Virginia Beach recently made a move to utilize the municipal bond market for funding a surf park development which has garnered attention due to its backing by multi-Grammy award winning artist Pharrell Williams. The Virginia Beach Development Authority announced the pricing of approximately $189 million in debt to support the construction of Atlantic Park. This development includes a variety of facilities such as an entertainment venue, parking structures, land acquisitions, residences, offices, retail spaces, and restaurants. The city has also committed its own funds towards the $350 million project.
The project, spearheaded by Venture Realty Group, involves a mix of unrated, high-yield bonds along with municipal bonds issued last year to attract investor interest. The partnership between the city and private developers showcases a unique approach to boost tourism in Virginia Beach. Patrick Duhaney, Virginia Beach’s city manager, expressed excitement about the potential for the music venue and surf park to draw in visitors and generate economic impact for the region.
Unlike the high-yield bonds from the previous year, the latest municipal bonds are secured by annual appropriations from the city rather than project revenues. This structure provides investors with a sense of security as any potential shortfalls in project performance would be absorbed by the city and its taxpayers. Dora Lee, research director at Belle Haven Investments, highlighted the low risks associated with the bonds, citing the city’s strong financial standing and credit rating from Moody’s Ratings.
Moody’s Ratings has assigned Virginia Beach an Aaa credit rating, reflecting the city’s robust economy supported by diverse industries and high property values. While the appropriation-backed bonds are rated slightly lower at Aa1, analysts have noted the essential nature of the projects being financed along with the annual appropriation risk. The competitive sale of bonds in multiple tranches indicates a positive market reception for Virginia Beach’s initiative to enhance its tourism offerings.
Virginia Beach is a prominent tourism destination attracting millions of visitors each year, with significant revenue generated from hotel accommodations and dining establishments. The city’s strategic investments in projects like Atlantic Park align with efforts to capitalize on the post-pandemic resurgence in travel. Municipalities across the country are exploring similar bond offerings to support tourist attractions and infrastructure improvements aimed at boosting local economies.
While the surf park development presents an exciting opportunity for Virginia Beach, past instances of defaulted bonds tied to tourist attractions serve as a cautionary tale. Municipalities must navigate the balance between attracting investors and managing financial risks associated with such projects. The success of Atlantic Park will depend on factors like market demand, operational efficiency, and continued support from both public and private stakeholders.
Virginia Beach’s foray into the municipal bond market for the surf park development signifies a bold step towards diversifying its tourism offerings and stimulating economic growth. The collaboration between the city and private developers underscores the importance of public-private partnerships in driving innovation and investment in communities. As the project progresses, stakeholders will closely monitor its performance and assess the long-term impacts on Virginia Beach’s reputation as a premier destination for visitors.