Mayor Gray Announces Completion of Soccer Stadium Deal in Buzzard Point

1st and R Street, SW

From a press release:

“Mayor Vincent C. Gray announced that the District has reached final business terms with Major League Soccer’s D.C. United for a new 20-25,000-seat stadium in the Buzzard Point neighborhood of Southwest Washington, D.C. The legislation was delivered to the D.C. Council for approval. The District now controls approximately 88 percent of the proposed site and has also brokered an agreement in principle for acquisition of the final parcels for full possession of the required land for the stadium.

“This is a major step forward for economic development in the District of Columbia,” said Mayor Gray. “The new soccer stadium will be the connector between developing areas around our baseball stadium and the new Wharf development along our Southwest Waterfront. The new soccer stadium is the final catalyst for what is certain to become one of the most vibrant and sustainable sports and retail districts in America.”

Last July, Mayor Gray and D.C. United announced a preliminary term sheet for a unique public-private partnership with Akridge, a real estate development firm, and PEPCO, the regional electric utility that includes a series of land transactions to support the approximately $300 million project. The development of the new soccer stadium at Buzzard Point provides an opportunity to leverage the District’s investment in Nationals Park and the South Capitol Street Bridge to transform an undeveloped and underused area into a vibrant and environmentally friendly new waterfront neighborhood.

Frank D. Reeves Center at 14th and U Street, NW

By exchanging the Frank D. Reeves Center of Municipal Affairs with Akridge for a majority of the stadium site, this asset will be used to support the project while creating a new source of tax revenue. The plan also calls for current Reeves Center tenants as well as District agencies in leased space to relocate to a “new Reeves” municipal facility in Anacostia near the intersection of Martin Luther King, Jr. Avenue and Good Hope Road SE.

The new municipal complex will adjoin another recently completed facility housing the District’s Department of Housing and Community Development (DHCD) and include street-level retail and adjacent residential and parking components. The facility will provide approximately 200,000 gross square feet (GSF) of office space to accommodate nearly 850 employees.

No current Reeves tenants will need to be relocated until the new Reeves Center is finished in approximately three years. The District will make every effort to keep select tenants in the vicinity of the 14th and U Street NW location for continuation of service to their target constituents.

Additionally, the deal calls for the District to acquire portions of land owned by PEPCO at Buzzard Point and for PEPCO to acquire District-owned parcels at 1st and K Streets NW. PEPCO will be required to build a new substation in this area to accommodate future growth and development in this area.

“This is another complex, public-private partnership with many moving parts that advances economic development in the District,” said City Administrator Allen Y. Lew, who served as lead negotiator and previously led the development and construction of Nationals Park as the CEO of the D.C. Sports & Entertainment Commission. “Throughout this process we listened to the community and discussed our progress with the Council. Ultimately I think we have negotiated a deal that spurs economic development across the city, provides for needed infrastructure improvements and continues our efforts to create jobs and business opportunities for residents.”

The District will act as a horizontal developer and assume the cost of land acquisition and infrastructure, capped at no more than $150 million, while D.C. United will construct the stadium at the estimated cost of approximately $150 million. The team will also develop adjacent property to support the stadium.

The ground lease includes a 30-year initial term with two five-year option extensions after which the site reverts to the District. The base rent during this term is $1 per year. However, there is a provision for the District to agree to a separate longer term for the ancillary-development portion of the site provided that D.C. United pays market rent during that additional term.

The ground lease also includes a phased-in sales tax provision under which the District will begin collecting sales taxes on day-of-game revenues from D.C. United and its concessionaires beginning in year six before all sales become subject to the District’s prevailing sales tax after 10 years.

The original term sheet with D.C. United provided that, in exchange for sales-tax abatement, the District would share in D.C. United’s profits. Over the course of negotiating the agreements, the parties determined that the likelihood of profits was speculative, and they replaced the profit-sharing provision with an additional rent provision. Under it, D.C. United will pay the District $2 for each ticket sold in years 11 through 20 and $2 per ticket – adjusted by the consumer price index (CPI) –for each ticket sold in years 21 through the end of the ground lease.

The lease also stipulates a provision for a phased-in real-estate tax, under which the District would begin collecting D.C. United property taxes at 25 percent of their full rate after five years; 50 percent after 10 years; 75 percent after 15 years, with full taxes due from 20 years through the remainder of the term.

The agreement also contains strong provisions, similar to those in the Nationals Park and school modernization programs, for the inclusion of District-based businesses in development contracts as well as local resident hiring goals for construction and operation of the stadium. Specifically:

· 51 percent of jobs at the soccer stadium (ticket takers, guest services, ushers, food service, etc.) would go to District residents;

· 50 percent of all development-related contracts (e.g. design, construction, etc.) would to go to Certified Business Enterprise (CBE) businesses with 35 percent to small and 20 percent to disadvantaged business enterprises; and

· 35 percent of all stadium operation contracts (i.e. janitorial, food service, security, etc.) to go to CBE businesses.

“This deal really gets us where we want to go faster. Planned intermodal transportation projects like the new South Capitol Street Bridge and streetcar system will support the stadium and serve as inducements for additional investment on both sides of the Anacostia,” said Lew. “We have worked with the community and will keep them involved every step of the way. In the next several years we will accelerate the development that has been envisioned for decades.”

66 Comment

  • So the DC Center gets screwed and a gay club gets screwed again. And the tax payers get screwed on the financing, again.

    Hopefully DC United at least wins some championships ha!

  • Excellent! The only sentence that really bothers me is “The District now controls approximately 88 percent of the proposed site and has also brokered an agreement in principle for acquisition of the final parcels for full possession of the required land for the stadium.” I am thinking imminent domain….hope it’s not the case.

    • From what I’ve heard on the labor side of this stadium development, the deal is FAR from done, and probably won’t be happening at all if Bowser is our next mayor.

    • I think you mean “eminent domain.”

    • The last remaining property is a scrap yard, and yes, eminent domain may need to be enforced here. Also, the people complaining about this deal are, as usual, just wrong. First, the neighborhood where the stadium is going is a mess–blighted by drugs and the aforementioned scrap yard. It needs to massive investment to turn it around. Second, Reeves as it currently stands is also a mess–the building’s “value” doesn’t includes the fact that it needs significant renovations to upgrade ethernet cables, plug leaking pipes and a roof, exterminate the rats. There’s also the fact that the building is mostly empty, and there’s no real clear direction on how to fill it, since the city doesn’t need most of the space, and no one is willing to pay to rent it commercially.

      • I’d also point out that strategically, it makes total sense as well. You want to connect two areas of development and remove blight between the two. It is good for the city, good for the tax coffers, and good for DC residents.

        Too bad Muriel Bowser seems incredibly uneducated about it.

      • The building’s value is the land it’s sitting on. If the city wants to unlock that value, they should sell the building on the open market, not give it away in some convoluted scheme designed to give hundreds of millions of dollars to a billionaire while trying avoid the debt cap.

  • No thanks. I believe that private enterprises should pay their own way. And the city should lower its tax rates instead of handing over free money to corporations.

    • Great news. A long way to go yet but I really hope this gets done. As far as stadium deals go, this is pretty small beans for the city, so I’m hopeful it doesn’t get hampered by folks who are still bitter about the Nats stadium debacle. I expect the city (i.e. Bowser) will hold out for a higher valuation of the Reeves Center but apart from that I think this has a good chance of going through.

    • Completely agree: study after study have shown that publicly financed sports stadiums never generate the revenue they are expected to. If DC United want a stadium fine, go build it yourself. If Gray has money to throw around, give it back to the taxpayers. Abe Pollin fully paid for MCI Center on his own.

      • I’m not saying if given choices, the city should take a back seat. But if the city can direct this in order to get the stadium in the city and not elsewhere and put it somewhere where the city will ultimately reap the rewards, then go for it.

        We as citizens should be able to use our government as a collective representation to make big deals happen that benefit us all and not rely on a private corporation with no accountability to us to do it. Don’t be silly.

        This will be a huge boon for that area that will more than return itself in money for residents of DC. Take one look at Navy Yard today versus in 2000 and tell me you think that hasn’t paid off. The Nationals don’t have to win games for the city to make money.

        • I think the Nats deal was a bad deal for the city, and this United deal will be too. I hope the council and/or the new mayor kills it.

        • The Nats deal was (and still is) a huge money loser for the city. They spent $600 million of taxpayer money to build the stadium. They are never going to recover that money.

          • Depends on whether you believe that the stadium was what jumpstarted development in Navy Yard. If so, what we get from increases in property tax revenue (and income tax revenue from people moving from other jurisdictions to live on the waterfront), then it’s possible we may indeed get our $600 million worth.

  • Although I think the Reeves Center is probably “worth” a lot more, I’m not going to complain when it gets torn down. DC will get a ton of tax revenue from this deal, even if the terms seem favorable to the soccer team. In the long run it will be good to revitalize another area of the city and eventually get a ton of revenue out of the properties involved.

  • clevelanddave

    So let me get this straight: a private developer gets a fairly large office building on one of the hottest commercial and residential corners in the entire city for a parcel at 1st and R SW- an office building that will probably be leased back to the city at a commercial rate until new space is found at the cost of millions of dollars.

    Then on the new city parcel on land that is worth only a small fraction of the one at the corner of 14th and U NW, a private developer gets to build all kinds of retail and parking and revenue producing development around the new stadium.

    The stadium itself will be built by the city for $150 million and leased back to DC United, a private, for profit organization for $1 for 40 years. People will buy the tickets, park in the parking garage and use the vendors in the stadium without any discounts or subsidies.

    At the end of 40 years, when the stadium will need to be gutted or torn down it will revert back to the city. And probably over the 40 years when the stadium needs improvements the private tenant, who is paying $1 a year, will ask the city to pay for it. And if DC United goes bankrupt one of the assets that may be sold would be the $1 a year lease on the stadium.

    Do I have that correct?

    All this is being negotiated by a corrupt mayor who is a lame duck?

    Let the next mayor negotiate this deal-it sounds awful- hopefully one that does not leave the city and its residents as the only ones who are shafted and left holding the bill.

    • Exactly – what a load of shit.

    • The city pays for land acquisition and infrastructure, the team pays for the stadium itself. Not sure why you would assume the city will have to pay for future improvements to the stadium, that doesn’t make much sense. Also remember that the city will have to pay for infrastructure no matter how or by whom that land is redeveloped; so unless you don’t want that area redeveloped then you should be okay with the city spending that money.

      • Actually, that’s usually how it works. A team gets a stadium and then asks for improvements every few years. A new score board is one of the most common.

        • I’ve got to say that I don’t have any real knowledge in this particular area, but that makes no sense to me and I would be genuinely surprised if that was true.

    • This is not correct:
      “The stadium itself will be built by the city for $150 million and leased back to DC United, a private, for profit organization for $1 for 40 years”

      • The team is paying for the construction of the stadium. From the press release (the one on this very page): “while D.C. United will construct the stadium at the estimated cost of approximately $150 million.”

    • How depressing….

      If DC United wanted to leave then we should have let them. The organization isn’t worth anywhere near the cost of the stadium. I know DC is flush with cash but this is absolutely crazy.

    • Almost all of it was negotiated quite a while ago. Some of the details are getting negotiated now, but the broad strokes have been in place for a while.
      You don’t have it correct. The TEAM, not the city will be building the stadium for $150 M. I haven’t read anywhere that the city will pay for any modifications. I would assume the team would pay for those too.
      If DC United “goes bankrupt” (I’m not really sure what that would mean), they’d be sold before something like that would happen and the new owner would presumably keep the team in the stadium because it would be a lot more work/money to move the team or build another stadium.

    • I’d let you get this straight, but you don’t appear capable.

      If you assume the only benefit to the city is the four corners of those parcels, perhaps the investment needs a harder look (and even then I say it is a win). But the businesses alone that will open up between the Navy Yard and Waterfront because of a redeveloped area at this stadium will give the city more than a return on this investment.

      What, do you want a giant ferris wheel and casino instead?

      • clevelanddave

        Well that is just a bunch o’ snark… you are right, DC United will pay for the stadium up to $150 million. DC will have to pay for the rest. And will probably have to pay for the upgrades/modernization. Yes, I am absolutely sure the developer would love to put in a casino, and the feds wouldn’t allow a ferris wheel but I’m sure they’d like that too…

    • You forgot the part about the DC United franchise being worth only $71 million in the first place. So, basically what this deal does is let them leverage city money to raise the value of the franchise for when they sell it. Which is why you buy a sports franchise in the first place – they’re already worth $20 mil more than they were when sold TWO years ago and that’s with a crappy stadium situation.

      Soccer fans are adorable.

  • So excited about this but also concerned that it will get killed due to complexity, grandstanding, etc. Read some of the news reports on the deal before hating. This is good for the city and exactly what public/private partnerships should do. The Reeves center spurred the transformation of 14th & U and a new civic/government center in Southeast can do the same.

    DC United will not stay in DC if there is no stadium deal. Maybe you don’t care, but I do. The team is not only performing well with limited resources, they are arguably the most involved in the community of any area major sports franchise with development camps, constant volunteering and outreach etc. Coach lives in Shaw. Players live in DC. They are part of our community. The fan community is family-friendly, diverse and positive.

    • Fully agree with everything you’ve said here. Most people I’ve talked to who are against this deal are not well informed about it – maybe they wouldn’t change their mind if they were, but I prefer people at least know what they’re talking about before they take a stand.

    • How exactly did the Reeves Center kick start development along the entire 14th Street corridor? Seems to me development started closer to Logan Circle and crept northward. That Reeves is up for sale/trade has more to do with it now being at the northern end of the development than anything else.

      How will getting a new stadium improve DC United’s resources? The cynic in me says that all of the community outreach the team does is more about fostering a fan base than something done out of goodwill.

      • “How will getting a new stadium improve DC United’s resources?”
        The team currently pays a lot of money per game to rent RFK stadium and gets almost no revenue from parking and concession sales. The only revenue the team gets that I am aware of is ticket sales and team merchandise, and maybe some operating support from the league. With a new stadium they will have improved revenue streams and may actually turn a profit.

        • Sounds like a perfect reason for the DC United owners to find financing options and build the new stadium on their own. Of course I would try to get the city to pay for it if I could, since that means more money for me. Since I don’t own the team and instead am paying for the stadium (and then for tickets if I want to see a game), I don’t get any money out of this and should fight against the deal.

          Development in the area is happening at the Navy Yard already. Building a stadium that is used for fewer than twenty games a year, with fewer than 15k fans showing up for any one game, is not going to kick start any more growth. The Nats stadium, while ungodly expensive, brings in more fans way more often.

          • If the stadium gets built you can be sure there will be more than 20 games and more than 15k at the games. This won’t be the dump that RFK is. Plenty of other games and concerts would bring $ in to the district.

          • How many concerts are at the Nats park now? Not that many. I find it difficult to believe that a new soccer stadium will suddenly draw in sell out crowds when Merriweather, Nissan, and Wolf Trap already attract bands that are willing to play outdoors during DC summers. Most of the Nats fan base is out of VA, and I imagine that this is also the case for DC United.

            How will there be more home games in the future when the season is set by MLS?

            I agree that the stadium won’t be a dump compared to RFK, but that’s hardly enough of a reason to imagine that the team will go from 13k crowds to 20k crowds.

      • Actually, U St was cool before 14th St. Then development started on P St and over the past few years the blocks between P and U filled in. It might have seemed like it was going north but it was really coming from both directions.

        • Except there was barely any development on U Street. The debatable “coolness” of U Street had nothing to do with a center that was closed most of the day and took up a huge portion of land. Logan Circle may have been (and sort of still is) full of prostitutes, but the development definitely started at P Street and moved north. Once it became evident that people were willing to move to and go out on 14th Street they started work further up.

          • This isn’t true at all. U Street had a teeming nightlife for years, back when P Street east of 16th was where you’d go if you wanted to meet a lady of the night, not go to a nightlife spot.

      • Sounds to me like you’re new to town. The Reeves center was built when Logan Circle was still full of prostitutes.

    • So, roughly 30-50 people would move out of DC as a result? Soccer fandom aside, I don’t see that as a huge loss.

    • My favorite bar is also a family friendly, diverse, and part of the community. Does that mean they should be able to extort money from DC government? If we are spending a couple hundred million on a soccer stadium then what’s a good bar worth? $5 million?

      • While certainly a bonus, that the team is family friendly, diverse, and part of the community is but a small auxiliary cherry on top of this deal. The main points are that DC gets an anchor development in what is now an electrical substation/scrap yard wasteland, the now-very-valuable land that is the Reeves Center site gets put back on the tax rolls to more productive use, and with the city jobs moving to Anacostia via the new Reeves Center, that struggling neighborhood gets a small but much needed boost similar to what U Street got 30 years ago. Oh, and the costs the to city are largely sunk (ie: no matter what new development eventually comes to Buzzard Point, the city will have to pay for some new infrastructure). And since the soon to be “old Reeves Center” is worth many millions more than the Buzzard Point land swapped with Akridge, most of those sunk costs will come straight from Akridge’s cash purse in make up money, thus not affecting the city’s debt cap limit as much. If you’re gonna whine about the stadium, at least take 5 minutes to understand the deal. Otherwise, you just sound like a Tea Partier ranting in the WaPo comments section.

        • I have a hard time believing that new buildings are going to suddenly pop up in this area when there parcels of land right across the street from the Nats park (and closer to the Metro and bars) that have sat undeveloped (I wouldn’t consider the Fairgrounds to be all that developed) for years. Every time I walk to the stadium I am reminded of what everyone was promised when it opened: vibrant nightlife with bars and restaurants. Why should we believe that a soccer stadium will change this when it’s going to be located in an even worse area?

    • clevelanddave

      Correct me if I’m wrong, but if this whole project costs the city $300 million and there are 20,000 committed DC United fans then this project will have cost the city $15,000 per fan.

  • Ugh….why?!?!?!?!

  • One modification I would love to see would be that ultimately Donald Trump gets the rights to develop the lot on 14th and U St and creates a corner to rival CityCenter.

  • Are there really enough DC United fans to fill this stadium? I’ve watched a few matches at RFK (cap. 45k) and I would guess 10k people tops at these events.

  • do any of the nay sayers attend DC United Games? Or do you just stand again the whole project for whatever falsities you read. Try going to a game, Watch an MLS game that has a soccer specific stadium.

  • “The plan also calls for current Reeves Center tenants as well as District agencies in leased space to relocate to a “new Reeves” municipal facility in Anacostia near the intersection of Martin Luther King, Jr. Avenue and Good Hope Road SE.”
    As Xzibit would say: “Congrats to the residents of the Reeves Center….your ride has officially been PIMPED!”

  • This is great news!

  • brookland_rez

    This is great news. Props to Gray for getting this done. Between this and his published stance on the streetcars yesterday, I’m really hoping Bowser or Catania will follow through on the things he’s started.

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