Virginia Beach Sued Over Canceled Arena


VIRGINIA BEACH, VA. (CelebrityAccess) Mid-Atlantic Arena, the developer that was planing on building an arena in Virginia Beach, Va., is suing the city for $165 million after Virginia Beach dumped the project.

The city had been interested in building an arena on its Oceanfront location since 2012 and, in 2014, Virginia-based United States Management proposed building it next to the Virginia Beach Convention Center.

The city approved the privately financed 18,000-seat arena December 2015, at which time United States Management CEO Andrea Kilmer said at a press conference “The NHL currently has two considerations of two potential teams that are on the table right now that they’re going through that process, and so now that we have those approvals we can certainly pursue that more aggressively,” adding that the private company was close to financing with Chinese lenders and expected to break ground at the end of 2016.

Mid-Atlantic Arena became the successor in interest to United States Management. It claims in the lawsuit, filed in Virginia Beach Circuit Court Jan. 16, that the city damaged the developer’s reputation. Virginia Beach’s city council voted 9-1 two months ago that it would not honor Mid-Atlantic’s agreement if it did not get financing in place by a Nov. 7 deadline, according to The Virginian-Pilot, and proceeded to claim the company failed to close on a $150 million loan or prove it had $70 million in investments.

Mid-Atlantic Arena claims in the lawsuit it has worked on the $245 million privately funded project for more than four years, assembled a “world-class team of professionals” to help with finance and design, and invested millions of its own money.

“After the City denied the bond financing that they had previously encouraged, we secured a commitment letter in an astounding four-month time frame 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,” Mid-Atlantic Arena said in a statement.

It was given until Nov. 7 to close the construction loan and it took until the last day to finalize, Mid-Atlantic said.

“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 lawsuit” to not perform its obligations, the statement said.

The developer provided an email from J.P. Morgan showing that it did indeed close the deal Nov. 7 prior to midnight.

“The city pulled the rug out from under the developer, causing a substantial waste of time, money, goodwill and other resources,” the suit claims. “Making matters worse, the city immediately embarked on a public relations campaign to wrongfully blame the developer for the arena’s demise in a blatant effort to control the narrative in the media and divert the public’s attention from the city’s wrongful conduct.”

The developer claims several equity partners, including facility operator AEG, Stephen Ballard of S.B. Ballard Construction Co., and an unnamed university, demanded and received refunds on their contributions. AEG had “agreed to invest tens of millions of dollars in the project and to have a profit-sharing interest” and the suit claims that AEG had contacted the mayor prior to Nov. 7 to notify him that they had entered into an agreement to be facility operator.

“I’m very disappointed to see the lawsuit,” Mayor Will Sessoms told the Pilot. “I’m very confident we will prevail.”

The lawsuit seeks no less than $15 million in expenses, development and financing costs, a $10 million loss in a development fee and $140 million in lost future profits.

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