Stadium Thoughts, 2023 Edition

June 12, 2023

by Steve Thomas

I’ve written several columns over the years about the issues surrounding a potential new stadium in the DC area, and it seems like a good moment to do another installment.  Assuming the sale of the Washington Redskins Washington Football Team Washington Commanders Any Name Other Than Commanders, please Washington franchise from Dan Snyder to the Josh Harris group closes at some point, as seems highly likely, one key priority for the new owner will be to replace Fed Ex Field, which was built by the late, great Jack Kent Cooke in the 1990s.  This might not necessarily be the first agenda item out of the gate, but it’ll be near the top of the list.  Why?  Because Harris and company will owe several billion dollars in loans, and they need a new stadium to generate the significant amount of income necessary to pay the debt service on such an enormous amount of debt.

To put things into perspective, a simple loan of $4B amortized over 30 years at 6% interest would have debt service of around $24M per month.  The financing for the purchase by the Harris group is way, way, more complicated than that; I’m not implying that this is the financing structure. It’s just an example to get you into the ballpark of the amount of money they’re going to owe.  Harris’ group has something like 20 minority partners, each of whom have various different, no doubt complicated financing arrangements, not just simple loans.  The point is, Harris and company are going to owe a ton of money.

Perhaps the best way for the team to increase monthly income is through a new stadium, at least if the fans return to fill it.  We all know that Fed Ex Field is one of the worst stadiums in the NFL; Little Danny tried to get a replacement done for years before he finally gave up.   Before we get into current options, I wanted to give a little more insight into the original Fed Ex construction deal and how it affects what Washington may do.  My last column from 2021 went into a little detail about the history of ownership and the debt on the property – I recommend that you go back and read it again by clicking here.

Since that last column, I did some additional digging and now have a better picture of the current stadium deal.  As I previously wrote, the stadium complex itself is owned by an called “WFI Stadium Inc.”, formerly known as “JKC Stadium Inc.”  This was the entity originally formed by the late Jack Kent Cooke to own the property when he took title to the stadium site, formerly known as Wilson Farm.  Snyder purchased the entity and changed the name to WFI Stadium Inc.  The team itself, which is owned by Pro Football Inc, is a tenant of WFI Stadium Inc.

In order to make the deal work, the Wilson farm property was purchased from the original, private owner by The Maryland-National Capital Park and Planning Commission, which is a state of Maryland entity, and then subsequently transferred to JKC Stadium Inc.  They did this for deal reasons – it isn’t worth getting into here, but both Maryland and Prince Georges County had some demands and provided some benefits, and this was the way to make it enforceable on Cooke and the team.

JKC Stadium Inc. recorded restrictions, which I didn’t have in 2021 but do now, in the Prince George’s County real property records, which contains some requirements that still exist and are relevant today.  This is very normal – as a commercial real estate attorney, I see and draft these types of documents every day.  I’m not going to bore you by getting into all of it here, but some points in the document are useful to cover.  In this particular case, the recorded document mentions the existence of an underlying agreement between the state of Maryland, Prince George’s County, The Maryland-National Capital Park and Planning Commission, JKC Stadium Inc, and Pro-Football Inc., that governs the entire stadium transaction.  First, the agreement was for a thirty year term, dating from Washington’s first home game in the new stadium in 1997 and ending prior to the start of the 2027 season.  The recorded restrictions have many interesting details, but among other things, it documents penalties if the team does not finish out the entire term at Fed Ex; meaning that, absent another agreement to the contrary, Washington can’t leave Fed Ex prior to the end of the 2026 season.  If they do leave, then the current owner – WFI Stadium Inc. – is required to deed the property over to Prince George’s County, and also faces having to pay additional, undefined financial damages.

I say all of this to make the point that I highly doubt that Harris and Company will be okay with just surrendering such a valuable asset, and may not consider it worthwhile to negotiate an early out; therefore, Washington will most likely remain at Fed Ex through 2026.  This doesn’t mean that the team can’t stay there past the 2026 season – remember, the team leases the stadium from its owner, i.e., it’s an in-house lease, and they could always extend the lease another few years.  However, the property is currently exempt from property taxes, and my guess is that the exemption is addressed in the principal unrecorded agreement.  Practically speaking, it means that the new owner would need to negotiate with the county again, but that’s doable.

Extending the existing lease may become important simply from a time perspective – getting a new stadium from the idea stage to a fully constructed and functional development doesn’t happen overnight.  Add the fact that Harris isn’t even the owner yet, and four years all of a sudden doesn’t seem like such a long time.  It isn’t impossible, but time is growing short.  I’ve worked to one extent or the other on three different stadium construction projects, and all of them were multi-year endeavors even from the point at which I became involved.

Now, with the preliminaries out of the way, where could a new stadium possibly go at this point, and how will it be funded?  All Redskins fans obviously long for a return to the RFK site, but I don’t think that’s much more likely now than it was a couple of years ago.  The site is still owned by the federal government and is leased to the District of Columbia.  The existing lease is for a limited remaining time, not an additional thirty years, so the District doesn’t have the authority to lease the site to the team for thirty years.  Yes, the evil, hated “Redskins” name is gone (read my  obituary here, which is still one of my best columns), and the evil, hated, tyrant owner will soon be history, both of which making a new deal at the RFK site more likely, but the federal government still has to act, and they’ve shown no real inclination to do so.  Further, the local residents don’t want a new stadium at that location.  Plus, the idea that the District of Columbia could be in a position to donate $1B or more for such a project seems unlikely.  Not impossible, but not likely.  The District had to take a loan to build Nats Park, and that was many years ago and significantly less expensive.

The states of Virginia and Maryland both previously considered building a stadium before they realized that Dan Snyder was too toxic.  Harris will clearly be a breath of fresh air in that regard, so both states will be open to the idea now.  For his part, rumors are that Harris sees the most potential in Virginia; by “potential”, I mean to say that Harris thinks that Virginia may give him the largest amount of free money, which is what’s most important.  I can’t necessarily predict which location is the most likely anymore.  Snyder supposedly had a purchase option on some property in Virginia south of the City, but we don’t know (a) what entity holds the option, (b) the terms of the option, (c) when the option expires, or (d) if it is transferable.  I can’t report on this primarily because I haven’t yet broken down and paid to get into the Prince William County real property records (thanks for that, Prince William; many counties are free).

In general, though, construction of a new stadium in modern times is at least a $1B project, and possibly much more, depending on what the developer wants to do.  A full-scale stadium / mixed use commercial development complete with retail, restaurants, and lodging could be several billion dollars.  On the low end, I would think that a simple, low-cost stadium with no other development around it could be done for between $1B and $2B.

For me, though, the bigger issue is that no government, whether local, state, or federal, should give that much money to an NFL owner for a football stadium.  At the end of the day, all of that hypothetical money was donated by taxpayers, whether involuntarily via increased property, income, or other taxes, or voluntarily through the sale of government bonds.  Governments routinely provide funding for development all around the country, but those funds are typically for things like affordable housing, community centers, and the like, not for the benefit of the NFL and a bunch of multi-billionaires.  That’s never what government funds should be used for – if the NFL wants to build a football stadium, let them do it themselves.  Some sort of state and/or local government-controlled entity may hold title to a stadium site, but in many cases, at least some of parking and concession income is directed back to the NFL and/or the local owner.  I strongly disagree with that.

It doesn’t matter what I think, though, because it appears highly likely that, in order of probability, (1) Virginia, (2) Maryland, or (3) the District of Columbia will soon donate a Fort Knox-sized mountain of taxpayer funds to get the job done for Harris and company.  In my view, the team is most interested in Virginia, but I could also see the team redeveloping the Fed Ex property, too.  Others are possible.  We’ll see.  Wherever a new stadium goes, one thing’s for sure: get your checkbooks out, because ticket prices are going to skyrocket, and I think personal seat licenses are likely.  These billions of dollars in debt services needs to be repaid somehow.