JBG Smith Promises More Affordable Housing If Potomac Yard Arena Proceeds

Proposed Capitals and Wizards arena is stalled in Virginia’s budget process

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JBG Smith (JBGS) wants to preserve more affordable housing near the proposed Potomac Yard mega-development anchored by a new arena for the Washington Capitals and Wizards — assuming it actually happens. 

JBG Smith is the developer behind the proposed $2 billion entertainment district in Alexandria, Va. The development, which would move the professional hockey and basketball teams out of Washington, D.C., is currently in limbo, and hinges on whether the Virginia General Assembly approves the $1.5 billion in taxpayer funds needed for the project. 

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As talks among lawmakers threaten to stall, JBG Smith now says it will double its affordable housing commitment in communities nearby the sprawling 9 million-square-foot development from 500 to 1,000 units. The new commitment comes in the wake of conversations the company had with Alexandria residents and local and state governments regarding its development plans, it said. The dwellings would count toward Alexandria’s goal of building or preserving 2,250 affordable workforce housing units by 2030. 

“Our extensive conversations with members of the Alexandria community, leaders such as Mayor [Justin] Wilson, the council and legislators from the commonwealth further reinforced the centrality and necessity of housing preservation efforts in Alexandria,” said AJ Jackson, JBG Smith’s executive vice president of social impact investing, in a statement. 

Yet preservation of the affordable units is contingent on the project moving forward. 

Virginia Gov. Glenn Youngkin and Ted Leonsis, owner of Monumental Sports and Entertainment, in December verbally agreed to a deal that would bring the Washington Capitals and Wizards to Northern Virginia, along with a new arena and the sprawling entertainment district to support the franchises. But after opposition from several key Democratic legislators during budget negotiations, the State Assembly passed a $188 billion budget for the next two fiscal years without including funding for the development earlier this month.

Where the development goes from here is a political jump ball. Youngkin has the option to pursue an amendment to include the project in the state’s budget, or he could call a special session to start over with a new bill, though the likelihood of those options happening, or the odds that it would change the outcome, are unclear. According to Youngkin, the development would generate roughly 30,000 new jobs and approximately $12 billion in economic impact for Alexandria over the next several decades if given the green light. 

“The project’s legislation follows the normal timeline for the governor to act on legislation in front of him to veto, sign, or submit any amendments back to the General Assembly,” representatives for JBG Smith told Commercial Observer in an email. “We expect this process to be no different than with any other legislation and hope that our project gets a fair hearing as part of that process.”

Still, a setback for Virginia and Youngkin is a potential breakthrough for D.C. and Mayor Muriel Bowser. Among her attempts to keep both teams in the District, Bowser earlier this year announced legislation that would extend Monumental’s lease for Capital One Arena, which currently expires in 2027, to 2052, along with $500 million in financing toward facility upgrades

Such an incentive may not even be needed. In a letter sent to Monumental last week, and obtained by the Associated Press on Friday, D.C. Attorney General Brian Schwalb argued that the franchises could not legally leave the District until 2047. Schwalb reportedly cited a bond agreement for arena renovations in 2007, which extended the teams’ lease for 20 more years past the original 2027 deadline. However, another agreement made in 2019, which ratified the  2007 deal, permits Monumental to pre-pay those bonds and revoke its lease extension with 120 days’ notice, per the AP.

“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,” a spokesperson for Monumental told the AP in response on Friday.

Representatives for JBG Smith declined a request from Commercial Observer to comment on Schwalb’s letter. 

Nick Trombola can be reached at NTrombola@commercialobserver.com.