Virginia Beach ArenaFinancing Proposal

June 28, 2016

Andrea Kilmer, USM

Create a flexible, state-of-the art venue that:

• Serves as an iconic symbol for the City, Region, & State

• Offers events for everyone

• Creates memories of a lifetime

• Creates jobs and business

• Draws major acts and top tier events

• Year-round playground

The time is now. The place is Virginia Beach. 2

Our Vision

The time is now. The place is Virginia Beach. 3

City Economic Impact

Construction Impact

New Jobs

2,300

New Spending

+

$240M

Salaries

Materials/Services

The time is now. The place is Virginia Beach. 4

City Economic Impact

Annual Operations Impact

New Jobs

440

Net NewSpending

NewSalaries

$15M

+ 20-Year NPV

$1.7B$111M

RoomNights

65,500

• Everything, except the lender and loan structure

• All previously negotiated agreements (with changes on 1 page out of over 400)

• Fundamental business model and market analysis

• City incentives

• Privately financed and locally owned

• Highly qualified, experienced team

• Minority participation

The time is now. The place is Virginia Beach. 5

What Remains the Same

• Lender will be a US Investment Bank

• Loan structure

• 2 clauses on 1 page of the Development Agreement

The time is now. The place is Virginia Beach. 6

What Changes

Main Benefits of Proposed Financing Change

• Domestic Alternative to Chinese Loan

Addresses any perceived security concerns

Removes procurement requirement

Removes political volatility

• Accelerated Development/Opening2016 ground breaking/2018 grand opening

• US Bank Trustee administrates Loan Proceeds

• No balloon payment or interest rate risk in year 15

• Early pro sports team potential

Plan of Finance

• Taxable Municipal Bond– Known Finance Structure

• U.S. Investment Bank Large Institutional Investors

• Bond Proceeds will be limited to use for the Construction Contract, related Cost of Issuance, and required Reserves and Escrows

• No Developer Fees or cost to date reimbursement

• USM fully responsible for the debt

• Bonds repaid by same revenue streams as current Agreement– 1% of Hotel Tax and “But For” Taxes

– Payments from Arena Operations

• VBDA may serve as the Conduit Issuer– No obligation and no recourse to VBDA, City, or State

– Same role it plays for other private entities, such as Westminster Canterbury

– Annual fee revenue

Proposed Change in Terms

• Type of lender/form of commitment

• USM’s debt to equity ratio will changeLoan will fund full Construction ContractDebt payments likely to decrease based on

current marketPayment Cap of City incentives cannot

increase and will likely decreaseEquity contribution estimated to be $10

million

The time is now. The place is Virginia Beach. 10

4.3 Loan Commitment. Developer will use commercially reasonable efforts to obtain

and deliver to City an executed copy of a loan commitment or bond purchase or placement agreement with the VBDA or other appropriate entity serving as a conduit issuer (the “Construction Loan Commitment”) from an InstitutionalLender committing to provide construction and permanent financing (a“Construction Lender”) to Developer (the “Construction Loan”) adequate to constructthe Arena Improvements and fulfill Developer’s other obligations under the TransactionAgreements, subject to customary lender requirements and conditions. City will havethe right to approve the Construction Loan Commitment and the documentsultimately evidencing and securing the Construction Loan (the “Construction LoanDocuments”) which approval right for purposes of this Section 4.3 shall be limitedto the right to approve those terms and provisions of the Construction LoanCommitment and the Construction Loan Documents which concern (i) funding mechanisms and reasonable assurances that any overseas lender will fully fund theConstruction Loan, (ii) protections and cure rights of City and the ConstructionLender in the event of a Developer default under the Construction Loan and/orTransaction Agreements, (iii) City Credit Rating Concerns, and (iv) verification that the plan of finance will fund no more than (1) one-hundred percent (100%) of the fixed price of the Construction Contract and A & E Contract, (2) costs of the financing, and (3) required reserves and escrows, without inclusion of any reimbursement to Developer for other costs incurred or payment of any developer fee general consistency with the debt, equity and loan term structure outlined in Developer’s proposal and pro-forma submitted to the City and the Term Sheet. Such approvalshall not be unreasonably withheld, conditioned, delayed or denied.

City Protections

City retains the right to review:

• Funding Mechanisms and Assurances

• Protections and the Right to Cure, but not the obligation to do so

• City Credit Rating Implications

The time is now. The place is Virginia Beach. 12

Future Vision (Strategic Growth Area)