Wizards, Capitals plan move to Alexandria in $2B deal

The Washington Capitals and Washington Wizards are planning a move across the Potomac River to a new home in Alexandria in a $2 billion deal that would see the professional sports franchises exit Washington, D.C., by 2028, Virginia Gov. Glenn Youngkin announced early Wednesday.

The nonbinding agreement to build a new arena for the Capitals and Wizards, which would become the first professional sports teams to play in Virginia, is part of a 9 million-square-foot entertainment complex and promises to add to the transformation of the Potomac riverfront in Alexandria’s developing National Landing neighborhood, where a new Metro station opened in May after decades of planning. The location, once a rail yard, had previously been eyed for development in the 1990s by the late Jack Kent Cooke, former owner of the NFL team now known as the Washington Commanders. Virginia Tech’s $1 billion Innovation Campus, which is under construction, would be a neighbor, and Amazon.com’s HQ2 campus is just two stops away in Arlington County.

Ted Leonsis, founder, CEO and chairman of Monumental Sports & Entertainment, which owns the Capitals, a National Hockey League franchise, and the National Basketball Association’s Wizards, as well as the WNBA’s Washington Mystics, noted that the new home for the teams is only four miles from their current one at D.C.’s Capital One arena, where each team has played for more than two decades.

“Our commitment would be to build really iconic, fan-centric businesses,” Leonsis said during a press conference announcing the deal Wednesday.

The project is a partnership between the state, Monumental, which would invest $403 million in the deal, the City of Alexandria and JBG Smith, the developer of Amazon.com’s HQ2. It would include the sports arena, as well as corporate headquarters for Monumental, a media studio, a Wizards practice facility, a performing arts venue and an expanded e-sports facility, along with retail, restaurants, hotels and conference and community spaces. The first phase, which includes the arena, could generate $12 billion in economic impact and create 30,000 jobs over the next several decades, Youngkin said. The district is planned for a 2025 groundbreaking with the project being completed by 2028.

The framework of the deal rests on approvals from the Virginia General Assembly and Alexandria City Council. The state legislature, which convenes Jan. 10, 2024, for its upcoming session, will be asked to approve the creation of a new Virginia Sports and Entertainment Authority that would own the land and buildings within the entertainment district. The $2 billion investment would be supported through bonds issued by the proposed authority, which would be repaid through annual rent paid by Monumental and arena parking revenues, naming rights and incremental taxes generated by the arena and development of the first phase, according to Youngkin. The City of Alexandria would contribute $56 million toward construction of the performing arts venue and $50 million toward underground parking development. The land and buildings would be owned by the authority, which would enter into a 40-year lease with the company. 

The project includes $110 million in on-site infrastructure, including site development and roadway, signal and intersection improvements funded through bonds.

Youngkin called the deal an “affirmation of what’s happening in Virginia,” citing deals that have brought national attention to Northern Virginia, including Amazon’s HQ2, as well as the headquarters relocations of global Fortune 500 defense and aerospace contractors Boeing and RTX in back-to-back announcements in 2022.

“This visionary sports and entertainment development district will bring together entertainment sports and technology like nowhere in the world,” Youngkin said. “This once-in-a-generation historic development will be the best place to live, work, raise a family and watch hockey and basketball.”

He also called the deal a good one for Virginia’s taxpayers, a refrain similar to statements he’s made while attempting to bring the Washington Commanders’ stadium to the state during the past two years. On Wednesday, Youngkin said while his focus has been on what he deemed a “monumental deal” to bring the Wizards and Capitals to Alexandria, he would continue to engage in discussions with the Ashburn-based Washington Commanders, now owned by a group that includes Maryland-born billionaire Josh Harris and NBA legend Magic Johnson.

But while officials tossed around sports terminology Wednesday to demonstrate their commitment to getting the deal with Monumental over the finish line for Virginia, city leaders in D.C. late Tuesday made a Hail Mary pass of their own to retain the teams. As details about the joint news conference by Youngkin and Leonsis in Alexandria made headlines, D.C. Mayor Muriel Bowser and Council Chair Phil Mendelson announced a bill that would offer Monumental $500 million in financing to renovate the aging Capital One arena, where the Washington Mystics now plan to move, and extend the ground lease for nearly three decades, The Washington Post reported.

Youngkin didn’t appear fazed by D.C.’s offer. Monumental had sought $600 million from D.C., and Bowser said during a news conference responding to Virginia’s deal that the city had put its “best financial foot forward.”

If Monumental’s deal with Virginia moves forward, it will raise additional economic development questions for the region, says Terry L. Clower, a public policy professor with George Mason University’s Schar School of Policy and Government and director of the university’s Center for Regional Analysis. For starters, in a regional economy that still hasn’t seen convention and hospitality traffic recover from the pandemic, will the new development’s hotels and conference space attract new visitors or just compete with already existing venues? Also, instead of seeing a “reduced level of activity” at the Capital One Arena, would D.C. benefit more from allocating that $500 million to “reimagine” and redevelop the Capital One Arena site for another use?

For Youngkin’s part, he said there’s no harm, no foul in D.C. making a last-ditch effort to hang on to the Capitals and Wizards.

“I don’t blame them because I think that this is a very important win for Virginia,” the governor said. “The reality is what can happen here in Northern Virginia is truly unique. It’s truly unique. What I’ve just described is something that can’t be replicated someplace else. And we’re going to work together in I think the most innovative public-private construct that has ever been done in these kinds of developments.”

Virginia Business Editor Richard Foster contributed to this story.