Two outstanding companies, both with wonderful ideas have finally given the Virginia Beach City Council something to smile about.
W.M. Jordan Co. and The ESG Companies have put together proposals that should eventually lead to Hampton Roads finally getting that 18,000 seat arena the region has wanted for years.
On Tuesday, ESG a Virginia Beach company founded by Eddie Garcia over 60 years ago, will present to council plans to construct an 18,000-seat sports arena and entertainment complex across from the city owned Convention Center. The deal came together after the company hosted business leaders from China last summer.
Unlike the Jordan proposal which was given to council three months ago, the ESG group will promise to design, build and facilitate the project using all private funds. Although S.B. Ballard Construction Company in Virginia Beach will be involved in the building of the arena, a major player will be Mortenson Construction, which just broke ground on a new NFL stadium for the Vikings in Minnesota. Mortenson is considered one of the largest sports contractors in the nation, and has offices in several US cities as well as Shanghai, China.
China is a major player in the venture. While the Jordan proposal is expected to need equity contribution from both the city and the state, Andrea Kilmer, the CFO of ESG says her project will be built with private money. That statement will have Beach tax payers and council members jumping for joy.
But who would loan ESG some $200 million dollars to build an arena without a major league sports franchise an anchor? A bank in China has agreed to finance the deal. ESG would pay it back over time. Chinese companies invested $14 billion in the US last year, driven by aggressive economic reforms in China, a more liberal policy environment for Chinese outbound investors, and a positive outlook for the U.S. economy. Local company Smithfield Foods was bought by a Chinese company this past September for $7 billion dollars. So a $200 million dollar loan for an arena in one of America’s top resort cities seems like chump change.
But deals that seem too good to be true often are. While the ESG group may not be asking the city to help with construction costs, Virginia Beach taxpayers will be expected to kick in for various improvements. A giant TV screen outside the building, a skating rink, improved roads, parking lots, maybe even a new off ramp at Birdneck Rd. The cost could be as much as $50 million, but would be less of a burden on the city’s bond ratings than what may be required by Mr. Lawson’s proposal. Considering projects like light rail and the Dome Site are still on the council’s priority list, interest rates and bond ratings are important. As any citizen knows, you can only borrow so much.
But where does an arena rank on the council’s priority list? A year ago, it probably wasn’t even there. But with these two fabulous proposals on the table it has moved up close to if not to the top. It was certainly discussed at the council’s last private retreat.
If ESG builds the arena, SMG will manage the building. They also manage the John Paul Jones Arena in Charlottesville. Should the W.M. Jordan group get the bid, Comcast-Spectacor would run the building on a 25 year lease and would kick in millions of cash for construction costs. Both plans are aesthetically breathtaking, the ESG building with giant doors in the back that would open for sound stages and equipment for state of the art concerts and sporting events.
The devil is in the details and that may end up being John Lawson’s biggest problem. He told me his proposal was the most extensive and time consuming his company has ever undertaken. It is very specific, every nail, window, and door handle accounted for. Ms Kilmer’s offer is expected to be a little more vague. Had Lawson presented his proposal earlier, before the Chinese came for their visit, it may have already been approved.
But that boat has sailed. City staff will now go through both proposals with a fine tooth comb. Term sheets will have to be written, and citizens will get their say. It will be one of the most crucial votes by the City Council in decades, and could frame the oceanfront for generations.
They have to get this right. The winner will end up being the heroes. But if they don’t follow through with their promises and the project is not completed, they will always be remembered as the goat.
More on this story Monday, February 17th on WAVY-TV and FOX 43 news.