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VSE calls off $100M sale of business to equity firm

Alexandria-based distribution and maintenance provider VSE Corp. has called off an agreement to sell off its federal and segment for up to $100 million to Louisiana-based private equity firm Bernhard Capital Partners.

The deal was announced in May, and the companies said in a news release Wednesday that they mutually agreed to terminate the and no fees were required to be paid as a result. Necessary approvals and closing conditions weren’t expected to be completed in “a reasonable amount of time” for reasons unrelated to either company, the companies said.

Michael Perlman, a vice president and spokesperson for VSE, said the business segment, which employs about 1,000 , remains for sale. He added that a sale could occur in the first half of 2024. The deal with Bernhard Capital included $50 million cash and up to an additional $50 million if performance milestones related to federal contracts were met.

“While today’s announcement is unexpected, we intend to continue to pursue the divestiture of the federal and defense segment to accelerate our growth strategies as a two-segment aftermarket business,” VSE President and CEO John Cuomo said in a statement. “Our decision to terminate the agreement did not come lightly, but we believe it provides a favorable opportunity for our team members and shareholders to move more quickly and effectively toward the sale of this business and its assets.”

VSE announced the deal May 1, saying at the time it wanted to simplify the company into two segments supporting aviation and fleet distribution and maintenance repair operations and to tailor its capital allocation to its growing aviation and fleet segments.

In July, VSE acquired Desser Aerospace’s distribution and maintenance, repair and operations sectors for $124 million. Following the Desser acquisition, VSE sold Desser’s proprietary solutions businesses to aerospace systems and parts manufacturer Loar Group for $30 million.

Dominion Energy shareholders receive mini-tender offer

Dominion Energy is urging its shareholders to reject a “mini-tender” offer from TRC Capital Investment, the -based Fortune 500 announced Monday.

Toronto-based investment firm TRC Capital offered to purchase up to 2 million shares of Energy’s common for $44 per share in cash, approximately 4.47% below the closing price of Dominion common stock on Sept. 26, which was the last trading day before the unsolicited offer.

Mini-tenders are offers for less than 5% of a company’s outstanding shares. Because these offers are below the 5% threshold, Securities and Exchange Commission tender offer regulations do not apply.

According to the SEC, “some bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price. Others make mini-tender offers at a premium – betting that the market price will rise before the offer closes and then extending the offer until it does or improperly canceling if it doesn’t.”

This is not TRC Capital’s first mini-tender offer to Dominion. In January 2016, the firm offered to purchase up to 2 million shares at $66.50 per share in cash, approximately 4.19% below the closing price of the trading day before the offer. Dominion also recommended shareholders reject that offer.

TRC Capital’s offer currently closes at 12:01 a.m. EST on Oct. 27, but the company can extend it if it chooses. Shareholders who tendered their shares can withdraw them before the offer expires through written notice.

TRC Capital made a slate of mini-tender offers, including an offer for up to 1 million Moderna common stock shares, in early September, according to TRC news releases. The firm offered $107.56 per share, approximately 4.44% lower than the closing price of common stock in Moderna, the Cambridge, Massachusetts-based maker of a COVID-19 vaccine, on Sept. 1, the last trading day before the offer. On Sept. 29, the firm decreased its offer price to $99 per share.

On Aug. 2, TRC Capital made a mini-tender offer to buy up to 3 million shares of Verizon Communications common stock at $31.95 per share, about 4.4% below the closing price of the stock on Aug. 1.

In May, TRC Capital terminated its offer to buy up to 1 million shares of Canadian fertilizer company Nutrien and returned tendered shares to their holders. Conditions in its offer, made April 5, were not met, according to a news release, including the market price it stipulated shares needed to hit during the offer period.

Virginia Natural Gas names chief admin officer

Virginia Natural Gas has named Shannon Pierce as its vice president of strategy and chief administrative officer, the -based announced Monday.

Pierce, a native of Surry, most recently served as vice president of growth and chief external affairs officer at SouthStar Energy Services, a subsidiary of ‘s parent company, Southern Company Gas. She was based in Atlanta but will move to Virginia Beach in her new role.

She will report directly to VNG President Robert Duvall.

“We are truly grateful to welcome Shannon Pierce into our VNG family as our vice president of strategy and chief administrative officer. We are deeply appreciative of her vast experience and steadfast dedication to our community, which complements our mission and values,” Duvall said in a statement.

Pierce began her career as a lawyer for McGuireWoods in and joined Southern Gas in 2004. Her community engagement includes memberships in the Virginia State Bar, the Energy Bar Association and the American Association of Blacks in Energy.

She earned her undergraduate and law degrees from the University of Virginia and serves on the board of managers for the university’s alumni association.

Nasdaq triggers delisting process for Urban One

Nasdaq has begun the delisting process for , the Maryland-based media company behind the proposed in , because it has not filed quarterly finance reports for fiscal year 2023 on time.

The exchange’s notification does not affect trading of Urban One or its presence on Nasdaq yet; according to a Friday news release by Urban One, the company will “request a hearing before a Nasdaq Hearings Panel. The hearing request will automatically stay any suspension or delisting action through Oct. 20, 2023.”

A spokesperson for Urban One said Monday there won’t be any impact on the current casino campaign underway in Richmond.

Urban One acknowledged in its news release that it has not yet filed financial reports for the first and second quarters of fiscal 2023 with the Securities and Exchange Commission, due to errors related to its investment in RVA Entertainment Holdings, the limited liability corporation chosen in 2021 and 2023 as the operator for the proposed $562 million casino in Richmond, which is up for a second referendum vote in November.

In its Sept. 29 news release, Urban One says that it “identified certain errors with regard to the timing of expense recognition of non-cash stock based compensation and the accounting for the company’s investment in the operations of its Richmond casino joint venture, RVA Entertainment Holdings LLC, the activities of which primarily related to 2021.” To address the issue, Urban One says it is “currently evaluating the related accounting for the non-cash stock based compensation matter and if the Company’s investment in RVA Entertainment Holdings LLC should have been consolidated during the historical periods due to its then-75% ownership interest.”

In a July board meeting, the media company dismissed BDO as its independent accounting firm and hired Ernst & Young to serve as its public accounting firm for its fiscal year 2023, which ends Dec. 31.

Nasdaq previously notified Urban One of its late SEC filings in three letters this year, starting April 3, and the stock exchange previously gave the company a 180-day extension to file 2022 Form 10-K and the Q1 2023 Form 10-Q by Sept. 27. The 10-K form was filed in June, but the 10-Q form is still outstanding.

Urban One’s news release says that it “is in the process of completing its Q1 2023 Form 10-Q and anticipates filing the delinquent reports as soon as practicable after resolution of the discrete accounting issues” related to RVA Entertainment Holdings.

In an 8-K form filed by Urban One to the SEC on Sept. 28, the company reports $109.9 million in consolidated revenue during the first quarter of the year, ending March 31.

Urban One was the majority partner in the 2021 proposed casino in Richmond, with Peninsula Pacific Entertainment as minority partner, but the city’s referendum failed by 1,200 votes in November 2021. After much jockeying in the General Assembly, Richmond voters will once again vote this fall on a casino referendum, this time a proposal by Urban One and , which bought PPE late last year and now owns the state’s Rosie’s Emporium franchise and Colonial Downs.

The renamed , if passed by voters, would include a 250-room hotel, a 3,000-seat concert venue, a $26.5 million upfront payment to the city government, an estimated 1,300 permanent jobs with an average salary of $55,000 and a predicted $30 million in annual tax revenue and $16 million over 10 years in charitable contributions.

According to Virginia Public Access Project’s finance report for political donations made through Aug. 31, Urban One and Churchill Downs contributed $8.14 million to the Richmond Wins, Vote Yes pro-casino PAC in August, more than three times the 2021 pro-casino campaign budget of $2.6 million.

Bon Secours, Anthem reach agreement in $93M dispute

Bon Secours announced Friday it has reached an agreement with in Virginia, which the health system sued in August, alleging the insurer owed $93 million in unpaid claims.

Although details were not released due to confidentiality agreements between the two parties, Bon Secours said it will drop the , which was filed in Circuit Court, and all Anthem Advantage and Medicaid health plan members will again have in-network coverage at Bon Secours. The agreement also extends coverage for employer-based Anthem customers and Affordable Care Act plan members until 2028.

“I’m proud that both organizations continued to focus on our shared priority: the communities we serve,” Anthem Virginia President Monica Schmude said in a statement. “We worked together to creatively address affordability for our members and the financial needs of an important care provider. This agreement provides long-term stable access to care at Bon Secours without cost increases for our members and employers.”

Anthem agreed to cover any claims that Medicare patients incurred at Bon Secours facilities since Aug. 1, when the health system was out of network.

“We understand that being out of network/potentially being out of network can be very difficult, and we are pleased that patients with Anthem can now see our physicians and use our hospitals at an in-network cost,” Mike Lutes, president of Bon Secours , said in a statement. “We sincerely believe that access to quality services is vital for our communities. This new agreement protects our patients’ access to compassionate care close to home.”

The agreement also prevented Bon Secours from being out of network for Medicaid patients, which would have occurred Oct. 1 absent a deal.

In April, Winchester-based Valley Health and Anthem  settled a $15 million lawsuit filed by Valley Health over unpaid reimbursements. The terms of that settlement also were confidential.

On June 28, Anthem paid $300,000 to settle a finding from the State Corporation Commission’s Bureau of Insurance that it was not paying claims within the 40-day requirement. State regulators found that Anthem did not pay 347 claims of the 67,000 it received from December 2022 to February 2023 within the 40-day timeframe.

Bon Secours has 10 hospitals in the Richmond area and and has more than 14,000 employees, including 820 physicians, according to the complaint.

Anthem, owned by Elevance Health, is the largest carrier in Virginia. Elevance reported $156 billion in total revenue for 2022, with net income of $6 billion.

Flying high

is on track to have the best year since its 1938 opening. In June, the airport reported a 7.5% increase in passenger activity, with 431,637 passengers — up from last June’s figure of 401,517, marking the largest number of June passengers in the airport’s history.

During the first six months of 2023, the airport’s passenger count increased 8.7% to 2,083,371 passengers, compared with 1,915,866 for the same period in 2022.

One contributing factor is Norfolk International’s ability to grow its number of and flights. “It has eight airlines, so customers have lots of options,” says Vinod Agarwal, deputy director of the Dragas Center for Economic Analysis at Old University.

Airlines serving the Norfolk airport include Allegiant, American, Breeze, Delta, Frontier, Southwest, Spirit, United and their regional airline partners. The airport began adding low-cost carriers in 2017, starting with Allegiant, followed by Frontier in 2018, Breeze in 2021 and Spirit in 2023.

In 2021, Breeze airlines selected Norfolk as a crew base for pilots and flight crews. Passengers can fly to 16 cities nonstop on Breeze from Norfolk, including the addition of Fort Myers, Florida, in July.

“We currently have 41 locations we can now fly nonstop,” says Norfolk International Airport President and CEO Mark Perryman. “We are continuing to grow that number and move up.”

The addition of Spirit Airlines in March, with flights to Fort Lauderdale and Orlando, was another boost to passenger count.

“They are a growth-stimulator type of airline, and they are doing that. Spirit went from 0% in March to now serving 3% to 4% of our total traffic. There is huge growth in low-cost carriers,” Perryman says. “We are talking with other airlines all the time. We have two other airlines that are extremely interested,” but Perryman declined to name them.

The airport’s positive growth hasn’t gone unnoticed. This year, it received a 4-Star Regional Airport rating from London-based Skytrax. The annual ratings, which go up to five stars,  are a global benchmark of airport standards.

Of the 572 rated in the 2023 survey, Norfolk International was one of only seven U.S. 4-Star airports, a group that includes the Cincinnati, Houston, Indianapolis, New York (LaGuardia), Portland and Seattle airports. Skytrax also ranked NIA sixth place among the World’s Best Domestic Airports.

To keep its standards steady, Norfolk International is undertaking a $30 million runway rehabilitation project to repair aging asphalt and concrete portions of two runways. The work is being performed in two $15 million phases, with phase one’s completion expected in November and phase two anticipated to be completed in November 2024.

In August, the airport released a request for proposals for a construction manager for a concourse gate expansion and a customs and border control facility, aimed at helping NIA attract international flights. The project is currently in the conceptual design phase.

In May, the airport issued a request for proposals for of a new hotel on airport property. Perryman was set to provide the airport’s board with a recommended developer in September, after this publication’s deadline.

Like Norfolk, many U.S. airports are beginning to see some of the largest increases in air traffic since the start of the pandemic, a sign of a pent-up consumer demand for recreational travel.

“We are predominantly domestic, and our numbers rebounded faster than some others in the country. The big international airports with flights internationally are still struggling,” Perryman says. “Anecdotally, I think the pandemic opened ‘s eyes to what the Roads region has to offer, but we don’t have hard evidence.”

Regionally, though, the story is different at the -Williamsburg Airport, which has a single airline — American Airlines, which serves only flights to Charlotte, North Carolina. In 2018, Newport News recorded 403,575 total passengers. In 2022, that number fell to 129,971. In February, the airport’s board dismissed airport Executive Director Mike Giardino. Avelo Airlines ended service at the airport in April, less than a year after it began offering flights from Newport News to Florida. In 2022, Delta left the airport.

“In the last 10 years or so, Newport News has seen a decline in its number of airlines. Supply and demand factors indicate the airport is having a tough time coming back to where it used to be,” says Agarwal. “If it flew to other places, it would attract more people.”

This summer, the Alliance received a $100,000 GO Virginia grant to conduct a regional air study, which will focus on both regional airports and include $50,000 in funding from Norfolk, Newport News, the Norfolk Airport Authority and the Peninsula Airport Commission.

The Peninsula Airport Commission’s members declined to discuss plans for Newport News’ airport until after the study is completed in early 2024. 

An overview of Hampton Roads

With a population of 1.79 million in 17 localities, Roads is the second most populated region of Virginia, just behind Northern Virginia. , with approximately 457,000 residents, is the commonwealth’s biggest city by population, and neighboring Norfolk has the highest density in the region, with 4,467 people per square mile, according to 2020 data.

The region also is a major economic driver, as the home of the Port of Virginia; Naval Station Norfolk, the world’s largest Navy base; Naval Air Station Oceana, the Navy’s East Coast master jet base; Huntington Ingalls Industries, including its Shipbuilding division; and the $9.8 billion offshore wind farm being built 27 miles off the coast of Virginia Beach. Also underway is the $3.8 billion expansion of the Bridge-Tunnel, the state’s largest-ever highway project.

As for , the region’s institutions include Christopher Newport University, Regent University, Virginia Wesleyan University, William & Mary, Old University, Hampton University, Norfolk State University, three community colleges and ECPI University, which is headquartered in Virginia Beach.

A rising tide

The Port of Virginia continues to drive activity in Roads as shipping and companies seek footholds. The region’s office vacancy rate rose this year — from 8.1% at the end of the first quarter to 8.4% at the end of the second quarter — but is “relatively healthy compared to similar-sized markets,” according to ‘s MarketBeat office market reports.

That’s largely because of a lack of new inventory, which is also driving rents up. But although the region’s office market reflects a lack of supply, its real estate market is booming from new demand for warehouse space, driven by proximity to the port.

At the end of the second quarter, industrial leasing prices were up 25.3% year-over-year and have risen 9% since the start of 2023, with a 2.3% vacancy rate, Thalhimer reports.

Although the first quarter saw a slight slowdown in activity because of rising interest rates, demand for of 200,000 square feet increased as summer ended and interest rates stabilized, says Geoff Poston, a senior vice president with Thalhimer. 

For local users such as HVAC suppliers, the market for warehouses of 20,000 to 50,000 square feet has stayed competitive, mainly because new is focused on bigger warehouses.

“Our market [is] really a tale of two different worlds,” Poston says, now that shifting trade patterns have put the port — and — on the national stage. 

  

Space race

Leaders of a regional engineering firm figured finding office space in the Town Center of would be a breeze. Newspapers were reporting that demand for was down nationally.

But that isn’t the case in the Roads area, where the office vacancy rate was 8.1% for the first quarter of 2023, according to a report by Cushman & Wakefield | Thalhimer. That’s about half the national average of 16.1%, and in some markets, the vacancy rate has hovered around 30%.

“It’s not that there’s not available inventory, it’s that what they want has already been snapped up because everyone wants the same kind of space,” says Rob Wright, a senior vice president at Cushman & Wakefield | Thalhimer in Virginia Beach who’s helping the firm — whose name he’s keeping private — find a location.

The pandemic upended employees’ expectations of working 9 to 5 in an office, and executives have found they need to provide the right incentives and environment so their staff sees a reason to come to the office, he says. They want them to be collaborative, see the benefits of teamwork and then be able to walk someplace nearby for lunch or an afterwork drink.

“Dollar Tree did that at the Summit Pointe project when they merged with Dollar General,” says Wright. “Their CEO basically said, ‘If we’re going to stay in Chesapeake, Virginia, we’re going to build a city within a city. We’re going to build perks for our employees. We’ve got to have space for them to have multifamily apartments right there on our campus. We want to have the best restaurants on our campus, the best entertainment venues and breweries.”

That decision has paid off — Summit Pointe’s two high-rise office buildings, one of which is Dollar Tree’s headquarters, are filled, and tenants are paying some of the highest rents in the area, Wright says. A third office building is planned.

Guesswork on leasing

Reflecting nationwide patterns, Class A office space in newer commercial developments like Town Center in Virginia Beach and City Center at Oyster Point in is in high demand across Hampton Roads. But older buildings with Class B or C office space? Not so much. Besides retail and restaurants, office workers also want free, easy-to-find parking, Wright notes.

“I think what we’re seeing in this modified, nontraditional, not-9-to-5 world is that when have to pay for parking, there is less motivation to go into the office,” Wright says. “There’s just some sticking point of not wanting to go and formally pay for parking versus when you have free parking. Maybe you feel better about popping in for a short workday.”

Downtown Norfolk, along with Hampton, are the softest submarkets in the Hampton Roads area. Besides parking challenges, a major factor is “large blocks of functionally obsolete build-outs” that are unappealing, according to Cushman & Wakefield | Thalhimer’s report.

Wright says it’s difficult right now for executives who have to make long-term decisions about leasing office space without a crystal ball to predict what their needs may be a decade from now.

“I don’t think we’re seeing dramatic reductions in overall square footage requirements,” he says. “What I have noticed is national companies with offices around the country have changed their requirements more than regional and local companies have.”

Some national companies have left the area, while others, such as Norfolk-based Sentara Health, have expanded, Wright says. “Whenever we’ve had these bigger blocks of square footage come up, there has been backfill occupiers grabbing them up, so that’s a good sign for the overall market.”

Lowe’s is expected to open its 1.5 million-square-foot regional distribution center in Suffolk’s Virginia Port Park in the third quarter, says Lang Williams with Colliers. Photo by Mark Rhodes

Port-driven

As for the industrial market in Hampton Roads, it’s remained healthy thanks to the Port of Virginia, an economic driver for the entire state. Amid heavy demand for imports during the pandemic and delays at other U.S. ports over the past two years, many retailers located logistics presences in Norfolk and surrounding localities, says Geoff Poston, senior vice president of Cushman & Wakefield | Thalhimer’s industrial group.

For the first quarter of 2023, industrial real estate had a 2% vacancy rate. “When all the ports across the country were backed up, we were the most efficient port,” Poston says. “Retailers were like, we can’t get into L.A. or Long Beach, we can’t get into New York. Let’s go to Norfolk. They don’t have any issues.”

In 2022, the Port of Virginia processed more than 3.7 million 20-foot equivalent units (TEUs) at its terminals, setting a record. Cargo movement and handling has resulted in higher demand for industrial space near the port’s terminals from distributors and third-party logistics companies.

Amazon.com, for example, built a 3.8 million-square-foot robotic fulfillment center in Suffolk and a 650,000-square-foot processing center in Chesapeake. In June, two industrial in Chesapeake sold for $24 million, and they’re fully leased to tenants that include Fortune 500 government contractor CACI International and third-party logistics firm Kalman & Co. Since July 2020, 79 companies have announced plans to establish manufacturing and distribution presences in Virginia, investing nearly $4 billion, according to an April 2023 study conducted by William & Mary.

TradePort Logistics, for example, fully leased and moved into Northbridge’s new 334,800-square-foot Chesapeake Logistics Center in May, says Lang Williams, a
Norfolk-based senior vice president with Colliers. TradePort has plans to construct a purpose-built transload facility near the Port of Virginia in the coming months.

Two other projects expected to open in Suffolk in the third quarter of this year are Lowe’s 1.5 million-square-foot regional distribution center in the Virginia Port Logistics Park and the 227,000-square-foot distribution facility that Los Angeles-based Industrial Realty Group (IRG), one of the largest real estate developers in the nation, is building on 40 acres in Suffolk. It will be fully leased to RoadOne IntermodaLogistics, a national intermodal, warehouse and logistics services company.

IRG is also working on two build-to-suit facilities in Suffolk and Portsmouth, totaling 1 million square feet, for Unis, a third-party fulfillment and company.

Companies are willing to locate near the port — and even a bit further away from the terminals — because it’s a fairly sure bet, given the port’s investment of about $1.4 billion to expand its overall capacity and cargo handling capabilities. This includes dredging the harbor to 55 feet so it can accommodate two ships at a time, “which is a game changer,” Poston says.

Demand is so high, Williams adds, that developers are starting to look to places along Interstate 64 like New Kent County, where AutoZone has broken ground for an 800,000-square-foot facility, and James City County, where Green Mount Logistics Center is expected to have a 373,536-square-foot Class A spec distribution facility ready in the fourth quarter of this year.

“So, we’re excited,” Williams says, “because we’re going to have more options for these companies to lease, which will be good.”