Proposed Land Transactions
Last July, Mayor Gray and DC 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 District now controls approximately 88% 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.
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.
Ground Lease Terms and Conditions
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 DC 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 DC 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 DC United provided that, in exchange for sales-tax abatement, the District would share in DC 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, DC 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 DC United property taxes at 25% of their full rate after five years; 50% after 10 years; 75% 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% of jobs at the soccer stadium (ticket takers, guest services, ushers, food service, etc.) would go to District residents;
- 50% of all development-related contracts (e.g. design, construction, etc.) would to go to Certified Business Enterprise (CBE) businesses with 35% to small and 20% to disadvantaged business enterprises; and
- 35% of all stadium operation contracts (i.e. janitorial, food service, security, etc.) to go to CBE businesses.
Additional terms and conditions are provided in the Development Agreement and Exchange Agreement (Part 1 and Part 2).
