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Virginia Beach Sells $189 Million in Bonds for Pharrell Williams-Backed Atlantic Park, Boosting Tourism

Virginia Beach sells $189M in bonds for Pharrell-backed $350M Atlantic Park to boost tourism with surf park and entertainment venue.

By Bill Bullington

5/16, 15:08 EDT
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Key Takeaway

  • Virginia Beach sells $189 million in bonds for Pharrell Williams-backed Atlantic Park, aiming to boost tourism with a surf park and entertainment venue.
  • The project, part of a $350 million development, is financed through high-yield bonds backed by city appropriations, reflecting strong investor demand.
  • Expected to enhance the city's tourism appeal, which drew 13.6 million visitors in 2022, contributing significantly to local tax revenues.

Virginia Beach's Ambitious Development

Virginia Beach has embarked on a significant development project, Atlantic Park, backed by multi-Grammy award-winning artist Pharrell Williams. The Virginia Beach Development Authority recently sold approximately $189 million of municipal bonds to finance parts of this ambitious $350 million enterprise. The funded aspects include a 3,500-person entertainment venue, parking facilities, land acquisitions, and other related projects. Atlantic Park is set to feature a surf park, a multi-purpose event venue, residences, offices, retail spaces, and restaurants, aiming to enhance tourism and entertainment offerings in the city.

Patrick Duhaney, Virginia Beach’s city manager, highlighted the project as a major public-private partnership designed to boost tourism. He expressed excitement about the potential of the music venue and the surf park to attract visitors and marquee acts to the city.

Financial Structure and Investor Appeal

The financing strategy for Atlantic Park involves the sale of unrated, high-yield bonds, with the latest issuance secured by yearly appropriation payments from the city to the development authority. This structure is designed to mitigate investor risks associated with the project's performance. Dora Lee, research director at Belle Haven Investments, noted the strong investor demand expected for the bonds, attributing it to the minimal risk due to the backing by appropriations from financially robust Virginia Beach.

Virginia Beach maintains an Aaa credit rating from Moody’s Ratings, reflecting its diverse economy, high property wealth, and resident incomes. However, the appropriation-backed bonds are rated slightly lower at Aa1, considering the potential risk of annual non-appropriation and the essential nature of the financed projects.

Tourism and Economic Impact

Virginia Beach is a prominent tourism destination, drawing approximately 13.6 million visitors in 2022. The city has benefited significantly from tourism-related tax revenues, with over $143.8 million collected from hotel rooms and restaurant meals during the fiscal year 2023. The Atlantic Park development is expected to further bolster these numbers by offering new attractions and facilities that appeal to both residents and tourists.

Municipal bond financing for tourist attractions has had mixed outcomes in the past, with several notable defaults. However, the post-pandemic period has seen a resurgence in such investments, with local governments, including Virginia Beach, leveraging bond markets to fund projects anticipated to draw more visitors.

Street Views

  • Dora Lee, Belle Haven Investments (Bullish on Virginia Beach Bonds):

    "There’s very little risks involved with this bond because it is backed by appropriations from the city and the city remains very strong financially."

Management Quotes

  • Patrick Duhaney, City Manager of Virginia Beach:

    "It’s probably the largest public-private partnership the city has done to boost tourism to the ocean-side enclave... We hope to be able to bring marquee acts to Virginia Beach. We’re excited about the music venue and the iconic surf park—we’re looking forward that to generate tourism impact in our city."