DC mayor proposes legislation to buy Capital One Arena for $87.5 million

D.C. Mayor Muriel Bowser has proposed legislation to buy Capital One Arena for $87.5 million after months of negotiations to keep the Washington Capitals and Wizards playing in the District.

Under Bowser's proposal, D.C. would buy the arena from Monumental Sports and Entertainment, which owns the Washington Capitals and Wizards. Then, the District would lease the arena back to Monumental for $1.3 to $2.5 million per year through 2050.

The proposed $87.5-million purchase — which would need to be approved by the D.C. Council — is part of D.C.'s $515 million plan to transform the downtown arena and the Gallery Place complex next door and keep the teams in D.C. through 2050.

All of the money would be put toward the revitalization projects, according to the proposed legislation and sources familiar with the negotiations.

Bowser and Monumental Sports and Entertainment CEO Ted Leonsis announced details on the public-private partnership in a press release on Monday.

The $87.5 mil is part of the $515 million deal. All $515 mil we’ll be used for improvements and upgrades to the new arena and is expected to be exempt from taxes according to the new legislation@nbcwashington https://t.co/CbMZVU1fgB

— Mark Segraves (@SegravesNBC4) October 20, 2024

“We’re keeping Washington’s teams where they belong – here in the Sports Capital, and we’re doubling down on having a world-class destination and entertainment district in the center of DC,” Bowser said in a press release Monday. “We know that when our Downtown does well, our city does well. This catalytic investment is an investment in our residents and businesses in all eight wards.”

Leonsis said: "Our vision for a wholly re-imagined sports and entertainment destination will be ambitious, reflective of our community, and designed to ‘wow’ our most ardent supporters as well as casual fans."

See It: Renderings show plans for new entrances, athlete spaces in Capital One Arena

Capital One Arena would have more concessions, player spaces

The $87.5 million used to buy Capital One Arena would be reinvested into the project, Bowser's office said in a release.

Plans for the arena include an expanded main entrance on F Street NW, wider concourses and more elevators and escalators. The company is planning to increase its concession space and the number of bathrooms, Monumental said in a release.

The Capitals would get a new film room in their locker room. A new players' lounge, a dining space and a lounge for their family members are also in the works, according to Monumental.

Exansion into the Gallery Place complex next door would also allow more space for hospitality staff.

However, Leonsis said Monday the Wizards will not build their new practice facility at the new arena as originally planned, but they will move out of their facility in Ward 8. The team is currently looking for a site somewhere in D.C. It may be at the former RFK Stadium site, if the District gets full control of that land from Congress.

What Capital One Arena construction will mean for summer games and concerts

As for the Washington Mystics, they've been playing some of their bigger games at Capital One Arena. But once construction begins, the arena will be closed for three summers. Leonsis said they are looking for locations to hold some of the bigger Mystics games and indicated those might be played somewhere outside of D.C. during renovations.

In addition, no concerts or other events will come to the arena during those summers of construction, keeping about 30 concerts per year away.

However, the Caps' and Wizards' schedules would not be impacted.

"This will be the largest investment made in an existing arena in the country," Leonsis said. "It's going to be messy. It's going to be long and hard three years of deconstruction and then construction. But we're up for that task."

Deal could keep Wizards, Caps in DC through 2070

Monumental's lease would last through 2050; then Monumental would have the option to renew the lease five times. Each leasing period would last four years, giving Monumental the option to stay through 2070.

In a letter to the D.C. Council, Leonsis said Monumental has agreed to spend at least $285 million on the revitalization project and pay for any cost overruns.

The arena would also be exempt from taxes, according to the proposed legislation.

What comes next?

The plan is subject to review by the D.C. Council. In a letter dated Friday, Bowser asked D.C. Council members to approve the sale and pass the Downtown Arena Revitalization Act of 2024 during their current session.

"The surrounding neighborhood will also benefit directly from a modernized building exterior, new entrances, and improved public realm that are worthy of the vision set for the future of Downtown DC," Bowser wrote.

The D.C. Council will hold public hearings and then vote on this sometime before the end of the year. Council Chairman Phil Mendelson said in a release that the Council would move expeditiously to get the deal done by then.

If the legislation does pass before the end of the year, Monumental is set to begin the design process this winter and kick off construction in early summer 2025, according to a press release.

Bowser said the project would create thousands of construction jobs and generate $21 million in tax revenue over a three-year construction period.

Not long ago, the arena's fate was in question for months after Leonsis and Virginia Gov. Glenn Youngkin announced a plan last December to move the Capitals and the Wizards to a proposed $2 billion sports and entertainment complex in Alexandria. However, facing opposition from leaders in both D.C. and Virginia, that deal fell through.

Alexandria officials then announced in March that they would stop negotiations, and D.C. and Leonsis reached the deal to keep the teams in the District.

The District pledged $515 million to keep the teams downtown.

'I want the money to go into the building, and the city owns the building right now'

The reason the District is working to buy the arena is so Leonsis and his partners won't have to pay taxes on the $515 million the city is giving them. Both Leonsis and a deputy mayor insist this deal is the only way to ensure that all of the money is spent on the project.

"We shouldn't have to defend it," Leonsis said. "It's, all the money is going into the building as opposed to paying taxes. Isn't that isn't that strategically like the right thing to do?"

The District has always owned the land on which Capital One Arena sits, and Monumental has always paid to lease that land.

"I don't want the money," Leonsis said. "I want the money to go into the building, and the city owns the building right now."

The deal just released to the public Monday has the District buying the arena and then leasing it back to Monumental Sports for the same rate Leonsis and his partners currently pay to lease the land the arena sits on.

"We anticipated and we are now effectuating the transaction that allows $515 million to be invested into modernizing, transforming and expanding the Capital One Arena," D.C. Deputy Mayor of Economic Development Nina Alpert said. "This is the best structure to effectuate that."

Alpert said transactions like this, known as sale leasebacks, are "very common."

"And as Mr. Leonsis said, it is what enables an efficient use of public money to be fully reinvested in this project as opposed to going to other uses," she said.