VIRGINIA BEACH, Va. (WAVY) — After months of motions, a trial has begun in a developer’s $165 million lawsuit against the City of Virginia Beach over the now-defunct arena deal.

Mid-Atlantic Arena LLC, sued the city last January, seeking $165 million in damages to cover the cost of developing and financing the arena, as well as lost future profits.

Since 2014, the development company, (formerly United States Management) had worked to build a $245 million arena next to the Virginia Beach Convention Center to host both professional sports and concert events. 

Back in November 2017, the City Council voted to terminate the deal, claiming Mid-Atlantic had not met all the requirements of the agreement, specifically the financing aspect of the deal.

To close on the $150 million loan with J.P. Morgan Chase, Mid-Atlantic needed to move $70 million in equity into an escrow account by midnight on Tuesday, Nov. 7, according to the city.

“Your honor, they ran out of time and they had a gaping hole in their equity,” said Gary Bryant, an Attorney with Willcox & Savage, hired to represent the city. 

That Nov. 7 deadline was a 60-day extension from a previous August deadline.

Former Virginia Governor Bob McDonnell was the first witness called on the stand. 

McDonnell served as inside counsel for ESG Enterprises, a majority partner in MAA, and was steadfast that the developers did all they needed to per the Development Agreement

“The $70 million isn’t required before closing, it is required before the first loan draw,” McDonnell said. “There is no requirement in there anywhere that capital must be in bank prior to closing.” 

McDonnell went on to detail how the termination came as a “shock” to him as he was a part of a team in negotiations with the NHL commissioner to bring a team to Hampton Roads.

“Expensive to do it, we were just trying to test the waters to make sure he knew that Virginia Beach was on the map as somebody that was about to build an arena and wanted to have a major sports franchise here,” McDonnell said. 

The trial is expected to last two weeks. 

Andrea Kilmer, President and CEO of Mid-Atlantic Arena, is expected to take the stand Tuesday.