Monumental, Youngkin announce deal to move Caps, Wizards to Virginia

Virginia Gov. Glenn Youngkin (R) and Ted Leonsis, owner of Monumental Sports & Entertainment, announced the proposal Wednesday, standing on a dirt lot in Alexandria’s Potomac Yard neighborhood where they hope a $2 billion, 12-acre mixed-use complex will rise.

While no official deal has been signed, Youngkin said he felt confident enough to join Leonsis and others in making the details public. “This is the exact same process we undertook with HQ2,” Youngkin said, referring to Amazon’s East Coast headquarters in nearby Arlington County. “It’s an agreement — a very formal handshake and understanding.”

The proposal faces multiple hurdles at the state and local level, and drew sharp reactions Wednesday from across the political spectrum, with District leaders pledging to continue their efforts to retain the NBA and NHL teams and Virginia lawmakers on both sides of the aisle questioning whether officials should be focused on wooing a billionaire sports team owner to further develop a well-resourced corner of the state.

Two aides to Youngkin who spoke on the condition of anonymity to share confidential details of the plan said the state would contribute $150 million to $200 million in transportation improvements for the project and issue $1.4 billion in bonds through a newly created sports and entertainment authority. The bonds would be repaid over 40 years, in part with a portion of tax revenue generated from the first phase of the project, arena parking revenue and annual rent paid by Monumental. The governor’s aides said terms of the 40-year lease were still being negotiated.

At Wednesday’s event, many of the elected officials present pledged to listen to the prospective arena’s neighbors and to Virginia taxpayers as they weigh next steps. As a small crowd of protesters could be heard chanting outside — and fliers imploring elected officials to “save the neighborhood” went up in surrounding areas — Leonsis echoed that promise.

“Hold me accountable. I feel that is not just words,” he said. “My commitment to you is we will do the right things in the right way to all the communities that we serve.” He did not take questions following the event.

If Monumental ultimately moves the Capitals and Wizards to Virginia, it would mark a major economic development win for Youngkin and the city of Alexandria and deal a blow to D.C.’s struggling downtown. The transition could also ease the path for Leonsis to take the company public, a possibility he has openly discussed.

Monumental’s arrangement with Virginia does not prohibit it from continuing to negotiate with D.C. to rehabilitate Capital One Arena, which opened in 1997. D.C. Mayor Muriel E. Bowser (D) late Tuesday night announced an 11th-hour attempt to retain the teams, including $500 million in public funds, that she said represented the District’s “best and final offer.”

And while some District boosters have signaled that losing the Capitals and Wizards would spell disaster for downtown D.C., Leonsis at Wednesday’s event suggested that his loyalties are to the region — not D.C. proper.

“That notion of community in the DMV really is what our business is about,” Leonsis said. “That’s the higher calling for sports. That is the higher calling on everything that we do — to build these legacies through winning championships from doing the right things in the right way by our fans, so that people can appreciate the community that they live in. It’s no secret that this great airport here was considered Washington National, and yet it’s in Virginia.”

The proposed move comes at a time when the economics of sports franchise ownership are changing. For decades, team valuations have ballooned in large part thanks to media rights deals, but cord-cutting has threatened to limit that growth, which means owners will look for new economic drivers.

Youngkin said Monumental’s upfront contribution to the project will be “more than $400 million.” The plan would ultimately allow Monumental to control two local arenas for live entertainment and boost the number of events it could host per year. Unlike the moneymaking entertainment district the Atlanta Braves have opened in suburban Cobb County, Ga., Monumental wouldn’t own most of the surrounding development.

Two people briefed on the plan who spoke on the condition of anonymity to discuss deliberations said they were told rent would be about $30 million a year. Monumental would get to sell naming rights for the arena, but the state could sell naming rights for the broader entertainment district, with those proceeds also going to pay down the bonds.

Renderings for that district provided by Monumental show a 20,000-seat arena, practice facilities for the Wizards and Capitals, expanded esports facilities, a “fan plaza” and a performing arts venue in addition to Monumental’s global corporate headquarters and a Monumental Sports Network studio.

Two Youngkin aides said the bonds would be paid back with income taxes on players, executives and workers at the site, plus business, sales, ticket and hotel tax revenue generated only from the first phase of the development, which would include the arena, convention center, concert venue, two hotels and an unknown number of apartments. Any portion of those taxes earmarked under state law for transportation, education and the locality would not be used for the bonds, and no new taxes will be imposed as part of the plan, the aides said.

Sen. Mark R. Warner (D-Va.) said that lawmakers began “kicking the tires” on the project “about seven or eight months ago.”

Leonsis approached the city first, Alexandria City Council member R. Kirk McPike (D) said in an interview, prompting further discussions that then looped in state officials over the summer. The plan got unanimous approval from a committee of Virginia state lawmakers at a closed-door meeting Monday — a major tipping point in the timeline.

Under the deal, Bethesda-based developer JBG Smith would sell the Potomac Yard land it owns to a Virginia stadium authority, which would lease the property to Monumental. The stadium authority would issue bonds for the project, allowing the developer to leverage below-market state and municipal interest rates.

In addition to being located next to the Potomac Yard Metro station, which is serviced by the Blue and Yellow lines, the facility would be just south of the graduate “innovation campus” that Virginia Tech is set to open next year.

Stephanie Landrum, president and CEO of the Alexandria Economic Development Partnership, said the Potomac Yard area would become “a world-class entertainment district” active for 18 hours a day, 365 days a year. The announcement Wednesday “is very much the first step in a lengthy process,” she said.

Local officials are eager to transform Potomac Yard, a former rail yard once floated as the potential site for a football stadium, into something more. After Amazon’s decision to move to nearby Arlington County, boosters have pitched the area as part of a tech-centric district they call “National Landing,” in hopes of luring more companies and retailers — and tax revenue — to the area.

Amazon founder Jeff Bezos owns The Washington Post, and the newspaper’s interim CEO, Patty Stonesifer, sits on the company’s board.

More than 7 million square feet of new construction has been greenlighted for development in the neighborhood. JBG Smith, which is also the developer for Virginia Tech and for Amazon’s nearby headquarters, owns or manages much of that land, including a strip-mall shopping center and a large parking area. Last year, it delayed plans to build two apartment buildings on the site where Monumental’s complex would be.

Officials Wednesday, including JBG Smith CEO Matt Kelly, suggested that the sports facility would catalyze a boom in development in adjacent lots, including a hotel or convention center.

Monumental cannot move the Wizards and Capitals to Virginia until 2027 under the terms of its lease. The company in a news release said it plans to relocate the teams in 2028.

Leonsis has for several years complained about having a mortgage with unfavorable terms on Capital One Arena, which in 2016 he estimated cost him $36 million annually. He called it “the worst building deal in professional sports” and suggested that he could leave the city when he paid off the mortgage.

District leaders on Tuesday expressed concern about what the departure would mean for D.C. as the city is facing severe budgetary constraints and working to revitalize a struggling downtown. In addition to the request for arena renovation financing, city leaders face appeals from the Washington Nationals baseball team for upgrades and competition to host the next Commanders football stadium.

If the Wizards and Capitals move, Monumental could transform Capital One to host between 10,000 and 20,000 fans for live entertainment, including concerts. The WNBA’s Mystics could also relocate there from the team’s current home in Congress Heights as early as 2028.

A senior JBG Smith executive said he couldn’t disclose the price at which JBG Smith would sell the arena tract of land to the Virginia stadium authority. He said JBG Smith would own and develop the adjacent tracts, which total 55 acres, according to the company.

Alexandria officials said the deal would create about 30,000 jobs — though it is unclear how many of those are indirect or temporary, a common criticism that watchdog groups often make of such projections — and result in an economic impact of $12 billion in the coming decades. It is unclear how that was calculated, though lawmakers indicated that millions could go toward affordable housing, rental assistance and other costs.

Reaction to the project was mixed even among conservative Republican legislators normally in Youngkin’s camp. State Sen. Mark J. Peake (R-Lynchburg), who early last year opposed a plan to lure the Commanders to Virginia, said he would “urge caution” on any deal that offers tax breaks to an individual business venture in the wealthiest part of the state.

“I’m always skeptical of giving tax breaks to billionaires,” he said. “I would much prefer a reduction in the corporate tax rate, which would benefit people across the commonwealth, corporations who have been here for decades, than a single billionaire and maybe a couple of his billionaire friends.”

Youngkin has pitched several House and Senate Democrats on the project, according to two people familiar with his efforts, who spoke on the condition of anonymity to share private conversations.

That outreach — notable for a governor who has not had warm relationships with many Democrats and does not regularly lobby legislators of either party — started immediately after Republicans lost control of the House of Delegates and failed to flip the Senate in the Nov. 7 General Assembly elections, the two people said.

With Democrats leading both chambers, Youngkin will need them to pass legislation creating a sports authority to oversee financing of the project and approve the additional transportation funds.

State Sen. Adam Ebbin (D-Alexandria) struck a cautious note. “I’m going to be evaluating this proposal very closely and I’ll have to weigh the tremendous economic potential for the city and community against any local concerns that would affect the quality of life for local residents,” he said. He added that he’d focus on how the nine-figure sum for transportation would be allocated.

State Sen. L. Louise Lucas (D-Portsmouth), incoming chairwoman of the powerful Senate Finance and Appropriations Committee, framed the project as a bargaining chip for regional or Democratic priorities.

“While some people want sports stadiums … I want tolls to disappear from Hampton Roads *and* I want recreational sale of marijuana,” she tweeted. “Guess we will have to find compromises this session.”

Jonathan O’Connell, Ben Strauss and Laris Karklis contributed to this report.