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Soccer stadium site? NCFC owner, developer partner invest in land in SE Raleigh

March 19, 2019

When North Carolina FC submitted its initial request for Wake County’s Room Occupancy and Prepared Food and Beverage Tax funding in early January, the report stated that the preferred location for its proposed soccer stadium and retail complex remained the state-owned Halifax Mall site on the north end of downtown Raleigh. However, their report also hinted at “several alternative locations in the greater downtown area.”

When North Carolina FC owner Steve Malik stood before a work group considering requests for these interlocal funds last Thursday, he decided to add more definition and clarity. Malik informed the interagency group that Raleigh developer John Kane and his Kane Realty Corp, Malik’s partner in the proposed Downtown and Entertainment Sports Center (DESC), has secured 40 acres in southeast Raleigh for a multi-use facility to be anchored by a soccer stadium.

“We’ve been working on it all along,” Malik tells WRALSportsFan, “but when you’re trying to put together quite a bit of acreage, you can’t be too vocal about that because of the process.”

Thursday’s presentation was the latest step in the approval process for interlocal tax funding. Those taxes are levied expressly to support arts, culture, sports and convention facilities in Wake County. North Carolina FC is requesting interlocal funds of $11 million per year for 30 years beginning in fiscal year 2022. Those funds would go towards annual maintenance of the DESC and debt service of the estimated $150 million construction costs.

(The Centennial Authority also presented last week, seeking up to $200 million for renovations and upgrades to PNC Arena.)

The differentiating factor for the DESC’s funding request, according to Malik, boils down to location, location, location.

“As I listened to city counselors and county commissioners, repeatedly people were like, ‘What can we do for southeast Raleigh?’ Everybody wants to, but it takes a project like this to really lift that up.”

Malik says the core 40 acres have been secured via a contract for sale. He wouldn’t specify the precise location, explaining Kane is still working to acquire other surrounding properties to augment the development project.

“What’s tough about any significant acreage like this is that you’re putting together multiple parcels,” Malik says. “It would apply to any significant amount of acreage that didn’t fully complete what you were hoping to accomplish.”

However, Malik did reiterate statements made during an interview with Spectrum News last Friday, that the current DESC location would fall within a designated Opportunity Zone. Opportunity Zones are a new community development program established by Congress in the Tax Cuts and Jobs Act of 2017 to encourage long-term investments in low-income urban and rural communities nationwide.

Malik says the legislation approving these Opportunity Zones is the biggest change affecting the location of the proposed DESC since plans for it were unveiled over 18 months ago.

“You’re going to see every new stadium going into an Opportunity Zone, and a lot of people don’t know what they are yet,” Malik says. “Opportunity Zones allow for capital gains from anything to be invested in census-tract, underprivileged economic areas. There are about 8,700 in the country. In Raleigh, there’s one from Red Hat Amphitheater south past I-440. In those areas, you can take an unrealized capital gain and invest it and avoid paying tax on the gain for as long as 10 years. You also get a step-up in tax basis. There’s very favorable tax treatment for investment in the Opportunity Zones.”

That would place the proposed DESC in and around the South Saunders and South Wilmington Street corridors.

Another noticeable change over the past 18 months is the emphasis of Malik’s sales pitch.

Malik says that Major League Soccer has been kept abreast of all possible DESC locations. “If we are fortunate enough to get a MLS franchise sooner rather than later, it will be hugely advantageous that we have a downtown stadium with a fabulous development around it,” he said.

“A lot of communities have been making bids for these MLS expansion spots for a long time,” Malik continues. “I’ve been asked do I think we’re the next slot. No, I do not. Do I think we’re a top 36 market for MLS? Yeah, absolutely, and every other major league in our country has gone up to 36 teams. We’re going to keep improving our position.”

Major League Soccer’s last three expansion invitations – to Nashville, Cincinnati and Austin –leaves one expansion slot available short of the league’s stated goal of 28 markets. However, during his annual state of the league address last December, Garber opened the door for possible expansion beyond 28 teams.

However, once touted as a MLS stadium first, Malik now underscores the multi-use function of this retail and sports complex. Other projects he cites as illustrative examples include The Battery Atlanta, L.A. Live, and the development around Detroit’s Little Caesars Arena.

“This is not about MLS,” Malik states. “If I have any regrets about our focus over the last 18 months in terms of public message, it would be too heavy on building an MLS stadium. In fact, when I presented last Thursday to the city and county, we presented as the Downtown Entertainment and Sports Center, not as North Carolina FC. What I’ve learned, listening to people the last 18 months, is that there’s an opportunity for Raleigh to get many more events … and we need a downtown venue that is outdoors with that sort of seating capacity.”

As one example, Malik cites the NCFC Youth tournaments series, which book 31,000 hotel rooms a year. “Of those, right now only 21,000 happen in Wake County because we need more facilities. We need a centralized location for referee scheduling, tournament scheduling, a capstone game, etc.”

Malik says his North Carolina FC and NC Courage teams will be the anchor tenants for the stadium portion of the DESC, under a lease that matches the term of the financial commitment. However, he stresses that will the occur regardless of whether MLS comes to town or not.

“I’ve been asked, ‘When are we going to get a pro team?’” Malik continues. “There’s an awareness challenge in the market, that you either have MLS or you don’t have soccer. In a community where we have 14,000 kids playing in our youth club, soccer in this market is about a lot more than whether you just have an MLS club. We have a great club, and we’re going to have the best soccer club in the country, and it’s going to have pro soccer.

“Would an MLS franchise be great? Yeah. But we have soccer. We’re going to draw a lot better when we provide people with a better gameday experience in a downtown location.”

Ultimately, the Raleigh City Council and Wake County Commissioners will vote on the allocation of the interlocal tax funds. First, there will be a recommendation made by the city and county managers, with information obtained from the working group they’ve established, and the process of deciding how much tax funding will be available is already underway. Malik says we could see recommendations as early as April, with a possible RFP process to finalize the funding consideration coming later.

“I think we have the most competitive project that provides the highest return on investment with the best fit for overall impact in the region,” Malik contends. “We’re the only [project] who is coming to the table putting a billion and a half dollars of our own money on the table, which generates a tremendous amount of property tax.”