The following statement is in response to a recent law suit filed against the city of Virginia Beach by Mid-Atlantic LLC of Virginia Beach:
On Tuesday, Jan. 16, 2018, the city was served with a complaint filed in Virginia Beach Circuit Court by Mid-Atlantic Arena LLC, the city's former partner in the development of an arena on city-owned property across from the Virginia Beach Convention Center.
The single-count lawsuit seeks $165 million in damages from the city for its termination of the arena Development Agreement after Mid-Atlantic failed to provide the city all required closing documents and sufficient assurances of its financing and its equity commitments before the expiration of the loan closing deadline contained in the Development Agreement.
"We are disappointed that Mid-Atlantic has chosen this path," City Attorney Mark Stiles said Friday. "The city did everything it reasonably could to support Mid-Atlantic's development of an arena in Virginia Beach."
Mid-Atlantic had more than two years to secure its equity commitments and loan financing for the project. The city not only granted all of the extensions contemplated by the Dec. 11, 2015 Development Agreement, but went beyond as the developer explored at least three different financing options.
Yet, as of Nov. 7, 2017, its final day to close the loan, Mid-Atlantic had failed to provide the city with documentation that its investors were committed to providing all of the required equity contribution to the project, which was a pre-condition to its lenders funding the loan.
Further, Mid-Atlantic had failed to provide a number of other required closing documents, many of which were proposed at the deadline to be deferred until a later date and were never finalized despite the developer and its lender having had months to complete them.
"The city had the right, and the obligation to its taxpayers, to ensure that the loan documents committed the lenders to fund the loan necessary for the construction of the arena," Stiles said. "The incomplete set of documents provided to the city did not do so.
"The city will vigorously defend this lawsuit," Stiles continued. "We are confident that the actions taken by the city were in good faith and in full compliance with its contract rights and its obligations to the public."
The city has retained Willcox & Savage, P.C., Norfolk, Va., to assist with the defense of the litigation.