Today, our company filed a lawsuit against the City of Virginia Beach for damages caused by the City’s refusal to honor its legal commitment to our firm and the many others who worked tirelessly over the past four and a half years to bring a world- class entertainment and sports arena to our community without the need for public financing. It asks for $140-million to recover development and financing costs incurred and lost future profits.
It was the last thing we wanted to do. For the good of all Hampton Roads, we wanted to build an Arena.
Following the submission of our proposal in February 2014, City Council voted unanimously to move forward with our team, mainly because of our proposed method of development and financing the project. In December 2015, after much negotiation, we entered into a binding legal agreement with the understanding and expectation that both parties would work in good faith to fulfill their respective responsibilities.
As anyone who has followed this project knows, we have engaged the public extensively throughout the project and made modifications to our development plan to address the public and City Council’s concerns and expectations. After the City denied the bond financing that they had previously encouraged, we secured a commitment letter in an astounding four-month timeframe from the largest lender in the nation, J.P. Morgan Chase, to meet a City-imposed deadline of March 8, 2017, a deadline that most industry observers thought we had little or no chance of meeting.
We were given a deadline of 11:59 p.m. on November 7, 2017 to close on the construction loan. With so many attorneys and other professionals involved, it took until the last day to finalize. We needed every hour, but the City and its lawyers, to our astonishment, decided at noon that day, “without legal authority or justification,” as it states in our suit, to “not perform its obligations to convey the project land to the Virginia Beach Development Authority, nor execute and deliver the last few documents required of the City by the Development Agreement.”
Later that afternoon. Council held a closed executive session and then in open session later, voted to terminate the Development Agreement if we did not close on the loan by 11:59 p.m. We understood that deadline, and at 10:36 p.m. J.P. Morgan confirmed in writing that the loan was closed. At 11:06 p.m., we provided a fully executed Credit Agreement and Accounts Agreement to the City. Despite proof of the loan closing, the only contract requirement of our company on November 7, the City sent us a letter very first thing in the morning on November 8, stating the contract with MAA was terminated. We have asked for a full explanation as to what information was provided to City Council during its closed deliberations in support of their decision to terminate but have been told there were no documents shown or notes taken.
Mayor Will Sessoms told The Virginian-Pilot that the Developer did not have the required $70-million of equity in the banks as of 11:59 p.m. on November 7, despite the fact that there is no requirement to do so in any of the legal documents. That said, J.P. Morgan would not have closed on the loan if it did not have all the equity accounted for to its satisfaction. Indeed an email to that effect from J.P. Morgan had been forwarded to the City earlier that day.
We spent many millions of dollars of our own money and over four years of hard work to assemble a world-class development team to meet the City’s long-stated dream to enhance its reputation and economic well-being as a prime visitor destination. We anticipated, as did several studies the City conducted, that the Arena would be a financial success, worthy of our resources and those of our outside investors. That opportunity is sadly gone, likely forever.
Beyond the damage to our company’s earnings and expectations, the harm to our reputation has been equally significant. By pulling the rug out from under us at the last minute, Virginia Beach broke faith with not only our development team, a local prestigious University, and the many organizations that supported our project, but also the citizens of Virginia Beach. We are saddened for the citizens of the region who were excited for the employment opportunities and anxious to attend concerts, family shows and sports events here.
The City’s decision, which to our many supporters in Virginian Beach and around the region, appears to be capricious and contrived to shift money to other projects in the resort area, and sends a poor message to other private developers considering financial partnerships with Virginia Beach.
Mid Atlantic Arena LLC greatly desired to bring an Arena to Virginia Beach, not a lawsuit, but since that is now impossible, we have no choice but to ask the courts to help us recover our significant investment, as well as lost future revenue, and rebuild our standing, which has been considerably impaired by the City’s breach of contract.