D.C. United executives and District officials have reached a preliminary $300 million deal to build a 20,000-seat stadium for the team on Buzzard Point in Southwest Washington.

The agreement, team and city leaders said, could end a decade-long search by the Major League Soccer franchise for a new venue that would allow it to leave RFK Stadium, where D.C. United has played since its founding in 1996 but where its investors say the team loses money every year.

The project also would mark an economic development achievement for Mayor Vincent C. Gray (D) as he weighs a run for reelection next year. Plotted between Half and Second streets SW just south of Potomac Avenue, a few blocks southwest of Nationals Park, the stadium would add another link in a chain of developments along the city’s waterfront.
Unlike previous mayors who considered stadium options to keep the team from relocating, Gray enjoys a stable budget outlook and a negotiating partner, in the team’s new investors, who say they can help finance the project.

But the plan hinges on a series of proposed land swaps and development projects across the city that could lead to political and logistical land mines. And persuading District residents and lawmakers to back the deal is likely to open old wounds over the divisive fight to build Nationals Park, which the District financed entirely.

City Administrator Allen Y. Lew, who negotiated the deal for the mayor, said the project has more in common with the construction of Verizon Center downtown — a privately financed stadium enabled by government spending on land and infrastructure.

A series of land swaps and agreements will be required for D.C. United to get a new stadium at Buzzard Point.

With the city planning a new streetcar line and a $600 million realignment of Frederick Douglass Memorial Bridge nearby, Lew said the soccer stadium could do for the west side of South Capitol Street what Nationals Park has done on the east.

“Our vision is that we would have two great stadiums on this side of the bridge,” said Lew, who spoke to The Washington Post ahead of a formal announcement on Thursday.

Jason Levien, managing partner for United, credited Gray and Lew with moving quickly to find a stadium solution after he and partners led by Indonesian media magnate Erick Thorir bought a majority stake in the team a year ago. Levien said the team could relocate as early as 2016.

“It’s amazing how quickly they have been able to get this done,” he said.

In the agreement, several aspects of which have not been finalized and would require approval from the D.C. Council, the District and United would split the costs for the project, with the city providing about $150 million to assemble land and prepare the site and the team spending a similar amount building the stadium. Levien said the team had yet to decide whether to build a 20,000-seat stadium with room for expansion or build 25,000 seats at the start.

D.C. United would be granted a 25- to 35-year lease for the land and would have the opportunity to develop restaurants, shops and possibly a hotel along Half Street SW. A sales and use tax abatement worth as much as $2.6 million in its first year is also a part of the tentative deal.

Trading properties

Lew said providing a stadium site for United would bring tax revenue, jobs and expanded riverfront development without having to borrow. With the city’s borrowing capacity strictly limited by a statutory cap, Lew has proposed financing the public portion of the deal by trading other city properties that could in turn drive development elsewhere.
In the highest-profile swap, the Frank D. Reeves Municipal Center, at 14th and U streets NW, would go to D.C.-based developer Akridge in exchange for about two acres of Buzzard Point, nearly a quarter of the land needed for the stadium, and cash to make up an expected difference in the value of the two properties.

The Reeves Center brought city office jobs to the U Street corridor when then-Mayor Marion Barry opened it in 1985, but the building’s deterioration and the rapid growth of the surrounding neighborhood has rendered it increasingly obsolete. Allowing a private company to develop it would bring the city new tax revenue.

For all its inefficiencies, however, the building remains a point of pride for Barry, whose name remains on the facade. Lew has proposed relocating the city agencies in the Reeves Center to Anacostia, an area that Barry (D-Ward 8) represents on the D.C. Council. The agencies would occupy the second phase of the Anacostia Gateway office complex on Martin Luther King Jr. Avenue SE, where the D.C. Department of Housing and Community Development relocated in 2009.

Matthew J. Klein, president of Akridge, said if the company acquired the property it would plot a mixed-use project that would include new housing. A 2011 report by the District’s chief financial officer suggested the 533,329-square-foot building could sell for as much as $186 million on the open market, but private-sector analysts said it would probably fetch closer to $100 million because of its inefficient design and dated condition.

“We are in the process of determining how that value would be established,” Klein said.

Successful franchise

Although it now holds the worst record in Major League Soccer, United is one of the 17-year-old league’s original and most successful franchises, winning MLS Cup championships in 1996, 1997, 1999 and 2004, and twice capturing the U.S. Open Cup.

But its inability to make money has brought constant pressure on management to find a way out of 52-year-old RFK Stadium, which is cavernous for the typical United crowd and considered obsolete by modern standards.

In 2007, majority investor Victor A. MacFarlane, a real estate magnate, pushed for a deal to build on Poplar Point, across the Anacostia from Nationals Park. After then-Mayor Adrian M. Fenty (D) walked from the idea, MacFarlane attempted to move the team to Prince George’s County but was turned away there and sold his stake in the team in 2009.

In the meantime, other MLS clubs built new stadiums, and more than half now play in newer venues built to accommodate crowds of 20,000 to 30,000.

Levien, a lawyer and former player agent who is also chief executive of the NBA’s Memphis Grizzlies, said United’s new investors were done looking at other jurisdictions: “We’re completely committed to the District.”

But although season tickets are up 30 percent from last year, when the team made the playoffs, United is averaging 13,645 fans through 10 home dates this year (down from 16,977 in the regular season over its first 17 seasons). Levien said the team would never be on firm financial footing until it left RFK. “Not only is it 50 years old, but you’re so far away from the viewing experience,” he said.

Growing economy

When Gray took office in 2011 with the national economy in disarray and unemployment at record levels, he displayed little urgency in taking up the stadium talks. But the District’s economy has been growing aggressively since then, and shortly after Thorir and Levien’s group took control of the team, Lew said Gray gave him the green light to negotiate a deal.

“Once the new ownership came in, we began to talk about how we can work together to determine how we could get it done, then Gray was convinced that this was a good thing for the city,” said Lew, who managed construction of Nationals Park.

Ending a stadium standoff that two of his predecessors did not could give Gray’s mayorship a substantial triumph, but it will probably not come without a fight.

Three members of the D.C. Council have announced runs for mayor in the 2014 election. Although two of those, Jack Evans (D-Ward 2) and Tommy Wells (D-Ward 6), have expressed support for a United stadium, many residents remain unhappy with the city’s deal to build Nationals Park, which, at nearly $700 million, far surpassed cost estimates and did not meet local hiring goals. Although few council members remain from the Nationals deal, council member and mayoral candidate Muriel Bowser (D-Ward 4) or other members could invoke the baseball deal to rally opposition to Gray’s plans for United when the council is asked to approve land swaps and a tax break for the team.

And footing part of the United stadium cost is made more difficult by the 2009 D.C. law capping city borrowing. In addition to the land swap with Akridge, Lew would have to secure two other land deals for its agreement with United to stick, and neither is complete.

Pepco, the electricity supplier for the District and suburban Maryland, owns about 45 percent of the needed land, where it operates a substation, and Thomas H. Graham, Pepco region president, has said he was in “preliminary” discussions about locating a stadium on the site.

Another private landowner on the site, businessman and venture capitalist Mark Ein, said he also was considering a swap for industrial properties he controls along S Street SW.

“I want to try to be a good citizen and be helpful,” Ein said. “As long as there’s a way to do it that’s fair, I’m totally open to it.”

Mike DeBonis and Steven Goff contributed to this report.