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D.C. AG to Leonsis: Caps, Wizards can’t leave arena for 23 years

Attorney General Brian L. Schwalb (D) aims to bring Leonsis’s company, Monumental Sports & Entertainment, back to the negotiating table.

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D.C. Attorney General Brian L. Schwalb sent a clear message to Wizards and Capitals owner Ted Leonsis this week as Leonsis forges ahead with his plan to leave Capital One Arena: You’re legally stuck here for another two decades.

In a March 18 letter to a representative of Leonsis’s company, Monumental Sports & Entertainment, Schwalb (D) accused Monumental of breaking promises to the city by negotiating with Virginia, and said the plan to pull the teams out of Capital One Arena before 2047 — the end of a planned lease extension — was a no-go. Schwalb said he didn’t want to pursue legal action and hoped the disagreement could be worked out. “In that spirit,” he said, Monumental should come back to the negotiating table with D.C. officials, who have offered Leonsis $500 million in public funds to upgrade the downtown arena.

“To be clear, the District very much prefers not to pursue any potential claims against MSE,” Schwalb wrote in the letter, which was first reported on X by reporter Tom Sherwood and later provided to The Washington Post by a spokesman for Schwalb. “It remains committed to maintaining and growing its partnership with MSE and to keeping the Wizards and Capitals at the Arena until the end of the existing lease term in 2047, if not beyond.”

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Schwalb’s letter articulates in fuller detail an argument put forth by D.C. Mayor Muriel E. Bowser (D) last month: that the Wizards and Capitals are obligated to stay at Capital One Arena through 2047, and moving them early would amount to a legal breach — an assertion Monumental representatives strongly disagree with. If not resolved, the legal dispute could end up turning into a major drama while Leonsis is already struggling to secure enough backing from Virginia lawmakers for his plan for a new arena.

In a statement to The Post, a spokeswoman for Monumental pointed to a 2007 amendment to the ground lease allowing the company to opt out of the lease extension to 2047 under certain conditions; D.C. officials — including the District’s general counsel — signed an additional 2019 amendment affirming the changes to the ground lease.

“We fundamentally disagree with the Attorney General’s opinions, which are contradicted by the D.C. General Counsel as recently as 2019 when the city ratified the Ground Lease,” the spokeswoman said.

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The Capitals and Wizards could move to Virginia
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The owner of the Washington Wizards and Capitals has reached a nonbinding agreement to move the teams from downtown D.C. to a future arena in Northern Virginia as soon as 2028.
Under the deal announced in December, the NBA and NHL teams would relocate to a new facility in Alexandria’s Potomac Yard area. Both teams now play at Capital One Arena.
The plan was crafted by Virginia Gov. Glenn Youngkin (R) and Monumental Sports & Entertainment owner Ted Leonsis.
Leonsis has called his mortgage for the teams’ home at Capital One “the worst building deal in professional sports” and expressed concerns about crime in the area. He has also said the District has not invested enough in the arena.
Virginia’s $2.2 billion proposal would move the teams next to the new Potomac Yard Metro station. The facility would also include a separate performing arts venue, underground parking, a Wizards practice facility and Monumental’s corporate offices and media studio.
State legislators and the Alexandria City Council still must approve the deal.
District officials, including Mayor Muriel E. Bowser (D), say they haven’t given up on trying to keep the teams. In December, they announced an 11th-hour bid of $500 million for upgrades to Capital One Arena.
If the teams leave, it’s not clear what would happen to that facility. Monumental owns the arena and the city owns the land under it.
The Virginia plan requires Monumental to pay about $400 million and calls for $1.5 billion in publicly issued bonds to be paid back over 40 years with a combination of sources.
State and local officials behind the deal, including the governor, have stressed that public funds for the project largely come from revenue that would not exist without it.
Some local officials in Alexandria have presented the arena plan as a necessary way to diversify the Northern Virginia city’s tax base.
Yet residents of nearby neighborhoods have also expressed concerns about what it would mean for area traffic, the region’s Metro system and housing costs, amid a host of other questions.

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Bowser and D.C. Council Chairman Phil Mendelson (D) had offered Leonsis $500 million in public funds to upgrade Capital One Arena in December, after Leonsis had asked the city for $600 million for upgrades last year. But by the time they made the pitch to him in his office, Leonsis had already made up his mind to build a new arena in Alexandria’s Potomac Yard, a handshake deal he announced with Virginia Gov. Glenn Youngkin (R) the next day.

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That plan has been tied up in the state General Assembly, where it faces intense opposition from a powerful Senate Democrat and her allies. In fact, the senator, L. Louise Lucas (D-Portsmouth), has pointed to Bowser’s accusations that Leonsis was violating the terms of an agreement as one of many reasons she did not support the Virginia arena plan.

In a Feb. 9 op-ed in The Post, Bowser said the city’s offer of millions for the upgrades to Capital One Arena still stood and Leonsis should take the deal — so that he could “avoid any broken promises, breached leases or potential litigation.” She told reporters a few days later that she intended to enforce the lease.

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The lease disagreement stems from the last time Capital One Arena underwent significant improvements, in 2007, with $50 million in public financing. At that time, the D.C. Council approved legislation hiking sales taxes at the arena, money that would go toward paying off the $50 million in bond financing. Former Wizards and Capitals owner Abe Pollin’s company committed to extending the lease another 20 years at the same time, council documents show.

But Monumental points to the additional documents Pollin’s company and District officials signed in 2007 that say the company can “opt out” of the lease extension if the bonds are paid off early — which Monumental representatives say they intend to do.

In his letter to Monumental, Schwalb said he did not consider that a valid option. He argued that the 2007 council legislation is binding and predates the other agreements — and that as part of it, lawmakers intended and required a lease extension. He called any other agreements “unenforceable.”

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Schwalb broached setting up a meeting with the mayor, the council chairman and Monumental representative Abby Blomstrom, the company’s general counsel — not to debate the legal dispute over ending the lease, but to restart negotiations.

“The purpose of the meeting should not be to discuss ending MSE’s partnership with the District, but rather to resume exploring an agreement to keep the Wizards and Capitals in our great city through at least 2047,” Schwalb said. “Such an agreement is not only in the best interests of the District and, we believe, MSE, but also what the lawful, authorized terms of MSE’s ground lease with the District require.”

Complications for Leonsis in Virginia have injected significant uncertainty into the plan to move the teams. Though Youngkin’s hope to include the arena in the state budget failed, he could try to revive it in a budget amendment or a stand-alone bill when the General Assembly returns April 17.

Gregory S. Schneider in Richmond contributed to this report.