Westminster Canterbury – Annual fee revenue

Proposed Change in Terms • Type of lender/form of commitment • USM’s debt to equity ratio will change  Loan will fund full Construction Contract  Debt payments likely to decrease based on current market  Payment Cap of City incentives cannot increase and will likely decrease  Equity contribution estimated to be $10 million

4.3 Loan Commitment . Developer will use commercially reasonable efforts to obtain and deliver to City an executed copy of a loan commitment or bond purchase or placement agreement with the VBDA or other appropriate entity serving as a conduit issuer (the “Construction Loan Commitment”) from an Institutional Lender committing to provide construction and permanent financing (a “ Construction Lender ”) to Developer (the “Construction Loan”) adequate to construct the Arena Improvements and fulfill Developer’s other obligations under the Transaction Agreements, subject to customary lender requirements and conditions. City will have the right to approve the Construction Loan Commitment and the documents ultimately evidencing and securing the Construction Loan (the “Construction Loan Documents”) which approval right for purposes of this Section 4.3 shall be limited to the right to approve those terms and provisions of the Construction Loan Commitment and the Construction Loan Documents which concern (i) funding mechanisms and reasonable assurances that any overseas lender will fully fund the Construction Loan, (ii) protections and cure rights of City and the Construction Lender in the event of a Developer default under the Construction Loan and/or Transaction Agreements, (iii) City Credit Rating Concerns, and (iv) verification that the plan of finance will fund no more than (1) one-hundred percent (100%) of the fixed price of the Construction Contract and A & E Contract, (2) costs of the financing, and (3) required reserves and escrows, without inclusion of any reimbursement to Developer for other costs incurred or payment of any developer fee general consistency with the debt, equity and loan term structure outlined in Developer’s proposal and pro-forma submitted to the City and the Term Sheet. Such approval shall not be unreasonably withheld, conditioned, delayed or denied. 10 The time is now. The place is Virginia Beach.

City Protections City retains the right to review: • Funding Mechanisms and Assurances • Protections and the Right to Cure, but not the obligation to do so • City Credit Rating Implications

Future Vision (Strategic Growth Area) 12 The time is now. The place is Virginia Beach.