City Finalizes D.C. United Deal, Sends to Council for Approval
More than four months after its deadline, the administration of Mayor Vince Gray has finally completed a deal to build a D.C. United soccer stadium at Buzzard Point and sent it to the D.C. Council for approval.
Under the deal, the city will supply the land needed for the construction of the stadium, while the team will fund the actual construction. This will be accomplished via a series of land swaps. The District will trade the Frank D. Reeves Municipal Center at 14th and U streets NW to the developer Akridge in exchange for land Akridge owns at Buzzard Point, near the meeting point of the Anacostia and Potomac rivers. Additionally, the city will trade land at 1st and K streets NW to Pepco in exchange for the utility's parcels on the stadium site.
These parcels will give the city 88 percent of the required land for the stadium project. According to a press release from Gray's office, the city has "brokered an agreement in principle for acquisition of the final parcels for full possession of the required land for the stadium"—parcels owned by Washington Kastles owner Mark Ein and the scrap yard Super Salvage, on which Ein purchased an option.
“This is a major step forward for economic development in the District of Columbia,” Gray said in a statement. “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.”
Under the plan, a new Reeves Center will be built in Anacostia. Development of the new center is expected to take three years, during which time tenants of the current Reeves Center will remain there. While most Reeves tenants are expected to move to the new center, the city will help select tenants remain near their current location as needed, according to the press release. (Where the values of land involved in the swaps are found to be unequal by an independent appraisal, cash is likely to be exchanged to make up any differences.)
The total cost of the project, including land acquisition, is estimated at around $300 million, half of which cost will be borne by the city. City Administrator Allen Lew was the city's lead negotiator in putting together the deal.
Lew declines to provide details on the swap negotiated with Ein and Super Salvage, since that deal has yet to be finalized in writing. "At this point, we literally just came to an agreement a few hours ago," he says. "We have a conceptual agreement, but it’s going to be a few days before we can put all this in writing."
Ein and Super Salvage owner Steve Middelthon released a joint statement Friday afternoon stating that it hadn't been their intention to sell their land at Buzzard Point. "Super Salvage wanted to maintain its employee-owned business of 62 years and Mark bought the land to bring one of his company's headquarters into the District of Columbia and be part of the revitalization of the area," they said in the statement. They said they agreed to take a "significant discount" on the price of the property, compared to the Lyon Bakery property across the street that sold in late 2013, "if that is what the residents and taxpayers of Washington decide they want." (The bakery property sold last year for $172 per square foot; Ein purchased his parcel in 2011 for $85 per square foot.)
According to Lew, the need to hash out these final trades was one of the reasons for the delay in completing the deal. Others included refining details with Pepco for its land swap and for power lines on the stadium site, as well as the terms of D.C. United's lease.
The team will have a 30-year initial ground lease for the stadium, followed by two five-year options; after that, the site will revert to the city. The team will pay a base rent of just $1 per year. While the initial term sheet signed by the city and team involved a profit-sharing provision, that's been replaced by provision that will have the team pay the city $2 for each ticket sold after 10 years of operation, with the payment increasing at the rate of inflation after 20 years. Additionally, a property tax will be phased in, with no property taxes in the first five years, rising to full taxes after 20 years.
"The District will have until January 1, 2014, to: (i) obtain site control of the Stadium Site ...; and (ii) obtain the necessary legal approvals from the Council of the District of Columbia and, if required, the United States Congress to proceed with the transaction," stated the term sheet signed by Gray and D.C. United co-owner Jason Levien last July. Clearly, that deadline was not met. But even now, the agreement is far from a done deal, with some councilmembers having expressed skepticism about elements of it.
Lew hopes to meet with all the members of the Council next week, he says, starting with Chairman Phil Mendelson.
This post has been updated to include comment from Lew.
Rendering via the Office of the City Administrator