Hounds Chasing New Financing Plan For Loudoun Stadium© Leesburg Today - 04/02/2014
After a winter of seeming hibernation, a new plan to fund the Loudoun Hounds stadium in Ashburn has emerged, but it will require support from the Board of Supervisors.
In February, Virginia Investment Partnership wrote to the Loudoun County Economic Development Authority asking for an inducement resolution for up to $55 million in taxable revenue bonds to help finance the construction of the baseball stadium near the Rt. 7/Loudoun County Parkway intersection at the One Loudoun development. The stadium would be home to VIP's planned Loudoun Hounds minor league baseball team and the Virginia Cavalry North American Soccer League team.
Plans for the baseball team first were announced in 2009. The anticipated stadium opening in 2011 repeatedly has been delayed, both by financing challenges and problems with the development plans in the original stadium location.
The request to the EDA is part of the latest financial scheme to fund the stadium's construction-a project that will be developed entirely with private funding, both equity and bond funding-without any investment from the county government.
""It has been an evolution,"" VIP CEO Bob Farren said of the financing. ""We started with 100 percent debt financing, but as the economy started to improve we have tried to take advantage of that.""
The plan now, Farren said, is a combination of debt and equity. ""We have all the money that is coming to us from the equity sourcesâ€¦they still believe in the project and the market.""
Instead of going into the bond market on its own, the benefit to VIP in using the EDA is the ability to secure better terms for the bonds, and save money, Farren said. And the EDA serves as nothing more than an intermediary.
""All we are looking for is a reasonable case for financing,"" EDA Chairman Brian Chavis said of providing an inducement resolution. ""We don't get into anyone's financials, how solvent they are, or anything along those lines. We are only a conduit.""
Chavis said an inducement resolution, which the EDA approved for the Hounds stadium on the caveat of action from the Board of Supervisors, is a standard part of the process, and any final documents for the deal will make clear ""everywhere, in bold letters,"" there is no county backing to the bonds.
""We do not provide credit, or credit inducements at all,"" he said, adding, ""We don't have any influence on how someone gets financing. We are very explicit in all these deals that we are not giving any backing.""
There is, however, one obstacle to VIP being able to use the EDA process. The current county ordinance allows the authority only to issue tax-exempt bonds.
""The Ordinance, as it was written in 1984, did not allow for issuance of taxable bonds and that is what the Hounds are requesting,"" EDA's counsel Stephen Robin said in an email. ""Virtually all other bonds the Authority has issued have been tax exempt to the bond purchaser under U.S. and State law, but the Hounds' purpose for the funds does not qualify for that tax break.""
Farren said he always expected the bonds to be taxable, but was surprised to learn during the initial EDA presentation that there was a restriction in place.
During the Board of Supervisors' March 5 meeting, Chairman Scott K. York (R-At Large) raised the issue, asking supervisors whether they wanted to consider changing the ordinance.
""I've asked that the board take a look at the issue of why don't we, and see if it is worth amending the ordinance to include doing taxable bonds,"" York said last week. ""In a recent discussion I had about the building of garages for Metro, this could potentially end up helping us there as well.""
Supervisors have not indicated whether they would support the EDA getting involved with taxable bonds.
The issue is slated for review by the board's Finance, Government Services and Operations Committee. However, it has not been put on the April agenda according to committee Chairman Supervisor Ralph Buona (R-Ashburn), and it is not known when it might be considered.
Farren said he needs the ordinance change to move forward with his financing plan. ""I am at a screeching halt because of this ordinance,"" he said.
The stadium financing plans aren't the only thing in flux. The whole Hounds organization has been shuffled in recent months.
In late November, the Hounds quietly announced online that Farren would step down as chairman and CEO of VIP, but would continue as an investor. Mark Stavish, who served on the board of managers and was a longtime investor in the venture, was named as interim chairman and CEO, and the company reported a process to find a permanent replacement was underway.
Then, even more quietly, Farren was back as CEO and chairman by the dawn of 2014. And Stavish and other board members had resigned from the board.
""I had stepped aside with the intent of not wanting to do anything that would harm or be disruptive to VIP,"" Farren said, adding that he came back because negotiations over the current financing plan were already underway and he wanted to see them through. ""I thought the smart thing to do for the best interest of VIP was to finish negotiations that were underway at the time that are now about to bear fruit.""
As for the leadership team, Farren said there now is a three-member board of managers in place, with an advisory group that has been meeting weekly.
""We have moved on,"" Farren said. ""The job has to get done one way or another, so I am moving forward with those who want to be involved.""
Since his return, Farren and partner Harry Stokes also have been working through some legal issues, with a complaint filed in Howard County, MD, Circuit Court in early February by Maryland-based Eaglebank. In the complaint, Eagleback sought and received a confession of judgment for a $3.25 million loan made to VIP in 2013. The loan included a guarantee of payment by VIP, according to the complaint.
""After defaults under the Note and the Guaranty, including a failure to pay, the Indebtedness is due and owing in fullâ€¦"" the complaint reads. ""Despite due demand, the Defendant has refused to repay the Indebtedness.""
Farren declined to comment on the complaint because it is an ongoing legal process. ""We're in constant communication with Eaglebank to close the matter out satisfactorily,"" he said. ""It's a legal protocol. We knew they were doing it, and there was no objection.""
With the financing plan not yet settled, everything else about the Hounds and stadium construction has come to a halt as well. One Loudoun developer Miller & Smith completed the infrastructure work for the stadium last year, in an effort to meet the Hounds' stated plans to begin play there in 2014. Other construction work going on in the area of the stadium is associated with infrastructure for One Loudoun, not the stadium, Miller & Smith Vice President Bill May said this week.
Last fall, Farren said a lot of on-site and off-site work was occurring for the stadium's construction, which at the time he still hoped to have complete sometime this year. ""At that time we were still racing to try and pull off 2014 [opening],"" he said this week. ""We were spending money to try and get it done.""
Now, a couple months shy of the year anniversary of the ground breaking, that work has stopped-awaiting the new financing deal.
""Believe me, the last thing I wanted is this. But it is not uncommon for these things to take longer than expected,"" Farren said. ""There are not a lot of financial institutions that want to underwrite construction of a ballparkâ€¦but we're going to have a better financial deal now than if we did this a year ago.""
One thing that is not at risk immediately is the right to the Hounds baseball team franchise from the Atlantic League of Professional Baseball. In a recent interview, Frank Boulton, founder and senior vice president for the Atlantic League, said ""there is no line in the sand"" to completing the franchise deal.
""We continue to work with them as they continue to work to get their funding for the ballpark,"" Boulton said. ""That is the primary focus. We have been and remain supportive of all their effortsâ€¦We're not working with anyone else.""
Boulton said he was well aware of the frustration that can come with delays to the establishment of a team, but said, ""we're not going to allow a member of our league enter into any proposal that wouldn't make them successful.""
The lack of public money in the stadium deal is ""the hard part,"" Boulton acknowledged, and said the league would continue to work with VIP and review any financing plan and lease before moving forward. ""We have a quality brand and we want to protect that brand.""
As for whether there is a time when the league would have to part ways with the Hounds, Boulton said, ""there is a point, but I don't know when that point is.""
Calls to representatives of the North American Soccer League, which has plans to use the ballpark as home field for the Virginia Cavalry, about the status of the Loudoun franchise were not returned.
Given the 40-year lease VIP has on the property at One Loudoun, there also is no immediate threat of losing the site for the stadium. ""We have entered into a ground lease with VIP sports entertainment,"" May said. ""It's their obligation to build the stadium.""
While the lease has been signed for some time, May noted that Farren has asked to renegotiate its terms.
Even with all the changes and delays, Farren said he remains committed to bringing the Hounds to Loudoun. ""I wouldn't still be doing this if I didn't think it was going to happen,"" Farren said, noting his extensive ""personal and professional investment"" in the company.
He said he always knew it was going to be a lot of work to establish the stadium and team, but that it has been even more than he thought to build a stadium with only private financing. ""If we had municipal support from the county or the state, we would be playing ball right now,"" he said, adding, ""It is still a good story; it is still going to happen. And Loudoun County is going to be very happy with what we do.""
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