Pharrell Williams-Backed Surf Park to Faucet $121 Million of Bonds
(Bloomberg) — Clap alongside for Grammy-winning singer and producer Pharrell Williams, whose long-awaited effort to construct a surf park in his hometown of Virginia Seaside, Virginia, will mark one of many largest high-yield offers to this point this 12 months.
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In a two-part transaction break up between the Virginia Small Enterprise Financing Authority and the Atlantic Park Neighborhood Improvement Authority, the issuers plan to promote a mixed $121 million of unrated income bonds on behalf of personal developer Enterprise Realty Group.
Proceeds from the sale will assist fund a 4-acre surf park dubbed The Wave. It’s the pièce de résistance of a gargantuan $330 million growth venture, Atlantic Park, which is the biggest public-private partnership within the metropolis’s historical past, in keeping with bond paperwork.
“This deal is one to look at,” mentioned Dora Lee, director of analysis at Belle Haven Investments. “It’s the primary really high-yield deal of dimension to hit the calendar this 12 months, so it’s fascinating to see it within the context of this January, the place you could have record-low issuance and also you’re beginning to get inflows coming into munis once more.” That’s a pointy reversal from final 12 months when traders yanked about $144 billion from the municipal-bond market, Lee added.
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The plan is to rework the location of Virginia Seaside’s former live performance venue, The Dome, which as soon as hosted legends like Diana Ross and The Rolling Stones, into 12 acres of retail, workplace and eating house. The event can even embody a brand-new leisure middle that may maintain as much as 5,000 occupants.
Virginia Seaside is betting greater than $140 million of its personal {dollars} that Atlantic Park will flip the town right into a year-round, household trip vacation spot, in keeping with Metropolis of Virginia Seaside Director of Communications Tiffany Russell.
Price Remick, a Virgina Seaside councilman and one of many liaisons on the venture mentioned the town has “excessive expectations.”
“It’s been completely vetted, it’s top-notch all through,” he mentioned in an interview.
Williams first teamed up with the builders behind the venture in 2017 when he pitched his concept for a surf park alongside the oceanfront. The feasibility research hooked up to the deal estimates attendance on the surf park alone will probably be about 200,000 patrons per 12 months. The price of admission will vary between $85-$150 per hour, with personal lagoon rental costing as a lot as $2,500. The park is anticipated to open to the general public by October 2024.
Excessive Yield, Excessive Danger
Regardless of the “Blissful” singer’s star energy behind The Wave, muni offers funding vacationer sights have a checkered previous. The listing of defaulted bonds is an extended one, together with a water park in Edinburg, Texas, and an iron and metal manufacturing-themed amusement park in Bessemer, Alabama.
Like the event in Virginia Seaside, these parks have been speculative bets conceived to invigorate native economies. However many have gone underneath as a result of success was reliant on sufficient folks constantly displaying up, 12 months after 12 months.
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That threat is baked into the sale paperwork. The bonds are being provided in minimal denominations of $100,000 solely to certified institutional consumers. The official assertion to the VSBFA bonds carries 12 pages of bondholders’ dangers. A few of these dangers embody hurricanes, flooding, earthquakes, building delays and the unpredictability of client spending on discretionary purchases.
The venture has had “unanticipated will increase” in building and code prices to increase the venue dimension and will increase in infrastructure, amongst different line-items, in keeping with Russell, the town’s spokesperson. A consultant for the developer didn’t reply to a request for remark.
“There hasn’t been plenty of success tales on this space,” Lee mentioned, referring to high-yield municipal bonds for vacationer sights. “The truth that there are different constituents taking threat in different components of the event is a optimistic, however on the flip facet, it’s important to get all the assorted shifting components clicked in on the proper time for the entire venture to succeed.”
On the brilliant facet, tourism has roared again to life in Virginia Seaside. Customer spending surpassed the $2 billion mark for the primary time in 2021, up 8% in comparison with pre-pandemic ranges, in keeping with the Virginia Seaside Conference & Guests Bureau. Nevertheless, the variety of guests truly fell from 2019, down 15% in 2021, suggesting a few of that earnings was inflation-driven.
The surf park lagoon will probably be outfitted with a mechanical wave that may generate as much as 900 waves per hour, and as excessive as six ft, in comparison with the common wave top for ocean surf in Virginia Seaside, which is 2 to 4 ft, in keeping with bond paperwork. Builders are betting the distinction will probably be definitely worth the value of admission.
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