NEWS

Developers Plan To Borrow $200M From Chicago Bank To Build Virginia Beach Arena

Wednesday, Jun 29, 2016

Looks like China is out and Chicago is in.

The developers of a $210 million arena near the Oceanfront say they are pursuing a new source of financing, and this time, it’s from an American bank.

United States Management announced Tuesday it had obtained a preliminary commitment from B.C. Ziegler and Company, a Chicago investment bank with experience in the health care and senior living sectors.

“It’s a made-in-the-USA loan alternative,” USM President Andrea Kilmer told the City Council on Tuesday.

USM said last year that it had planned to privately finance the project on 19th Street with a $170 million loan from the Export-Import Bank of China, in addition to using $40 million in private equity. However, closing the deal was “difficult because of distance, language and other constraints,” Kilmer said.

“We’ve kept our ear to the ground,” she said. “We’ve kept all our options open.”

Switching to a domestic bank, Kilmer said, addresses “perceived security concerns” from the public and protects the project from international political uncertainty.

“We’ve seen what’s happening around the world,” she said in reference to Britain’s vote last week to leave the European Union.

Under the new terms, B.C. Ziegler would finance $200 million and USM would be on the hook for $10 million. There would be no more requirement to use Chinese materials, as was the agreement with the Export-Import Bank of China.

The deal with Ziegler means a lower interest rate than the 6 percent expected with a Chinese loan. The exact rate has not been decided, but it could be around or lower than 4.5 percent.

“Who would’ve thought last week that this week, interest rates couldn’t go even lower?” Mayor Will Sessoms asked. “If you’re asking me where the opportunity is for everyone, it’s about these rates.”

The agreement with the city, which includes funneling tax revenue generated by the arena back to the developers over 30 years or more, would not change except to switch the name of the lender and the loan structure, Kilmer said.

Council members seemed pleased with the opportunity to obtain American financing.

“This was a major, major factor,” Councilman Bobby Dyer said about the new lender.

The council, which will hear more about the project in closed session next week, could vote on an updated agreement as early as July 12. Kilmer asked the council to vote quickly so the team from Ziegler won’t get pulled off on another project.

“They’re working on it around the clock. My emails are pinging all night long,” she said. “And they’re not from China.”

If the council approves it, construction could start by the end of this year – a step Kilmer said needs to be taken before negotiations can be hashed out with professional sports teams.

“Until you are building a facility, you really can’t get in the conversation,” she said.

The arena, which will take two years to build, could open by 2018 – a year ahead of the city’s deadline.

 

Source : pilotonline.com

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